NEW PRODUCT

D EV ELOP MENT
PROCESS
What is New Product?
 What is New Product
Development?
NPD emphasizes the importance of
introducing new products on the
market for continuing business
success.
New Product Development Process

Booz, Allen, and Hamilton (BAH) Model 1982

New Product Development Process
1. New product strategy

 The purpose of this stage is to provide guidance for the new product effort.
 It identifies the strategic business requirements that the new product should
comply with, and these are derived from the corporate objectives and strategy of
the firm as a whole.

2. Idea generation

 New product ideas can derive from internal sources, external sources and from
implementing formal research and development.

 Brainstorming and focus group interviews are the two techniques used for
generating new product ideas.
New Product Development Process
3. Screening and evaluation
 Product development process that eliminates ideas that are inconsistent with the
organizations new product strategy or inappropriate for some other reason.

4. Business analysis
 Stage in product development process where demand, cost, sales, and profitability
estimates are made.
5. Development
 In the early stage of development, the research and engineering department may
develop a prototype of the product.

 In this stage, the technical feasibility of manufacturing the product as well as its cost is
thoroughly examined.

 The stage can last a long time and thus be very expensive.
New Product Development Process
6. Testing or Test Marketing

 Process during which a product is introduced to the market to determine the

reactions of potential customers.

 The performance of a product is how well the product achieves the

functionality desired.
• Feature
• Perceived Benefits

7. Commercialization
 This is the final stage in the new product development process. It is the decision to
market the product.
RISK ASSOCIATED
W ITH P ROD U CT
DEVELOPMENT
 Risk Associated with Product Development
1. Risk of losing opportunities by sticking to a single development plan

Organizations often like to stay within their comfort zone and place “inordinate faith in
their plans” believing that their development plan is the most effective.

2. Risk of starting a product development task too soon

Launching new product development projects too soon due to downtime experiences
of the business or management may leads to dilution of resources

3. Risk associated with products having too many features

The team should work on identifying and eliminating features that are irrelevant.

4. Risk arising from zero tolerance of failure

SPREAD OF NEW
PRODUCT/
INNOVATION
Stages in the Adoption Process

AIDA
Attention-Interest-Desire-Action

Hierarchy of Effects Model

Robert J. Lavidge and Gary A. Steiner
Hierarchy of Effects Model
 DIFFUSION
OF
INNOVATION
 DIFFUSION OF INNOVATION
An innovation is a product perceived as new by a potential
adopter. Diffusion is the process by which the adoption of
innovation spreads. The diffusion process is the spread of a
new idea from its source of invention or creation to its ultimate
users as adopters.
Five adopters in the diffusion process:
1. Innovators

2. Early Adopters

3. Early Majority

4. Late Majority

5. Laggards
 ET H I C A L I S S U E S I N
BUSINESS AND VIEWS
OF SOCIAL
RESPONSIBILITY
Ethics
Ethical Issues in Business
 Fairness and Honesty

 Organizational Relationships

 Conflict of Interest

 Communication
 Social
Responsibility
Two Views of Social Responsibility

1.The Economic Model

2.Socio-Economic Model
 A Comparison of the Economic and Socio-economic Models as
Implemented in Business

Economic Model Socio-economic Model

Primary emphasis is on Primary emphasis is on

Production Quality life

Exploitation of natural resources Conservation of natural resources

Internal market-based decisions Market-based decisions with some community controls

Economic return (profit) Balance of economic return and social return

Firms or managers interest Firm’s and community interest

Minor role of government Active government involvement