New Product Development

Development of original products,

product
improvements, product modifications,
and new
brands through the firm’s own R & D
efforts.
Six categories of new products:

• New-to-the-world products
• New product lines
• Additions to existing product lines
• Improvements and revisions of
existing products
• Repositioning
• Cost reductions
 Why

is

NPD

so

DIFFICULT
?

Factors that tend to hinder new-product development

• Shortage of important ideas in certain areas
• Fragmented markets
• Social and governmental constraints
• Cost of development
• Capital shortages
• Faster required development time
• Shorter product life cycles
Major Stages in New-Product Developmen
Idea Generation Idea Screening
• Process to spot good
ideas and drop poor
ones.
Company Employees
• Develop system to
estimate: market
Customers size, product price,
development time
and costs,
Competitors manufacturing
costs, and rate of
return.
Distributors
• Evaluate these
findings against set
Suppliers of company criteria
for new products.
 Concept Development and Testing

• Product Idea: idea for a possible product that the

company can see itself offering.
• Product Concept: detailed version of the idea
stated in meaningful consumer terms.
• Product Image: the way consumers perceive an
actual or potential product.
DiamlerChrysler’s Fuel-Cell-Powered Electric
Car

The company’s task is to

develop
its fuel-cell-powered electric car
into
alternative product concepts,
find
Marketing Strategy
Development

And

Business Analysis
rketing Strategy Development Business Analy

Involves a review
Part One :
The Target Market of the sales,
Planned Product Positioning costs, and profit
Sales, Market Share, & Profit Goals projections to
assess fit with
Part Two Outlines the First-Year’s: company
Product’s Planned Price objectives.
Distribution
Marketing Budget
If yes, move to
the product
Part Three Describes Long-Run:
Sales & Profit Goals development
Marketing Mix Strategy phase.
Product Developmen

• Develop concept into physical product

• Calls for large jump in investment

• Prototypes are made

• Prototype must have correct physical

features and convey psychological
characteristics
TEST MARKETING
Product and program introduced in more realistic market
setting.
• Not needed for all products.
• Can be expensive and time consuming, but better than
making major marketing mistakes.
Customer Testing Market Testing:
A. Alpha testing Seeks to estimate four variables
B. Beta testing – Trial
– First repeat
Consumer preference – Adoption
measures – Purchase frequency
- Paired-comparison
- Monadic-rating A. Sales wave research
B. Simulated Test Marketing
C. Controlled Test Marketing
How many test cities? Which cities? Length of test? What
information? What action to take?
Nokia test-marketed its new N-Gage
cell phone/mobile game player
extensively before introducing it
worldwide.
 Commercialization
• Must decide on timing (i.e., when to introduce the
product).
• Must decide on where to introduce the product (e.g.,
single location, state, region, nationally,
internationally).
• Must develop a market rollout plan.
he Consumer-Adoption Process/ Innovation diffusion process
Adopters of new products move through five stages
Awareness Interest  Evaluation Trial 
Adoption
So inspite of ALL this new products fail.

Why?

Overestimation of market size

Design problems
Incorrectly positioned, priced, or advertised
Pushed despite poor marketing research findings
Development costs
Competition
Defining Product and Brand Failures

•The withdrawal of the product from the market for any reason;

•The inability of a product to realize the required market share to

sustain its presence in the market;

•The inability of a product to achieve the anticipated life cycle as

defined by the organization due to any reason; or,

•The ultimate failure of a product to achieve profitability.

Great Product, Lousy Business

The Concorde supersonic passenger jet: Thought of as

a milestone in commercial aviation

Many consider its creation second only to the Apollo

moon landing as the greatest feat of 20th century
engineering.

Back in 1956, when the British government organized

the Supersonic Transport Aircraft Committee to begin
work on a passenger jet that could fly at twice the
speed of sound.

The commercial logic seemed ironclad.

First flight of Concorde in 1976
- The cost of producing the jet had already gone far beyond
the original
budget
- Noise
- Cramped interiors were less than luxurious
- High fuel costs (1973 oil crisis)

The demand for business travel had flattened  hard for them
to fill their existing seats They began to slash their fares.

When the Concorde made its first commercial flight on January

21, 1976, it entered a market that had changed drastically from
the one which existed 20 years earlier.

The supersonic revolution never happened.

Only 16 Concordes were ever sold, all to British Airways and Air
France.
The other airlines, struggling to make ends meet, cancelled
On July 25, 2000, an Air France Concorde crashed during
takeoff, killing everyone on board and resulting in a
temporary grounding of all SSTs.

On September 11, 2001, the attacks on the World Trade

Center devastated demand for air travel.

On April 10, 2003, the end came abruptly, as British

Airways and Air France simultaneously announced that
they would retire their Concorde fleets.

On October 24, 2003 the jet flew for the last time, and a
month later many of its parts were auctioned off at
Christie’s in Paris.

The Concorde had become just another flashy product

that had failed to find a market.
Try, Try Again
2005: France and Japan announced ambitious plans to
develop a new supersonic jet by 2015.

Why it may be a hit:

• Combining France’s experience with the SST +
• Japan’s skill at building powerful engines +
• Recent advances in lightweight materials and engine

efficiency, would allow the plane to carry 300

passengers
( concorde :100)
• Surge in business travel especially between Europe
or North America and the Far East

The technology and the market, in other words, may

finally be ripe for the profitable launch of a supersonic
passenger jet.
pple iPod (introduced in 2001)

A six months effort by a

35 member team
(a record for apple)

as rapidly become the best selling

oduct in Apple’s portfolio

0% of world share in portable music players

nnovator??

was not the first hard disk based player in the market.

eative’s “Nomad Jukebox” had been in the market since September 2000
- When introduced, iPod had greater storage capacity and
was easier to use in comparison to Normad Jukebox

- First iPod : 5GB hard disk: could store 1000 songs (weighed
6.5 ounces)

-Later available in 5Gb ($299); 10 GB ($399) and 20 GB ($

499) (store digital photographs, contact list, organizer, voice
recorder)

-February 2004: lighter slimmer iPod : iPod mini ($ 299)

weighed 3.6 ounces . Came with 4GBdisk capable of storing
1000 songs.

 iPod mini had 16 times the capacity of a 256 MB

flash based player and was priced only about $50
over the flash player’s price
Creative Sony Samsung Virgin Archos Dell Apple

2000 2004 2004 2005

Nomad VAIO Yepp T5V Virgin Gmii DJ Ditty
Zen player XS200 5GB
Extra
30 GB 20 GB 128 MB 5 GB 20 GB 512 MB ($299)
MP3 hard disk ($120 ) music ($250) ($99)
player and also player 10 GB
($400) flash with FM ($399)
memory tuner
varients 20 GB
($499)
Micro 1 GB 20 % Data FM
5GB: ($ 249) more storage Tuner iPod
$250 storage periphera mini
(lower +8 ls 4GB
than iPod hours ($299)
mini) continuo
us
+ 256
playback
mb
+ 512
mb
+ 1 gb
REASONS FOR SUCCESS

• Senced the need for a portable device after the success of

iTunes software: enabled users to compile and manage
playlists on their computers
• Successful as it was a better alternative to the existing small
storage MP3 players
• Leveraged upon the company’s design and software
capabilities
• Diverse product range
• Continuous innovation:
In september 2005: introduced iPod nano replacing its popular
model iPod mini
In October 2005: Unveiled Video iPod and opened online store
to provide contents such as TV shows, short films and music
videos fro its product
• iPod used as an effective promotional tool: Citibank ordered
iPods in bulk as promotional products for its promotions

iPod mini came to be known as the top motivational

Issues:

Despite customer appeal, iPod nano faced complaints from users:

screen vulnerable to scratches and also risked breakage

In september 2005, a lawsuit was filed that alleged Apple had

released the product in spite of being aware of its defects
Apple lost a patent battle to Creative Labs over the technology
used for making iPods

Creative won the patent that covered the ability of a digital music
player to display music using artist, album and track menus.
Friday, 25th August 2006, Business Standard
“Apple agrees to shell out $100mn to settle iPod
battle”

Paying the amount to Singapore based rival

Creative Technology, which had sought to halt US
sales of iPod music players

Companies at loggerheads since may 2006.

Settlement ends 5 lawsuits

Deal:
•Apple gets to use Creative’s patent filed in 2001
•Creative gets to manufacture iPod accessories
(Had reported a $118 million loss in 2005)