An introduction to New

Product Development (NPD)

New products Development:

Considerations when
developing an NPD strategy

New Product Development- Considerations

when developing NPD strategy

Learning Objectives
Understand the contribution market research can make to the
new product development process
Recognize the benefits and weaknesses of consumer new
product testing
Recognize the powerful influence of the installed base effect on
new product introductions
Understand the significance of discontinuous products
Understand the role of switching costs in new product
introduction

Module Code and Module Title

Title of Slides

The Purpose of New Product

Testing
Estimate market reaction to the new product under consideration
prior to expensive production and promotional costs
1. The market
Current buying patterns
Existing segments
Customer view of the products available
2. Purchase intention:
Trial and repeat purchase
Barriers to changing brands
Switching cost
3. Improvements to the new product
Overall product concept
Features of the product concept
Module Code and Module Title

Title of Slides

Type of Customer Needs

Basic needs e.g. A customer would expect a
new car to start every time
Articulated needs- A customer can readily
express e.g. A customer may express a desire
for additional features on a motor car
Exciting needs that will surprise customers e.g.
new financial packages enabling easy and quick
purchase of a new car

Module Code and Module Title

Title of Slides

Market Research Activities

Ensure that companies are consumer oriented
New products are more successful if they are
designed to satisfy a perceived need rather than
taking advantage of technology
With sufficient research, chances of failures are
significantly reduced
Once a product has been carried through the
early stages, it is sometimes painful to raise
questions once money has been spent
Module Code and Module Title

Title of Slides

Techniques Used in Testing New

Products
Concept Tests
Qualitative techniques, especially group
discussions, are used to obtain target customer
reactions to a new idea or product:

Understanding and believability in the product

Ideas about what it would look like
Ideas about how it would be used
Ideas about when and who it might be used

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
The most common way to assess purchase intention is to
provide a description of the product or provide the
product to respondent:
Definitely would buy
Probably would buy
Might or might not buy
Probably would not buy
Definitely would not buy

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Test Centers
Used for product testing when product is too
large
Too expensive or complicated to be taken to
consumers for testing
Consumers to be brought to the test centre for
exposure to product and reaction testing

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Hall Tests/Mobile Shops
Used for product testing or testing other aspects
of marketing mix such as advertising price,
packaging ect
Representatives sample of consumers is
recruited
E.g. Shopping mall or mobile caravan
Representatives are exposed to test material
and asked questions about it
Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Product-use Tests
Frequently used in business-to-business markets(B2B)
Use of the product for a limited period of time
Technical people watch how these customers use the
product
Manufacturer learns about customer training and
servicing requirements
Customer asked detailed question about the intent of the
purchase

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Trade Shows
Draw a large numbers of buyers who view new
products in a few days
See how buyers react to various products on
display
Convenient and deliver in depth knowledge of
the market
Buyers views may differ considerably from end
user consumers
Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Monadic Tests
Respondents given only one product to try and
asked of their opinion
Consumer tries new product and draws on recent
experience with the product they usually use
Not very sensitive in comparing the test products

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Paired Comparisons
A respondent is asked to try two or more products in pairs and
asked
Less real in terms of the way consumers normally use products
Deliberately tested against others

In-Home Placement Test

Impression of how product performs in normal use is required
Respondent are asked to use the product in the normal way and
complete a questionnaire
Tested comparatively or sequentially

Module Code and Module Title

Title of Slides

Techniques Used in Consumer

Testing of New Products
Test Panels
Representative panels are recruited and used for
product testing
Test material and questionnaires are sent through post to
reduce cost of conducting in home placement test
B2B firms may use test panels of customers or
intermediaries with whom new product or service ideas
or prototypes can be tested

Module Code and Module Title

Title of Slides

Discontinuous New Products

Major innovations
referred to as discontinuous new products when they
differ from existing products in that field
Could be entire new markets and changes in behavior
patterns
E.g. 3Ms Post-It notes

Major Difficulties in market research

1. The problem of selection of respondents
2. The problem of the understanding of the major
innovation
Module Code and Module Title

Title of Slides

Barrier to Discontinuous Product Adoption

Technology-Intensive Products
Installed Base
Massive inertial effect of an existing technology e.g. User
prefers QWERTY keyboards despite DVORAK which
has shown to provide up to 40% faster typing speeds

Switching Cost

One time cost for buyer to switch to new product

Compatibility issues
Buyers may have to develop routines and procedures
for dealing with a specific vendor that will need to be
modified

Module Code and Module Title

Title of Slides

Breaking with convention and

winning new markets
customers are notoriously lacking in
foresight. Ten or fifteen years ago, how
many of us were asking for cellular
telephones, fax machines and copiers at
home, 24 hour discount brokerage
accounts, multivalue automobile engines,
video dial tone ect?

Module Code and Module Title

Title of Slides

When it may be correct to ignore

your customers?
Critics of market oriented approach see
consumer research act as an expensive
obstacle course to product development
the significance of discontinuous new
products is often overlooked Marones
(1993)

Module Code and Module Title

Title of Slides

Striking the balance between new

technology and market research
False Dichotomies
That you must either lead or follow
customers
That you cannot stay close to both current
and potential customers
That technology push cannot be balanced
with market-pull

Module Code and Module Title

Title of Slides

Tutorial
1. Explain why consumer market testing might not
always be beneficial?
2. Discuss the dilemma faced by all firms of trying
to listen to customers needs and wants and yet
also trying to develop new products for those
customers that they do not yet serve.
3. Explain why some writers argue that
organizations are the graveyard of product
innovations rather than the birthplace.

Module Code and Module Title

Title of Slides