New Product Development Process

New Product A product new to the world, the market, the producer, the seller, or some combination of these.

Strategies for Obtaining New Product Ideas Developing and Managing Products New pdt development Strategies for Obtaining New Product Ideas Acquired Companies New to world Acquired Patents New product line Acquired Licenses Addition to existing pdt line Repositioning, cost reductions Chapter 10 Version 6e

Categories of New Products New-To-The-World New Product Lines Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Six Categories of New Products

Why Do We Develop New Products? New technology Increase sales and profits Product life cycle and having products in every stage/shorter cycles Increased domestic & foreign competition Change in consumers needs & tastes /product obsolescence

Causes of New Product Failures Developing and Managing Products Causes of New Product Failures Overestimation of market size, Product design problems, Product incorrectly positioned, priced or advertised, Product may have been pushed despite poor marketing research findings, Costs of product development Competitive actions Chapter 10 Version 6e

Why Do New Products Fail? Shortage of imp. ideas Fragmented markets Social n govt. constraints Costliness of development process Capital shortage Faster development time Shorter product life cycles

Improving New-Product Success Developing and Managing Products Improving New-Product Success New product success depends on having : Unique superior product (one with higher quality, features, and value in use) Well-defined product concept (a defined target market, product requirements, and benefits). understand its customers, markets and competitors, & develop products that deliver superior value to customers. Chapter 10 Version 6e

Lessons From Npd In India Understanding local culture-mcdonalds Value for money as positioning-Peter England Pdt. availability in urban n rural International brand helps firm gain entry.

New-Product Development Process Idea Generation Idea Screening Concept Develop.& Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization

Sources of New-Product Ideas Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas

Idea Screening Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Product idea Target market Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Criteria In Reviewing Idea Does pdt meet need? Would it offer superior value? Can it be distinctively advertised? Does co. have capital & R&D? Will new pdt deliver sales vol., sales ,growth, profit?

Concept Development 1. Develop New Product Ideas into Alternative Detailed Product Concepts 2. Concept Testing - Test the New Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers Product Image is the Way Consumers Perceive an Actual or Potential Product

Concept Development Product idea-possible pdt co. might offer Product concept-elaborated version of idea in consumer terms

Marketing Strategy Part One Describes Overall: Developing and Managing Products Marketing Strategy Part One Describes Overall: Target Market-Young Planned Product Positioning-low price,good quality Sales & Profit Goals Market Share-10% to 14% Part Two Describes First-Year: Product’s Planned Price Distribution-allowances,free samples Marketing Budget-adv on tv n print Part Three Describes Long-Term: Sales & Profit Goals-25% mkt share,12% investment Marketing Mix Strategy Chapter 10 Version 6e

Considerations in Business Analysis Stage Preliminary Demand Cost Sales Profitability

Product Development quality function deployment-CA-EA Improves communication b/w marketers, engineers, manufacturing Functional aspects n psychological parameters like size, color, weight Alpha test- test pdt within firm Beta test- customer will use prototype Consumer test-invite consumer to co. n give them samples

Test Marketing Standard Controlled Test Market Simulated Sales wave Full marketing campaign in a small number of representative cities. Controlled A few stores that have agreed to carry new products for a fee. Simulated Test in a simulated shopping environment to a sample of consumers. Sales wave research Reoffering pdt or competitor brand at less cost

Elements that May be Test Marketed by a Company Choosing a Test Market Advertising Packaging Product Budget Levels Positioning Distribution Pricing Branding Elements that May be Test Marketed by a Company Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.

Alternatives to Test Marketing Single-source research using supermarket scanner data Simulated (laboratory) market testing

Distribution Shipments Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Steps in Marketing a New Product

Why New Products Fail No discernible benefits Poor match between features and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product

Success Factors Factors in Successful New Products Match between product and market needs Unique but superior product Benefit to large number of people Factors in Successful New Products

Global Issues Develop product for potential worldwide distribution Build in unique market requirements Design products to meet regulations and key market requirements

The process by which the adoption of an innovation spreads. Diffusion The process by which the adoption of an innovation spreads.

Categories of Adopters Laggards Late Majority Early Majority Early Adopters Innovators Categories of Adopters in the Diffusion Process

Categories of Adopters Percentage of Adopters Time Innovators 2.5% Early Adopters 13.5% Late Majority 34% Laggards 16%

Product Characteristics and the Rate of Adoption Trialability Observability Relative Advantage Compatibility Complexity Product Characteristics Predict Rate of Adoption

Marketing Implications of the Adoption Process Direct from Marketer Word of Mouth Communication Aids the Diffusion Process

Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). PLC

Product Life Cycle Time Dollars Product Category Profits Category Sales Introductory Stage Growth Maturity Decline

Full-Scale Launch of New Products Introductory Stage Full-Scale Launch of New Products High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels

Offered in more sizes, flavors, options Growth Stage Offered in more sizes, flavors, options Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered

Many consumer products are in Maturity Maturity Stage Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge Many consumer products are in Maturity

Rate of decline depends on adoption of substitute products Decline Stage Rate of decline depends on change in tastes or adoption of substitute products Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses

Marketing Strategies for PLC INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Distribution Promotion Pricing Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level.