Lesson 3:

New Product Development

Importance of New Product
Development

• To meet customer needs and wants

• To meet competition
• To increase profits
• To avoid threats from substitutes

2
Types of New Products

Additions to
New to the New to the firm
existing product
world products products
lines

Improvements
and revisions of
Repositioning Cost reductions
existing
products

3
From the organization’s point of view,
the key attributes are:

Marketability

Developability

Manufacturability

Costs

Logistics

4
Idea Generation

Systematic search for new product ideas:

Internal sources

Customers

Competitors

Distributors

Suppliers
6
 Idea Screening

Process to spot Technically feasible Financially viable Compatibility Relevance

good ideas and
drop poor ones

Constraints Feasibility Value risk

7
Concept Development & Testing

Presenting the product concept to target consumers, physically or

symbolically, and getting their reactions.

In the past, creating physical prototypes was costly and time

consuming, but today firms can use rapid prototyping to design
products on a computer and then produce rough models to show
potential consumers for their reactions.

8
Concept Development & Testing

Communicability and
believability

Gap level &

Purchase Need level
intention

User targets, purchase

Perceived
occasions, purchasing
value
frequency.

9
Concept Development &
Concept Testing
Concept 1: An affordable electric car focused on working
individuals who commute daily. This car can be charged at
home but isn’t viable forlong distance travel.

Concept 2: A mid-priced electric car for environment-focused

millennials. The car has sporty looks, and there are recharging
points available.

Concept 3: A high-priced electric SUV for high earning

individuals who care about the environment.

Concept testing: Prototype

10
Marketing Strategy Development

Overall: target market, product positioning,

Part 1 sales & Profit goals, market share

Short term: product’s planned price,

Part 2 distribution, marketing budget

Long term: Sales & Profit goals, Marketing mix

Part 3 strategy

11
Business Analysis

Review of product sales, costs. And

profits projections to see if they meet
company objectives

Projected five-year cash flow statement

12
Product Development

ALPHA TESTING BETA TESTING

13
Test Marketing:
Eg: Ghost pepper (Maggie) @ 7E

Standard test
• Full marketing campaign in a small number
of representative cities.
Controlled test market
• A few stores that have agreed to carry new
products for a fee
Simulated test market
• Test in a simulated shopping environment to
a sample of consumers

14
Test Marketing:

How many
test cities?

Length of
Which cities?
test?

What
What action
information to
to take?
collect?

15
Commercialization

Commercialization incurs the company’s highest costs to date. The

firm will need to contract for manufacture or build or rent a full-scale
manufacturing facility.

To introduce a major new consumer packaged good into the

national market can cost $25 million to $100 million in advertising,
promotion, and other communications in the first year.

For new food products, marketing expenditures typically represent

57 percent of first-year sales.

Most new-product campaigns rely on a sequenced mix of market

communication tools.

16
Acceptability of an innovation
is a function of:
Relative
advantage

Trialability Complexity

Diffusion of
Innovation Theory

Communic Compatibilit
ability y

17
Issues in New Product Development
• New coke:
➢https://en.wikipedia.org/wiki/New_Coke
➢https://www.cbsnews.com/news/30-years-ago-
today-coca-cola-new-coke-
failure/#:~:text=That%20negative%20association%
20emerged%2030,but%20sweetened%20with%20c
orn%20syrup.

18
Issues in New Product Development
• Del Monte:
➢Del Monte’s NPD team identify opinion leaders of
their New customer segment – “Dogs are people,
too!’’ NPD, approach 500 pet owners to join this
invitation-only community, and develop new
product, Snausages Breakfast Bites, tailored to
their expectations.
• https://raisingthem.com/pampers-vs-huggies/
• Extra readings:
➢https://www.intechopen.com/predownload/597
51
➢https://www.feedough.com/new-product-
development-npd/
19
End of Slides