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Bilal Raja
bill_raj@hotmail.com

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 Marketing!

New Product Development!

New Product Development (NPD)
• NPD is a process which is designed to
develop, test and consider the viability
of products which are new to the
market in order to ensure the growth or
survival of the organization!
What is a New Product?
• The product that opens up an entirely new
market.
• A product that adopt or replaces an existing
product.
• A product that significantly broadens the
market for the existing market.
• An old product introduced in a new market.
• An old product marketed in a different way!
Why to develop New Products?
• To add a product portfolio
• To create stars and cash cows for the future
• To replace declining products
• To take advantage of new technology
• To maintain/increase market share
• To defeat or keep up with rivals
• To bring in new customers
• To maintain competitive advantage
New Products can be used to:
• Increase/defend market share by offering
more choice or updating older products
• Appeal to new segments
• Diversify in the new markets
• Improve relations with distributors
• Maintain the firm’s reputation as a leading
edge company
• Make better use of the organization's
resources!
Types of New Products
• New to the world products-innovative
products.
• New product lines- to allow the firm to enter
in to an existing market.
• Additions to product line- to supplement the
firm’s existing product line.
• Improvements and revisions of existing
products.
• Repositioned products- existing products
targeted at new markets.
New Product Planning
• This is the strategic stage
• The firm assesses
- its current product portfolio
- opportunities and threats
The firm then determines the type of
the product which best fit in with the
corporate strategy.
Stages in NPD
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy development
• Business Analysis
• Product development
• Test marketing
• Commercialization/Product launch
Idea generation
• R & D department
• Production department
• Sales team
• Employees
• Competitors
• External sources
• Market research
Idea screening
• Screening of products to spot good ideas and
drop poor ones as soon as possible.
• Ideas are checked for technical feasibility,
financial viability and marketability.
• The business analyses the product to
evaluate its demand, marketability and profit
potential.
• Given ideas ratings according to marketing,
production and strategic factors.
Criteria for evaluating New Products.
• Is there sufficient demand?
• Will it be profitable?
• What is the likely payback period?
• Does it fit the firm’s image?
• Does it fit the firm’s product portfolio?
• What is the likely life cycle of the
product?
Criteria for evaluating New Products
• What is the state of the market and
competition?
• Does the firm possesses the capabilities
to successfully produce and market the
product?
• How easy will it be to manufacture?
Product Concept and testing
• Product concept- a detailed version of the
new product idea stated in meaningful
consumer terms.
• Turning ideas into tangible products that
consumer perceive as being valuable.
• Concept testing: testing new product
concepts with a group of consumers to find
out if the concepts have strong consumer
appeal.
Market strategy development.
• Designing an initial marketing strategy
for a new product based on the product
concept
• Formal market research is carried out to
assess the product’s market potential
Business Analysis
• A review of the sales, costs and profit
projections for a new product to find
out whether these factors satisfy the
firm’s objective.
• Estimate potential sales, income, break
even point, profit and return on
investment from new ideas.
• Projecting probable costs and sales. Will
profit reach the firm’s targets?
Product Development
• R & D turns the idea into the product
• Engineering and production issues are
resolved.
• Concerned with design, materials, production
processes, quality and safety.
• Developing a product concept in the physical
product to ensure that the product idea can
be turned into a workable project.
• Translating the idea into the reality through
prototypes or simulations
Design mix
• Formal design- concerned with
aesthetics. Does the product look good?
• Functional design- concerned with
performance. Does it work? Is it
reliable?
• Economy of manufacture- does
design allow it to be made efficiently
and at a cost which allows for profit?
Characteristics of good design
• Fit for purpose
• Reliable
• Pleasing appearance
• Easy to use
• Convenient for user
• Efficient in use
• Easy to maintain
• Safe to use
Characteristics of good design
• Safe to manufacture
• Financially viable
• Legal
• Environment friendly
• Consistent with the needs of the market
Test marketing
• Launching a product in a small
geographical area.
• A field experiment in realistic market
setting.
• Releasing a product into small but
representative market where consumer
reactions can be assessed and the
marketing mix checked and adjusted.
Aims of test marketing
• To forecast likely results of the national
launch.
• To test the operational effectiveness of
the marketing plan
• To identify possible problems
• To access customer reaction
Problems of test marketing.
• The test market might not be a true indicator
• Environment might change between the test
and the national launch.
• Competition may disrupt the test marketing
by engaging in exceptional marketing activity.
• Test marketing alerts competitors
• Largely but not entirely replaced by simulated
test marketing.
Commercialization
• Introducing the new product in the
market
• Timing is critical for success.
• There will be heavy promotional
expenditure at the time of launch.
• Choice of skim or penetration pricing.
• The product has to well targeted and
positioned.
New Product introduction
• There are three ways to introduce new
products under the auspices of the existing
products.
• Line extension- using an existing brand
name on products within the same category.
• Brand extension- using an existing brand
name on products in the new category but
within the same broadly defined market.
• Brand stretching- using an existing brand
name in a different market.
All products need a USP
• The unique product benefit that a firm
aggressively promotes to its target
market.
• The benefit usually reflects functional
superiority, best quality, best service,
lowest price and most modern
technology.
• If the product doesn’t have any USP,
why would then anyone want to buy it?
Factors in new product success
• Development of a unique and superior
product
• Differentiation from rivals.
• Well conceived and properly executed launch.
• Top management backing
• Market attractiveness- the product should be
aimed at attractive markets
• Speed and timely
• Quality
• Market driven and customer focus.