PRODUCT

DEVELOPMENT

PRESENTED BY: JENNIFER MAE LANGAMAN, CPA, MBA

 Reasons for New Product Failures
Definition of Terms
CONTENTS
NPD Process
Product Life Cycle
  Poor marketing research
 Technical problems
 Insufficient marketing effort
 Bad timing
 The wrong group was targeted.
REASONS FOR
 Unrealistic forecast.
NEW PRODUCT
 Insufficient level of awareness.
FAILURES
 To create successful new products, the company
must:
 understand it’s customers, markets and competitors
 develop products that deliver superior value to
customers.
  PRODUCT – any marketable thing with
some utility in it, produced either by labour
or through series of automated processes.

DEFINITION  DEVELOPMENT – act of making or

achieving a continuous progress in something
by someone. Progress transit from an earlier
policy (traditional approach) to an advanced
policy (modern approach).
  It is the complete process of bringing a
new product to the market till its
consumption & feedback from the end
user of the business chain through the
NEW PRODUCT systematic procedure & parameter.
DEVELOPMENT  It may be a consumable product,
(NPD) service or idea.
 May be done to develop an item to
compete with a particular product or
may be done to improve an already
established product
  New product development is essential
to any business that must keep up with
market trends and changes.
 Approximately one-third of the
WHY NEW revenue a business generates is coming
PRODUCTS? from products they did not sell five
years ago
 Changing environment creates new
demands and needs
 A way of getting new and keeping
NEW old customers
PRODUCTS Effective way of obtaining a
NECESSITY competitive advantage
Source of growth and excitement
 New to the world products
New product lines
Product line extensions
NEW PRODUCT
Improvements and revisions to
CATEGORIES
existing products
Repositioning
Cost reductions
ACTIVITY

 Think of steps on how to enhance the existing product

 The answers should not be something that exists or existed
  Idea Generation
 Idea Screening
 Concept Development and Testing
NEW PRODUCT  Marketing Strategy
DEVELOPMENT
 Business Analysis
PROCESS
 Product Development
 Test Marketing
 Commercialization
  Referred to as phase “zero”
 Ideas for refinement of existing
products/or for new products are
1. IDEA solicited from existing staff members,
GENERATION and also from market research.
 This phase specifies the target market
for the product, business goal, key
assumption and various different
constraints.
 Systematic Search for New Product Ideas
 Internal sources
1. IDEA
 Customers
GENERATION
 Competitors
 Distributors
 Suppliers
  Process to spot good ideas and drop
poor ones
 Criteria
2. IDEA  Market Size
SCREENING  Product Price
 Development Time & Costs
 Manufacturing costs
 Rate of return
 Product Concepts
Alternative
1. Develop Product Ideas into

3. CONCEPT
DEVELOPMENT of Target Customers
Product Concepts with Groups
& TESTING 2. Concept Testing - Test the

Concept testing is the process of

using quantitative methods and
qualitative methods to evaluate
consumer response to a product idea 3. Choose the Best One
prior to the introduction of a product
to the market.
 Marketing Strategy Statement Formulation

Part One - Overall:

Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
4. MARKETING
STRATEGY Part Two - Short-Term:
Product’s Planned Price
DEVELOPMENT Distribution
Marketing Budget

Part Three - Long-Term:

Sales & Profit Goals
Marketing Mix Strategy
 If Yes, Move to
Product Development
If No, Eliminate
Product Concept ANALYSIS
5. BUSINESS
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
  Must be alert to quickly develop
opportunities
6. PRODUCT  Focus on markets or product categories
DEVELOPMENT consistent with organization’s
objectives, resources, capabilities and
strengths
 Securing a competitive advantage
 Standard
Controlled
Test Market
Test Market
7. TEST Full marketing campaign A few stores that have
in a small number of agreed to carry new
MARKETING representative cities. products for a fee.

Test marketing is an experiment conducted Simulated

in a field laboratory ( test market)
comprising of actual stores and real-life
Test Market
buying situations, without the buyers Test in a simulated
knowing they are participating in an shopping environment
evaluation exercise. Test marketing may to a sample of
last from few weeks to consumers.
several months.
STANDARD TEST MARKETING

 Few representative cities,

 Good shelf exposure.
 Full Advertisement and Promotion campaign.
 In this method company have to take following decisions:
- HOW MANY TEST CITIES?
- WHICH CITIES?
- LENGTH OF TEST?
- WHAT INFORMATION TO BE COLLECTED?
- WHAT ACTION TO TAKE?
CONTROLLED TEST MARKETING

 A panel of stores carries new product for a fee.

 Specific number of stores and geographic location.
 Controlled shelf position; number of facings,
 Sales are measured at check out.
 A sample of consumers interviewed later to give their impression of the product.
 Disadvantage:
 This technique exposes the product and its
 features to competitors’ scrutiny.
SIMULATED TEST MARKETING

 30 to 40 qualified shoppers were called and questioned brand familiarity and

preferences in a specific product category.
 These consumers attended a brief screening of well known as well as new TV
commercials or print ads.
 Consumer are provided small amount of money and they are invited to a store where
they may buy any items.
 This provides a measure of the ads relative effectiveness against competing ads in the
market.
 This method gives fairly accurate result of effect of ads and trial rates. The results are
incorporated in to new product forecasting model to project ultimate sales levels.
 TEST MARKETING
Approach Advantages Disadvantages
Standard • conducted in a • the marketer gets to measure the • competitors learn about the
limited number of real-world performance of its marketer's new product or new
cities that are a fair marketing plan marketing strategies well before
representation of the the national introduction
national market • very expensive and can take as
long as three years to complete
Controlled • the research supplier • distribution is guaranteed • the marketer cannot gauge
offers the marketer a retailer's reactions to the new
panel of stores product
• competitors can look at the new
product before its national launch
Simulated • not conducted in real- • significantly faster and cheaper than
world markets; they standard test markets because the
are laboratory tests marketer does not have to execute
the entire marketing plan
  Based on the feedback, the product
is launched on a full scale to the
8. desired segments.
COMMERCIALIZATION  Products produced during product
ramp up are sent to preferred
customers and careful evaluation is
done to checkout remaining flaws.
STEVE JOBS INTRODUCES IPHONE IN 2007

https://www.youtube.com/watch?v=vN4U5FqrOdQ
PRODUCT LIFE CYCLE
Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments ($)
INTRODUCTION
Sales Low sales

Costs High cost per customer

Profits Negative

Create product awareness

Marketing Objectives and trial

Product Offer a basic product

Price Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early

adopters and dealers
GROWTH
Sales Rapidly rising sales

Costs Average cost per customer

Profits Rising profits

Marketing Objectives Maximize market share

Product Offer product extensions, service, warranty

Price Price to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the mass

market
MATURITY
Sales Peak sales

Costs Low cost per customer

Profits High profits

Marketing Objectives Maximize profit while defending

market share

Product Diversify brand and models

Price Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

DECLINE
Sales Declining sales

Costs Low cost per customer

Profits Declining profits

Marketing Objectives Reduce expenditure and milk the brand

Product Phase out weak items

Price Cut price

Distribution Go selective: phase out unprofitable outlets

Advertising Reduce to level needed to retain

hard-core loyal customers
  New product development drives
growth.
 Market research is critical to the
success of a new product launch.
SUMMARY
 Market research is a continuous
process as customer needs, your
business and the environment changes.