New Product

New A product new to the world, the

NewProduct
Product
market, the producer, the seller,
or some combination of these.

1
Categories of New Products
New-to-the-World
New-to-the-World

New
New Product
Product Lines
Lines

Product
Product Line
Line Additions
Additions

Improvements
Improvements
Market or
or Revisions
Revisions
Development

Repositioned
Repositioned Products
Products

Lower-Priced
Lower-Priced Products
Products

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REVIEW LEARNING OUTCOME
Developing New Products

3
The New-Product Development Process

New Product Success Factors

Long-term
Long-termcommitment
commitment

Company-specific
Company-specificapproach
approach

Capitalize
Capitalizeon
onexperience
experience

Establish
Establishan
anenvironment
environment
LO2 4
New-Product Development Process

New-Product Strategy
Idea Generation

Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
LO2
5
 Idea Generation

Customers

Employees

Distributors

Competitors

Vendors
Sources of
New-Product
Ideas R&D

Consultants
 Brainstorming

Brainstorming The process of getting a group

Brainstorming
to think of unlimited ways to
vary a product or solve a
problem.

7
 Idea Screening

Screening The first filter in the product

Screening
development process, which
eliminates ideas that are
inconsistent with the
organization’s new-product
strategy or are inappropriate for
some other reason.

8
 Concept Test

Concept A test to evaluate a

ConceptTest
Test
new-product idea, usually before
any prototype has been created.

9
 Business Analysis
Demand

Considerations
Considerations in
in Cost
Business
Business Analysis
Analysis
Stage
Stage Sales

Profitability

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 Development
 Creation of prototype
 Marketing strategy
 Packaging, branding,
labeling
 Promotion, price, and
distribution strategy
 Manufacturing feasibility
 Final government approvals
if needed

11
 Test Marketing

Test
The limited introduction of a
Test
Marketing
Marketing product and a marketing
program to determine the
reactions of potential
http://www.merwyn.com
customers in a market
situation.

Online

12
 Commercialization
Production
Production

Inventory
InventoryBuildup
Buildup

Distribution
DistributionShipments
Shipments

Sales
SalesTraining
Training

Trade
TradeAnnouncements
Announcements

Customer
CustomerAdvertising
Advertising
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REVIEW LEARNING OUTCOME
New-Product Development Process

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 Why New Products Fail
• No discernible benefits
• Poor match between features and customer
desires
• Overestimation of market size
• Incorrect positioning
• Price too high or too low
• Inadequate distribution
• Poor promotion
• Inferior product

LO3 15
 Success Factors

Match between product and market needs

Different from substitute products

Benefit to large number of people

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 Product Life Cycle (PLC)
• Products have a limited life
• Product sales pass through distinct stages
• Profits rise and fall at different stages of the
PLC
• Product require different strategies in each
stage of the PLC
 The Product Life Cycle

Maturity
Sales or
Profits

Decline

Growth Sales curve

Introduction
Profit curve

Time
 Strategies - Introduction
• Skimming the market
• Penetrating the market
• Must have sufficient resources to withstand
the initial losses and heavy promotion costs
• Incremental selling efforts at this stage is
highest
 The competitive cycle
Pioneer Growth of Excess
Introduction Industry capacities

New entrants Reduction High

discouraged In margins Inventories

Weaker
Existing
companies Pioneer increases share
companies
withdraw
consolidate
 Strategies - Growth
• Improves quality and adds features
• Adds new models and variants
• Enters new market segments
• Increases distribution coverage and adds new
channels
• Shifts communication from awareness to preference
building
• Scale economies enable it to lower prices to attract
the next level of price conscious buyers
 Strategies - Maturity
• Most products are in this stage
• Price wars are inevitable.
• Scramble for market share
• The fittest survive
• Market modification, product modification,
marketing mix modification can help extend
the maturity stage
 Strategies - Decline

• Withdrawal
• Harvesting whatever is possible
• Divesting the product