CHAPTER 11: NEW PRODUCT DEVELOPMENT
Meaning
Significance of New Product Development
Stages in New Product Development
MEANING
New product development (NPD)
is the complete process of bringing a new product to
market.
SIGNIFICANCE OF NEW
PRODUCT DEVELOPMENT
A company’s current products face limited life spans and
must be replaced by newer products. But new products
may fail—the risks of innovation are as great as the
rewards. The key to successful innovation lies in a total
company effort, strong planning, and a systematic
near-product development process. The company must
continuously monitor the performance of the new
product. They must make necessary changes in their
marketing plans and strategies else the product will fail.
STAGES IN NEW PRODUCT
DEVELOPMENT
Idea generation
Idea screening
Concept testing
Business analysis
Product development
Test marketing
Commercialization
Review of market performance
IDEA GENERATION
Major sources of
The new-product
new-product ideas include:
development process
consists of eight sequential • internal sources,
• customers,
stages. The process starts • Competitors,
with idea generation. • distributors and suppliers.
IDEA SCREENING
The purpose of ide ageneration is to create a large number of ideas. The purpose of
the succeeding stages is to reduce that number. The first idea-reducing stage is idea
screening, which helps spot good ideas and drop poor ones as soon as possible.
Before selecting or rejecting an idea, the following questions are considered or asked:
• Is the product truly useful to consumers and society?
• Is it good for our particular company?
• Does it mesh well with the company’s objectives and strategies?
• Do we have the people, skills, and resources to make it succeed?
• Does it deliver more value to customers than do competing products?
• Is it easy to advertise and distribute?
If the answers to these questions are positive, then the new-product idea is selected,
otherwise it is rejected.
CONCEPT TESTING
An attractive idea Whether the
must be developed consumers
into a product understand the
concept. product idea or not?
Whether the
Whether the
consumers will
consumers need the
accept the product
new product or not?
or not?
BUSINESS ANALYSIS
Whether the new
What will be the Is there any
product is
cost of the new demand for the
commercially
product? new product?
profitable or not?
Whether this Are there any How the total
demand is regular competitors of the sales of the new
or seasonal? new product? product be?
What will be the
How much profit
expenses on
the new product
advertising, sales
will earn?
promotion, etc.?
PRODUCT DEVELOPMENT
The R&D department will develop and test
one or more physical versions of the
product concept.
Developing a successful prototype can take
days, weeks, months, or even years. Often,
products undergo rigorous functional tests
to make sure that they perform safely and
effectively.
The prototype must have the required
functional features and also convey the
intended psychological characteristics
TEST
the stage at MARKETING
which the
product and
Test
marketing
marketing
program are
gives the
introduced
marketer
into
It letsmore
the
experience
realistic
company
with
market
test the
marketing
settings.
product and
the product
its entire
before
marketinggoing
to the great
program—p
expense
ositioningof
full
strategy,
introductio
advertising,
n.
distribution,
pricing,
branding
and
packaging,
and budget
levels.
COMMERCIALIZATION
Commercialization is introducing the new product into the market
The company must decide when- to launch the new product—in a single
location, a region, the national market, or the international market.
REVIEW OF MARKET PERFORMANCE
Are the
Is the new
Are the demand, consumers
product
sales and profits satisfied with the
accepted by the
high? after-sales-servic
consumers?
e?
Is the Marketing
Are the manager
Are the
marketing staffs changing the
middlemen
happy with their marketing mix
happy with their
income from the according to the
commission?
new product? changes in the
Are the environment?
competitors
introducing a
similar new
product in the
market?
CASE STUDY: MERCK’S NEW PRODUCT
DEVELOPMENT AND
LAUNCH STRATEGY FOR JANUVIA
This case is about how Merck & Co, Inc. (Merck) successfully developed and launched Januvia, its drug for Type 2
diabetes. Merck was in urgent need of a new blockbuster drug as it had been reeling under the numerous product
liability lawsuits related to its pain relief drug Vioxx, the expiry of its blockbuster cholesterol drug, Zocor, and the
imminent expiry of three more blockbuster drugs. The success of Januvia in the market was significant in the sense
that if Merck had adopted the traditional drug development timeline, the drug would not have reached the market
before 2010. Merck was a late starter and had joined the race for the new class of diabetic drug (DPP-4 inhibitors)
almost five years after the pharmaceutical giant Novartis had initiated its own research and development efforts.
However, Merck managed to reach the market first. This was done by shaving off time from the traditional drug
development timeline by conducting some phases of its clinical trials in parallel rather than sequentially. Even in the
launch of Januvia, Merck showed a lot of urgency and was able to take the brand to the market almost immediately
after gaining approval for marketing the drug.
As part of its new commercial model (that moved away from the traditional commercial model in the
pharmaceutical industry), Merck focused on more targeted communication to doctors through its reps, e-detailing
and video detailing. It made extensive use of new media such as the Internet. Experts hailed Merck’s marketing
acumen and said that more companies were expected to follow a similar model in the future.
QUESTIONS
Discuss the issues, challenges and opportunities in new product
development.
Discuss what steps should be taken by Merck in order to
successfully develop its product.
Discuss how Merck successfully launched Januvia using a new
commercial model as part of its new corporate strategy.
REVIEW QUESTIONS
Explain the concept of New Product Development. What are the phases in
new product development? Explain.
Distinguish between concept testing and test marketing.
What is the purpose of test marketing? What potential problems are involved
in test marketing?
“New product failure is the most common phenomenon than success”.
Comment on this statement.
What is the significance of new product development?
“New Product introduction is often the best strategy to arrest the decline in
sales and profits”. Do you agree?
