New Product Development

Categories of New Product New the world product New Product lines Additions to the existing product lines Improvements or revision to existing products Repositioning Cost reductions

Causes of New Product Failures Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand it’s customers, markets and competitors develop products that deliver superior value to customers.

New Product Development Process Idea Generation and Screening Concept Development and Testing Marketing Strategy development Business Analysis Product Development Test Marketing Commercialization

New Product Development Process Step 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

New Product Development Process Idea generating techniques Attribute Listing Forced relationship Need/problem identification Brainstorming

New Product Development Process Step 2. Idea Screening Process to spot good ideas and drop poor ones Two types of errors Go error Drop error Criteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

New Product Development Process Step 3. Concept Development & Testing

New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One

Concept development Concept 1 Concept 2 Concept 3 Category concept Who Why when Category concept Product concept Brand concept

Concept Testing Are the benefits clear? Does it solve a problem/need? Does other products solve this need and satisfy the customers? Is the price reasonable? Would u definitely/definitely not/ probably /probably not buy this product? Who would use this product and when and how often the product be used?

Marketing Strategy Statement Formulation New Product Development Process Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation Part One - Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two - Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy

New Product Development Process Step 4. Marketing Strategy Development The marketing strategy formulation takes place in three parts The first part describes the size, structure and behavior of the target market, the planned product positioning and the sales, market share and profit goals sought in the first few years. The second part outlines the product’s planned price, distribution strategy and marketing budget for the first year. The third part describes the long run sales and profit goals and marketing mix strategy overtime.

New Product Development Process Step 5. Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives New Product Development Process Step 5. Business Analysis Step 6. Product Development If No, Eliminate Product Concept If Yes, Move to Product Development

New Product Development Process Step 6. Product Development Making of pilot models Making prototypes Running laboratory tests Turning the concept into the workable product Functional test Consumer test

Full marketing campaign representative cities. New Product Development Process Step 7. Test Marketing Test Marketing This CTR relates to the discussion on pp. 282-284. Controlled Test Market A few stores that have agreed to carry new products for a fee. Standard Test Market Full marketing campaign in a small number of representative cities. Test Marketing Standard Test Markets. Under this approach, the company finds a small number of representative test cities, conducts a full marketing campaign in those cities, and then measures and evaluates performance. This provides a “real world” picture of how the product performs. But there are drawbacks. Standard testing is expensive, long, and tips competitors to company strategy. Controlled Test Markets. This approach uses a research firm that has designated store placement space for their clients. Participating stores receive a fee. Some services like Scantrack (Nielsen) and BehaviorScan (IRI) offer computerized monitoring of individual consumer panels whose television viewing is cross-tabulated with store purchases. Controlled testing is quicker and less expensive than standard testing. Concerns revolve around representativeness of the test markets (small size) and tipping off competitors. Simulated Test Markets. This approach creates a simulated shopping environment by the company or research firm. Consumers are exposed to promotions and then given money to shop with. Purchase patterns are observed and consumers are interviewed afterward by researchers. Simulated test marketing is inexpensive and quick. Representativeness and demand characteristics are concerns and this approach might be used as a pretest for a go-no go decision on further testing. Simulated Test Market Test in a simulated shopping environment to a sample of consumers.

Commercialization This is the final stage in the new development process. After the successful test marketing of the product , the company is ready to introduce the product in its target markets. This is called commercialization . With commercialization product starts its introductory stage of product life cycle.