NPD: New Product Development

Why New Products? Sustain growth Increase revenues and profits Replace obsolete items Innovative Firms – Apple – Google – Microsoft – IBM – Toyota

New technologies lead to NPD

New Products New to the world (discontinuous innovations) – Create an entirely new market – Smallest category New Product Lines Additions to existing Product Lines Modifications Repositioned products Lower-Priced

NPD Process Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization

Idea Generation Customers Employees Distributors Vendors Competitors R&D Consultants

Idea Screening MOST IMPORTANT STEP Weed out bad ideas Another group performs a review Concept testing – Does not predict success

Business Analysis Survived Screening process Estimate – Demand – Cost – Sales – Profitability CDSTEP

Development Prototype by engineering – Start marketing strategy Can take a long time – Crest 10 years – Polaroid in color 15 years – Xenox 15 years – Minute Rice 18 Years Work out the kinks All departments work at once - Simultaneous

Test Marketing Limited introduction – Tests customer reaction – Marketing strategy Costly Alternatives – Lab testing – Internet to assess demand

Commercialization Decision to go full Launch Manufacturing large scale – Order materials/equipment – Inventories – Shipping – Etc.

Diffusion of Innovations

Diffusion in numbers

In a more serious tone… Innovators: eager to try new ideas; obsession Early adopters: group oriented, opinion leaders Early majority: weighs pros & cons Late majority: most of their friends have it Laggards: low SES; adopt when obsolete; luddites

How Product influences adoption Complexity Compatibility Relative Advantage Observability Trialability

Product Life Cycle