New Product Development
Why do firms Introduce New Products?
• New products are required for filling the Strategic Planning Gap –
(How much do you want to grow, where do you want to reach, how
much is the desired growth can come from your present business,
and what is the gap you have to plug through new business/ new
products?
• New products reflect the Value Game the firm wishes to play
• New products are required for making new profits
• For making changes in consumer expectation
• For combating Environmental Threats
Classification of New Products
• By new product we mean original products, product improvements,
product modifications, and a new brand that firm develops through its
own product development.
Simply, it means -
• Intrinsically new products that arise out of technological innovations –
products that are new to the world
• New products that arise out of marketing oriented modifications –
products that are the new versions of existing products
Stage 1: Idea Generation
• “The systematic search for new product idea”
• Major Sources –
• Internal Sources – R & D Department, Employees like from executives to
salespeople to scientists to engineers and manufacturers
• External Sources – Distributors and Suppliers, Competitors, Customers, etc.
Crowdsourcing – (Open Innovations or New Product Idea Programs)
• “inviting broad communities of people – customers, employees,
independent scientists and researchers, and even public at a large –
into the new product innovation process”
Stage 2: Idea Screening
• Screening new product ideas to spot good ones and drop poor ones
as soon as possible
• It requires to answer – What the product or service is, the proposed
customer value proposition, the Target Market, and the Competition
• Answer for “R-W-W”
• R – Is it Real? Is there a real need and desire for the product?
• W – Can we Win? Does the product offer sustainable competitive advantage, does the
company have the resources to make such a product a success
• W – Is it Worth Doing? Does the product fit the company’s overall growth strategy, does
it offer sufficient profit potential?
Stage 3: Concept Development and Testing
• An Attractive Idea must be developed into a Product Concept.
• Product Idea – it is an idea for a possible product that the company
can see itself offering to the market.
• Product Concept – it is a detailed version of the idea stated in
meaningful consumer terms
• Product Image – it is the way consumers perceive an actual or a
potential product
Concept Testing
• It means testing new product concepts with a group of target consumers
to find out if the concepts have strong consumer appeal
• It is the process of using surveys (and sometimes qualitative methods)
to evaluate consumer acceptance of a new product idea prior to the
introduction of a product to the market
• To develop the original idea further.
• To estimate the concept’s market potential
• To eliminate lower-potential concepts
• To determine the value of concept features and benefits
• To identify the highest potential customer segments
• To estimate of sales or trial rate
• To estimate of sales or trial rate
Stage 4: Marketing Strategy Development
• Designing an initial marketing strategy for a new product based on
the product concept
• It has three parts:
• Target Market, the Planned Value Proposition, The Sales, Market Share and
Profits
• Product’s Planned Price, Distribution and Marketing Budget for first year
• The Planned long run Sales, Profit Goals and Marketing Mix strategy
Stage 5: Business Analysis
• A review of sales, costs and profit projection for a new product to find
out whether these factors satisfy the company’s objectives
• Understand the cost and profits of the new product and determining
if they meet company objectives
Stage 6: Product Development
• Developing the product concept into a physical product to ensure that
the product idea can be turned into a workable market offering
Stage 7: Test Marketing
• The stage for new product development in which the product and its
proposed marketing program are tested in realistic market settings
• It can be done in Controlled Test Market OR Simulated Test Markets
Standard Test Controlled Test Simulated Test
Market Market Market
Full marketing campaign A few stores that have Test in a simulated
in a small number of agreed to carry new Shopping environment to
representative cities products for a fee a sample of consumers
Stage 8: Commercialization
• Introducing a new product into market
• For formally launching a new product the following decisions to be
take:
• When to launch (Timings)
• Where to launch (Geographic Strategy)
• To whom (Target-Market Prospects)
• How to launch (Introductory Market Strategy)
