Lebanese University

Faculty of Business & Economics

New Product Development

2nd Semester 2022-2023

Dr. Ziad F. Haddad

 Part Three

Chapter 14:
•New Product
Development
 Chapter’s Objectives

• Examine the relationship between new products and prosperity;

• Recognize the range of product development opportunities that can
exist;
• Recognize that a new product is a multi-dimensional concept;
• Identify the different types of models of NPD;
• Provide an understanding of the importance of external linkages in
the new product development process.
 Innovation Management and NPD
New products are the outputs of the innovation process, where
the new product development (NPD) process is a sub-process
of innovation.

Managing innovation concerns the conditions that have to be in

place to ensure that the organization as a whole is given the
opportunity to develop new products.

The actual development of new products is the process of

transforming business opportunities into tangible products.
 Product Development Decisions
There are five basic decisions to be made:

1.What are the target values of the product attributes?

2.What will the product concept be?
3.What variants of the product will be offered?
4.What is the product architecture?
5.What will be the overall physical form and industrial
design of the product?
Considerations when developing an NPD strategy

 Ongoing corporate planning

 Ongoing R & D and technology management
 Ongoing marketing strategy
 Ongoing market planning
 Opportunity analysis
 New Product Development Process
Marketing Business
Strategy Analysis
Development
Concept Product
Development Development
and Testing

Idea Market
Screening Testing

Idea
Commercialization
Generation
 New-Product Development Strategies

Strategies for Obtaining New Product Ideas

Acquired Original
Companies Products
Acquired Product
Patents Improvements
Acquired Product
Licenses Modifications
New
Brands
 NPD Process. Step 1: Idea Generation
Idea Generation is the Systematic Search for New
Product Ideas Obtained Internally From Employees
and Also From:

Customers Competitors Distributors Suppliers

 NPD Process. Step 2: 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:
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return
• Then, the idea is evaluated against a set of general
company criteria.
 NPD Process. Step 3: Concept Development

1. Develop New Product Ideas Product Image is the

into Alternative Detailed Way Consumers
Product Concepts Perceive an Actual or
Potential Product

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
NPD Process. Step 4: Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget

Part Three Describes Long-Term:

Sales & Profit Goals
Marketing Mix Strategy
 NPD Process. Step 5: Business Analysis
NPD Process. Step 6: Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives

If No, Eliminate
Product Concept

If Yes, Move to Product

Prototype Development
 NPD Process. Step 7:Test Marketing

Test Marketing is the Stage Where the Product and Marketing

Program are Introduced into More Realistic Market Settings.

Budget Levels Product

Packaging Positioning
Elements that
May be Test
Marketed by a
Branding Company Advertising

Pricing Distribution
NPD Process. Step 7:Test Marketing
Standard Controlled
Test Market Test Market
Full marketing campaign A few stores that have
in a small number of agreed to carry new
representative cities. products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
NPD Process. Step 8: Commercialization
Commercialization is the Introduction of the
New Product into the Marketplace.

When is the Where to

Right Time to Launch a
Introduce New
Product? Product?
 Commercialization

Whom

When Product
Price
Place
Promotion
Where
 NPD Growth Strategies: Ansoff’s Matrix

Existing New
products products

Existing 1. Market 3. Product

markets penetration development

New 2. Market
markets development 4. Diversification
 New Product Decisions: 5 Decisions

Product Attributes
Branding
Labeling
Packaging
Product Support Services
 New Product Attributes
Developing a New Product or Service Involves
Defining the Benefits that it Will offer Such as:
Ability of a Product to Perform
Product Quality its Functions. It includes Level &
Consistency
Help to Differentiate the Product
Product Features
from those of the Competition

Product Style Process of Designing a Product’s

& Design Style & Function
 Branding
Consistency Quality & Value

Attributes Advantages Identification

of
Brand Names
High Brand Brand Strong Brand
Loyalty Equity Association

Name Awareness Perceived Quality

Labels:

Promote

Describe

Identify
 Labeling
• Printed information appearing
on or with the package.
• Performs several functions:
 Identifies product or brand.
 Describes all related information
about the product.
 Promotes the product through
attractive graphics.
 Packaging
• Activity of designing and producing
the container or wrapper for a
product.
• Packaging used to just contain and
protect the product.
• Packaging now has promotional
value and marketers should:
 Establish a packaging concept,
 Develop specific elements of the
package,
 Tie together elements to support the
positioning and marketing strategy.
 Product - Support Services
Companies should design its support services to profitably
meet the needs of target customers and gain competitive
advantage.
How?
Step 1. Survey customers to assess the value of current
services and to obtain ideas for new services.
Step 2. Assess costs of providing desired services.
Step 3. Develop a package of services to delight
customers and yield profits to the company.
 New Product Development Models

1. Departmental-stage models
2. Activity-stage models and concurrent engineering
3. Cross-functional models (teams)
4. Decision-stage models
5. Conversion-process models
6. Response models
7. Network models
8. Outsourced models
 Departmental-stage Models

Departmental-stage models represent the early form of NPD

models. These can be shown to be based around the linear
model of innovation, where each department is responsible for
certain tasks.
R&D provides the interesting technical ideas
The engineering department will then take the ideas and
develop possible prototypes
The manufacturing department will explore possible ways to
produce a viable product capable of mass manufacture
Then, the marketing department will be brought in to plan and
conduct the launch.
Activity-stage Models and Concurrent Engineering

These are similar to departmental-stage models but, because

they emphasize activities conducted, they provide a better
representation of reality.
They also facilitate iteration of the activities through the use of
feedback loops, something that the departmental-stage
models do not.
The systematic method of concurrently designing both the
product and its downstream production and support
processes.
It focuses attention on the project as a whole, rather than the
individual stages, primarily by involving all functions from the
outset of the project.
This requires a major change in philosophy from functional
orientation to project orientation.
 Cross-functional Models (Teams)

Common problems that occur within the product development

process revolve around communications between different
departments.
This problem, specifically with regard to the marketing, R&D,
production, and finance departments.
The use of cross-functional teams requires a fundamental
modification to an organization’s structure.
 Decision-stage Models
Decision-stage models represent the new product
development process as a series of decisions that need to be
taken in order to progress the project.
The stage-gate process suffers from a number of limitations:
• The process is sequential and can be slow.
• The whole process is focused on end gates rather than on
the customer.
• Product concepts can be stopped or frozen too early.
• The high level of uncertainty that accompanies
discontinuous new products makes the stage-gate process
unsuitable for these products.
 Conversion-process Models

As the name suggests, conversion-process models view new

product development as numerous inputs into a ‘black box’
where they are converted into an output.
The concept of a variety of information inputs leading to a new
product is difficult to criticize, but the lack of detail elsewhere
is the biggest limitation of such models.
 Response Models

These models focus on the individual’s or organization’s

response to a new project proposal or new idea.
This approach has revealed additional factors that influence
the decision to accept or reject new product proposals,
especially at the screening stage.
 Network Models

Essentially, network models emphasize the external linkages

coupled with the internal activities that have been shown to
contribute to successful product development.
There is substantial evidence to suggest that external
linkages can facilitate additional knowledge flows into the
organization, thereby enhancing the product development
process.
These models suggest that NPD should be viewed as a
knowledge-accumulation process that requires inputs from a
wide variety of sources.
Network Models
 Outsourced Models

outsourcing of development activities for developing new

products (goods and/or service), where all or the innovative
part of the NPD process is purchased externally according to
a contract from organizational units separate from
the outsourcing firm