Introducing New Market Offerings

Agenda

• Challenges in NPD
• Organizational structure and process to oversee NPD
• Stages in developing new products and services
• Managing new product development process
• Factors affecting rate of diffusion and consumer adoption of
new products
 What is a new product?

• Booz, Allen and Hamilton identified six categories of new products

from the producer’s perspective namely:

1. New to the world

2. New product lines

3. Additions to existing product lines

4. Improvements and revisions to existing products

5. Repositionings

6. Cost reductions
 Factors that Limit NPD

• Fragmented markets

• Social, economic and governmental constraints

• Cost of development

• Capital shortages

• Shorter product life cycles

• Poor launch timing

• Lack of organizational support

 Organizational Arrangements

• Budgeting for new-product development

• Organizing new-product development

• Cross-functional teams

• Crowdsourcing

• Stage-gate systems
NPD - Stages
Stage 1: Idea Generation
 Idea Generation

Why idea generation?

•An article titled ‘3000 raw ideas = 1 commercial success’ by Stevens &
Burley, 1997
•Newness is not always a product idea. It applies to market and
business model as well.
What is the objective of idea generation?
•Put forward a body of initially acceptable ideas which can be taken on
to further development and evaluation
•Ideas from the outset, must relate to the eventual benefits they will
deliver to a set of specified potential customers.
Stage 2: Idea Screening
 Idea Screening

• Screening , is the first evaluative stage of NPD process and an

initial assessment of the extent of demand for the ideas

generated and of the capability the company has to make the

product.

• Internal opinion is sought from R&D, sales, marketing, finance,

production to assess market demand and company’s capability.

Objective is to weed out unsuitable ideas.

 The Importance of Screening

• NPD costs, & Industry specific behavior

– R& D costs extremely high, marketing costs comparatively lower:

Biotechnology, electronics, and pharmaceuticals

– Low R&D costs, high marketing costs: Food processing

• Therefore, screen ideas when evaluation can be done relatively

cheaply before the physical development of new product.

Stage 3: Concept Development and Testing
 What is a New Product Concept?

• A product concept is a detailed description of an idea, described from

customers’ perspective. It is a promise of the benefits derived from

certain product characteristics or attributes

• The attributes are produced from the manipulation of certain material

properties, either of which might be transformed by new or modified

technology.

• Example: Healthy snack as an idea takes the form of packet soups,

vitality drink, confectionary health bar

 Concept Testing

• Feasible idea is taken to the target audience for following answers:

– What do they think about the idea?

– Will it offer the benefit that the organization hopes it will?

– Has the organization overlooked certain issues?

– Will there be a demand for the product?

• Note: The idea taken to the target audience is not a working

prototype at this stage, it is just a concept.

Techniques for Concept Development and Testing

• Perceptual/positioning maps

• Conjoint analysis
– Evaluate how potential customers judge products in terms of
their attributes and examine the extent to which they might
‘trade’ one ‘attribute’ for another
Stage 4: Marketing Strategy Development
 Marketing Strategy Development

• How will the product/service idea be launched within the

market?

• A proposed marketing strategy lays out the marketing mix

strategy of the product, the STP strategy and expected sales

and profits.
Stage 5: Business Analysis
 Business Analysis

• Analyzing financially worth of the product concept in the long run

• The business analysis stage looks more deeply into the Cash flow the

product could generate, what the cost will be, and how much market shares

the product may achieve?

• Financial analysis for new product decision includes:

1. Review of basic financial concepts (unit sales, revenues, fixed and

variable costs)

2. Techniques for analyzing the potential financial performance of a new

product (sensitivity analysis, CVP analysis)

Stage 6: Product Development
Prototype development and testing
 Stage 7: Market Testing

• Consumer-goods market testing

– Sales-wave research

– Stimulated test marketing

– Controlled test marketing

– Test markets

• Business-goods test marketing

– Alpha and Beta testing

 Stage 8: Commercialization

• When (timing)

• Where (geographic strategy)

• To whom (target-market prospects)

• How (introductory market strategy)

Product Adoption
 What is Product Adoption?

• An individual’s decision to use a product

in preference to alternative or substitute

product which might be used to satisfy

the same need.

 Rogers’ Model of Product Adoption

• Awareness: The individual is exposed to the innovation but lacks

complete information about it
• Interest: The individual becomes interested in the new idea and seeks
additional information about it
• Evaluation: The individual mentally applies the innovation to his or her
present and anticipated future situation and then decides whether to try
or not to try it
• Trial: The individual uses the innovation on a small scale in order to
determine its utility in his or her own situation
• Adoption: The individual decides to continue the full use of the
innovation
 Product Adoption
• Is it necessary that an individual goes through all the stages before
adopting a product?
• The length of the stages will vary depending upon the nature of the
decision being taken. Ex: Low involvement Vs. high involvement
products.
• Factors influencing product adoption:
1. Differences in individual readiness to try new products (adopter
categorization)
2. Characteristic of an innovation like relative advantage, compatibility,
complexity, divisibility ( the degree to which an innovation can be tried
on a limited basis), communication
 Diffusion

• The adoption of innovation gives rise to a process known as

diffusion

What are the factors that influence diffusion?

• Rogers (1962) identified three elements as critical to the diffusion

process:

1. The innovation (revolutionary, evolutionary)

2. Its communication from one individual to another

3. The relevant social system of which these individuals are a part