new product development process by tamzidul amin

8/6/2019 New Product Development Process by Tamzidul Amin

1/26

University of Science & Technology

Chittagong (USTC)

[MBA 13th

batch]

New Product

DevelopmentMarketing Strategy on New Product

Development Process

Submitted to:Mr.Md.Monowarul Islam Bhuiyan

Faculty, Marketing ManagementMBA Program, USTC

Submit Date: 26th Nov, 2010

Submitted by:Mr. Tamzidul Amin (Group Leader),Mr. Md. Nur-e Rahman, Mr. Md. Parvez,

Mr. Md. Rakibul Islam, Mr. Md Shaheenul Islam,Mr. Md. Mozibur Rahman


2/26

26 November, 2010

Mr. Monowarul Islam BhuiyanFaculty, Marketing ManagementMBA Program

University of Science & Technology Chittagong (USTC)

Subject: Submission of Term Paper assignment on Marketing Strategy onNew Product Development Process

Dear Sir,

It is our pleasure to submit the term paper on the topic MarketingStrategy on New Product Development Process of the course programMarketing Management for your kind consideration.

We have made earnest efforts to study related materials, documents, &study relevant records for preparation for the term paper. This reportcontains description of different types of new products, marketing strategyfor these products taken by the company & finally the outcome.

Within very short time, we have to made this repot as comprehensive aspossible. But there may be some mistakes due to various limitations. For thisreason, we solicit your kind consideration in this regard.

We thank you for letting us the opportunity to accomplish a term paper on a

topic of present vital importance in Bangladesh. This report has definitelygiven us an exceptional experience that will be of use in the future. Wesincerely hope this report will gratify to your expectations.

Thank You.

Sincerely Yours

--------------------------------------------------Tamzidul AminRoll: 05(Five), 13th Batch, 3rd SemesterOn behalf of Group A

2 | P a g e P r e p a r e d b y T A M Z I D U L A M I N


3/26

Table of Indexes:



4/26


Index Name PageNo

1. Introduction

04

2. What is product?

05

3. What is new product?

05

4. What is NPD process?

05

5. Why develop new product?

06

6. Types of new product

06

7. Stages of NPD

07

8. Idea generation

07

9. Idea screening

08

10. Concept development& testing

09

11. Marketing strategydevelopment

09

12. Business analysis

09

13. Product development

10

14. Test marketing

11

15. Commercialization

12

16. New productintroduction

12

17.A Sample PharmaceuticalsNPD flowchart

13

18. Case Study

15

19. Source of References

23


5/26

INTRODUCTION

The development of a new product (herein after New product developmentas NPD) by a company begins when the need to create a new productappears either due to the emergence of a new technology, or theappearance of a competitive product or a change in the existing legalframework and is completed with the final introduction of the product in themarket.

A company or an enterprise may proceed to a new product developmentwhether that company or enterprise is part of a rapidly changing market ornot. (A rapidly changing market is one where a rapid change in technologyleads to swift changes in the structure of the market, the consumer habitsand their attitude).

Those new products may be based on other already existing ones and act asa complement or improvement to existing offerings, or may be totally newproducts based on new technology without the need of support from others.

A company or enterprise decision to develop a new product is probably one

of the most important decisions to be made in the history of that company orenterprise, because a new product development is directly linked with thedevelopment and the evolution of that very company or enterprise. Thefollowing question, which should be raised each time, is deemed necessaryfor the development of a new product, and it is very characteristic andindicates the relationship between a new product development and thefuture evolution of the company or enterprise: Where does the companystand today and where should it be a decade later?

For a company to develop a new product, the development and goodmanagement of a Research and Development (R&D) department within the

company is essential. The administration, engagement and improvement ofsuch departments constitute a fairly difficult task, given the fact that marketconditions and demands constantly change and future developments may beunpredictable.

For the proper development of a new product, an enterprise should followthe NPD Model. It is important for that enterprise to use a questionnaire -check list in order to obtain an initial estimate for the need to develop a new



6/26

product, the way to develop it and the extent to which this development isfeasible.

WHAT IS PRODUCT?

The product is defined as a "thing produced by labor or effort" or the "resultof an act or a process". In marketing, the product is anything that can be

offered to a market that might satisfy a want or need. A product can bedivided into two types, which are tangible & intangible products. Tangibleproducts are toothpaste, soap, biscuit etc & intangible products are teaching,doctors consultation, lawyers, celebrity, Ideas, places etc.

WHAT IS NEW PRODUCT?

A product that opens an entirely new market A product that adapt or replaces an existing product An old product introduced in a new market An old product packaged in a different way

An old product marketed in a different way

WHAT IS NEW PRODUCT DEVELOPMENT (NPD) PROCESS?NPD is a process which is designed to develop, test and consider the viabilityof products which are new to the market in order to ensure the growth orsurvival of the organization. In other words, NPD is the term used to describethe complete process of bringing a new product or service to market.

Newprodu

ct

Strategy

Ideagenerat

ion

Ideascreen

ing

Conceptdevelopm

ent

& testing

Business

analy

sis

Productdevelopm

ent

& testing

Testmarket

ingLaun

ch

Figure-01: Shows Booz Allen Hamilton model of NPD



7/26

Figure-02: Shows Stage-GateTM process of NPD

WHY DEVELOP NEW PRODUCT?

To add to product portfolio To create stars & cash cows for the future

To replace declining products To take advantage of new technology To maintain/increase market share

To defeat rivals

To keep up with rivals To maintain competitive advantage

To fill a gap in the market

To bring in new customers

TYPES OF NEW PRODUCT

New to the world products-innovative products New product lines-to allow the firm to enter an existing market Additions to product line-to supplement the firms existing product line Improvements and revisions of existing products Repositioned products-existing products targeted at new markets Cost reductions-new products that provide similar performance at

lower cost



8/26

Figure: Shows different types of new product

STAGES IN NEW PRODUCT DEVELOPMENT (NPD)

Idea generation

Idea screening

Concept development & testing

Marketing strategy development

Business analysis Product development

Test marketing

Commercialization

IDEA GENERATION

Every new product and every new product development process starts withthe idea generation. Idea generation is a process in which creative thinking isused to produce large amount of ideas for new products. It is very important

that all ideas no matter how ridiculous or extreme may sound, to begathered. The idea generation process should be on - going, have a specificpurpose, involve the whole of the company including its clientele orconsumers, use a variety of methods, have one person in charge and notevaluate the gathered ideas. During the idea generation - gathering processone should not criticize the ideas of others, should be freewheeling andgenerate as many ideas as possible. The management of ideas is also very



9/26

important at this stage due to the large number of ideas to be selected andtheir diversity.

Idea generation steps are as below:

Step-01: Setting the brainstorming teamStep-02: Setting the brainstorming processStep-03: Contacting initial individual brainstormingStep-04: Concluding individual brainstorming resultsStep-05: Conclude individual brainstormingStep-06: Contacting group brainstormingStep-07: Concluding brainstorming preliminary resultsStep-08: Assessing brainstorming preliminary resultsStep-09: Refining brainstorming preliminary resultsStep-10: Send ideas to management for approving step forward to nextstage of New Product Development

IDEA SCREENING

Screening ideas based on company objectives:

The assessment of new product ideas based on the objectives of aspecific enterprise and its strategic course in any market may enhance

its objectives, also allowing it to select the optimum idea for thedevelopment of a new product in accordance with the future course ofthe enterprise as set through its strategic planning. This way, selectingthe appropriate strategy may also function as a guide for theassessment of various ideas and the adoption of the best one amongstthem.

Screening ideas based on sales and company profit:

Each new product to be developed or each new idea to be made into anew product should be capable of producing a minimum percentage ofsales, and consequently profit, for the enterprise. Prior to the

development of a new idea on a new product, many large enterprisesset minimum sales goals amounting to a 60% profit on the cost of theproduct development. If a small company is trying to face a largercompany that has set the above goals through the development of anew idea on a new product.

Screening ideas based on big customers & user:



10/26

An important issue that many companies, big or small, tend tooverlook is the assessment of new ideas, which could develop into newproducts, deriving from big customers and users. The most commonphenomenon is the full development of a product ensuing from a goodidea, without the slightest involvement of the end-users, due to the

large enthusiasm entailed in such a development. As a result, NPD mayfail, due to the lack of communication between the enterprise and itscustomers and the users of its products upon the assessment of newideas to be developed into products.

A comparison table between product & market involving risk:

SameProduc

t

ExtendedProductRange

IncrementalChange

Totally NewProduct

Same Market Low Low Medium MediumBetter MarketCoverage

Low Low Medium Medium

Related Market Medium Medium Medium HighTotally NewMarket

Medium Medium High High

CONCEPT DEVELOPMENT & TESTING

Develop the marketing and engineering details

a) Who is the target market and who is the decision maker inthe purchasing process?

b) What product features must the product incorporate?c) What benefits will the product provide?d) How will consumers react to the product?e) How will the product be produced most cost effectively?f) Prove feasibility through virtual computer aided rendering,

and rapid prototypingg) What will it cost to produce it?

Testing the Concept by asking a sample of prospective customers whatthey think of the idea

MARKETING STRATEGY DEVELOPMENT



11/26

What will be the target market for the product

How much sales we can achieve, what will be our market share

How much profit we can gain with this product

What pricing strategy we must be following

What distribution channel we must be using to reach to the market What is our future expected sales, profit marketing mix

BUSINESS ANALYSIS

A review of the sales, costs & profit projections for a new product tofind out whether these factors satisfy the firms objective

Estimate potential sales, income, breakeven point, profit & return oninvestment (ROI) from new ideas

Projecting probable costs & sales, will profits reach the firms targets?

PRODUCT DEVELOPMENT

Research & development turns the idea into a product

Engineering & production issues are resolved Concerned with design, materials, production process, quality & safety Developing the product concept into physical product to ensure that

the product idea can be turned into a workable product Translating the idea into reality through prototypes or simulations Involves the development of a prototype



12/26

Figure: Shows Product Development Structure

Design Mix:Design mix is another important part of a NPD process. Design mix dividedinto three categories. They are:

Formal design - concerned with aesthetics. Does the product lookgood?

Functional design - concerned with performance. Does it work? Is it

reliable? Economy of manufacture does design allow it to be made efficientlyand at a cost which allows for profit?

Characteristic of a good design: Fit for purpose

Reliable

Pleasing appearance



13/26

Easy to Use

Convenient for user

Efficient in use

Easy to maintain

Safe to use

Safe to manufacture Financially viable

Legal

Environmentally friendly

Consistent with the needs of the market

TEST MARKETING

Launching a product in a small geographical area

A filed experiment in realistic market setting

Releasing the product into a small but representative market where

customer reactions can be assessed and the marketing mix checked &adjusted.

Aims:a) To forecast likely results of a national launchb) To test the operational effectiveness of the marketing planc) To identify possible problemsd) To assess customer reaction

Problems of test marketing The test market might not be a true indicator.

Environment might change between the test & the national launch.

Competition may disrupt the test marketing by engaging in exceptionalmarketing activity.

Test marketing alerts competitors.

Largely but not entirely replaced by simulated test marketing.COMMERCIALIZATION / PRODUCT LAUNCH

Introducing a new product into the market

Timing is critical for success

There will be heavy promotion expenditure at the launch

Choice of skim or penetration pricing

The product has to well targeted & positioned

NEW PRODUCT INTRODUCTION

Three ways to introduce new products under the support of existingproducts:



14/26

Line Extension using an existing brand name on products within thesame category

Brand Extension using an existing brand name on products in a newcategory but within the same broadly defined market

Brand Stretching using an existing name on a product in a different

market

Factors in new product success

Development of a unique, superior product

Differentiation from rivals

Well conceived, properly executed launch

Top management backing

Market attractiveness the product should be aimed at attractivemarkets

Resources must be in place Speed & timely

Quality

Market Driven & Customer focus

Reasons for failure of launched products

Neglect of market research

Inaccurate market research

Poor marketing after launch

Poor distribution Product performance below expectation

Product too complex

Unforeseen events

Market not to ready for the products

Inadequate support for the product


A SAMPLE PHARMACEUTICALS NPD


15/26



16/26

CASE STUDY: NPD MARKETING APPROACH OF PRIMEBANK LTD.



17/26

BACKGROUND:

Many Bangladeshi companies currently distribute their images through the

Internet to clients all over the world, but the monetary transactions takeplace through conventional means. Some companies put messages onbulletin board, on ' internet yellow pages' with email links, and sometimesweb pages, but there never is a place to submit a credit card. This isbecause currently the government does not permit credit card charges overthe internet. However, the ISPs in Bangladesh do have the technology for e-commerce, and are anticipating governmental approval within the next year.Prime Bank Ltd. offers all kinds of Commercial Corporate and PersonalBanking services covering all segments of society within the framework ofBanking Company Act and rules and regulations laid down by our centralbank. Diversification of products and services include Corporate Banking,

Retail Banking and Consumer Banking right from industry to agriculture, andreal state to software.

SIX CATEGORIES OF NEW PRODUCTS-PRIME BANKS LOOKING FORAN ADDITIONNew Product Development process usually the possible productdevelopments are:

a. New-to-the-world productsb. New product linesc. Additions to existing service lines

d. Improvements and revisions of existing productse. Repositioningf. Cost reductionsPrime Bank has followed the Addition to their existing product lines. Theyhave followed the responsiveness of the IN HOUSE ONLINE BANKINGtobring to the customers in this regard. Also changing the motive of theinnovation in their existing banking services could bring them a meaningfulfruit to their operation.

CHALLENGES IN NEW - PRODUCT DEVELOPMENTPrime Bank has failed to get the market leading position for its delayed

performance in the activities to get it to the highest possible position in themarket. Elaborately meaningful contributions in the consumer mind canchange the position of Prime Bank into a new place where it can show theconsumers a new way to minimize the risk of their finance residing in thebank. The challenges PrimeBank could face are:

a. The product fails to gain sufficient distribution coverage or support



18/26

b. Development costs are higher than expectedc. Competitors fight back harder than expected

New concept could lead the consumers to an unseen experience that theymay not find comfortable. But for Prime Bank the introduction of new service

will definitely bring benefit for both the customers and the bank itself. Theexperienced management has overcome all those issues in advance to avoidthe failure of their possible new concept.

IDEA GENERATION-CUSTOMERS AND COMPETITORS HAVEPLAYED THE ROLE

One of our initiatives is to continuously upgrade the system withtechnological developments and industry standards. The Bank believesthat technology will greatly help us to serve the customers better andstreamline our cost of operation. Possible Idea generation boxes are as

follows:a) Customersb) Scientistsc) Competitorsd) Employeese) Channel members andf) Top Management

The bank was being motivated by Customers and Competitors greatly.But the employees were playing a supportive role to implement a newbanking system where they will have to use only single software to run

their daily operations rather than multiple ones. This will definitelyease their operational complications they face daily.

IDEA SCREENING-IT GOT THE HIGHEST PRIORITY

Maintaining the standard banking operations all banks are keen toreceive IT as a helping entity to enhance their process of service. PrimeBank was not different in this case for resolving their burning issues tobe solved professionally. The local banking system providers are nowunder process to develop centralized real time banking system. TheBank has observed that with previous system it is not possible to offer

modern delivery channel like SWIFT, ATM and POS network, SMSbanking, Internet Banking. Creating a banking system where thecustomers will be able to use any branch for their banking was the coreconcept. Also the issues the bank has followed to ease the operationalcomplicacies were in frontier too.

CONCEPT DEVELOPMENT AND TESTING-CUSTOMER CHOICEDOMINATED MOSTLY



19/26

The product idea for Prime Bank was to initiate a process where theconsumers will be able to do transactions in most possible ways fortheir easy operational services. For that purpose the bank has got theidea as follows: To allow consumers to do banking activities in most

possible roaming way.

Concept Development:Concepts have been developed to make a better deal with theconsumers to serve them in a better way. Initially the bank generatedtwo concepts which could make the journey possible and easygoing.

The concepts are:

a. Concept 1: Allowing customers to receive all banking information in

any branch along with the integrated service to use ATM over mostpossible outlets.

b. Concept 2: The banking service provided with online facilities tomeet the clients requirements over online Internet kiosks or home.

Concept Testing:

To test the possible services in the market Prime Bank was involved indealing with two concepts. The concepts were logical and also veryprosperous for the bank but it is not always possible to get the

concepts to become true always. Initial concept was succeeded in theincubator to reach the process of generating goodwill in the bankingservice market. When the consumers were asked some possiblebenefits they want from the bank and the respondent were veryfrequent to indicate the online banking system to which the bank isheading to.

Rapid Prototyping:

For initiating a service in a bank it is quiet impossible to build a

prototype as does not have any existence of a product

Virtual Reality:

The bank was keen to establish a sample issue where the consumerswere given chance to get the facilities of an online banking. They were



20/26

happy to receive the instructions and chose the idea of staying inqueue for less time

MARKETING STRATEGY DEVELOPMENT-WAS LESS FOCUSEDISSUE

Availing a healthy marketing status has put Prime Bank to avoid thisprocess to their new product development to enhance the customerrelationship in this process. The essentiality of developing marketingstrategy is not extremely necessary for this bank. Meaning theindication to meet the results of existing marketing practice in housecould save them from spending excessive time in this regard. Constantresponse from these non-interest benefits have been motivated themanagement not to invest money and time in refining the existingmarketing strategy for online banking. Putting full effort to the newlyadopted IT services was more important to Prime Bank to establish

their existing concept of Customer service at an ease. This hashelped the bank to think about the location benefits of its branches indifferent localities in regional dividing of Bangladesh to provide theirutmost service to the customers. Formulizing the customer beneficialsteps could help the bank to think twice not to spend time in this stepfor their newly developed product supported by IT enabled services.

BUSINESS ANALYSIS-COST MINIMIZED BY BENEFITS

After management develops the product concept and marketingstrategy, it can evaluate the proposals business attractiveness. Forproviding better and secured customer services through introduction ofmodern IT-based products through all of its branches, the Bank intendsto purchase a centralized branch banking software includingfollowing banking systems and processes:

a) Customer information systemb) Any Branch Banking

c) Commercial and corporate loans.d) SWIFT/Telex/FAX interfacese) Fund Transferf) Merchant Bankingg) Tele bankingh) Mobile bankingi) ATM interfacej) Credit Card/Debit Card interface



21/26

k) MICR clearing with PBM (Participating Bank Module)

The Bank has already short-listed three vendors for providing softwaresolution after going through a rigorous selection and evaluationprocesses. The status is such that one of the vendors could be selected

from these three vendors after completion of site visit and financialnegotiation.

After selection of software the Bank selected network infrastructure.Stabilization of software and network will take around 1 to 1 years.Then the Bank will go for ATM switching system and ATM and POSnetwork.

Estimated Total Sales

After the inauguration of this online banking service the expected

growth of the banking will start to continue in several ways:a) Consumer Bankingb) Merchant Bankingc) Inter Bank Transactions, etc.

The bank planned to get increased sales of their service at a sum of 5million a year. This will increase at a rate of 5% per year forintroducing the new concept in this regard.

The cost has incurred at this given rate:Software Cost (10user/Branch X 20 Branch) USD 1.5 Million

Hardware for Head Office Data Centre USD 1.0 MillionHardware for Branches USD 0.6 Million Total USD 3.1 Million (Eqv., @ 70, Tk 21,70,00,000)

Break-even Analysis

Introduction of a new service bundled with existing services will not beable to get an idea of Break-even Analysis in this case.

Risk Analysis

In House Online Banking as & traditional banking methods,security is a primary concern. At the Bank every precaution necessaryto be sure that, the information is transmitted safely and securely. Thelatest methods in Online banking system security are used to increaseand monitor the integrity and security of the system. The security ofthe Bank of Online banking application is addressed at three levels.



22/26

The first concern is the security of customer information as it is sentfrom the customer's PC to the web server. The second area concernsthe security of the environment in which the Online banking server andcustomer information database reside. Finally, security measures arein place to prevent unauthorized users from attempting to log into the

online banking section of the web site.

PRODUCT DEVELOPMENT-EASING THE OPERATION

In product development phase the relational criterion are:

a) Physical Prototypes The R & D department developed onephysical version of the service concept. Service logic design hasbeen developed in this phase for opening new systematic

operation of Prime Bank Limited.b) Customer Tests 1. Alpha testing: The service was introduced to the in house

employees to generate some feedback. The feedbackswere then tested by the developers to give a firm positionof the marketing process.

2. Beta testing: After the alpha testing, consumers were sentto a sample branch activity to get the idea of true onlinebranch banking. Data were collected from the usagefeedback of the consumers.

MARKET TESTING-HINDRANCES MADE IT FAILIn product developmental process the consumers are given chances totest the service but the service is too sensitive to give it to theconsumers to test for the initial time. Though the tests are possible likethese:

a) Trial

b) First repeatc) Adoption

d) Usage frequency

The consumers were closely monitored to get the information thosewho where choosing the online banking system and who were

choosing the traditional system of banking. Four Major Method ofConsumer service market testing:

a) Simulated Test Marketingb) Controlled Test Marketingc) Test Markets

Q. How many test cities?



23/26

Only one branch was in the process to test the new version of thesoftware. That is only one location was being tested in this process.

Q. Which cities? The Motijheel Branch was in the queue to test the consumer

responses.

Q. Length of test?For 30 days the bank was under surveillance to test the service.

Q. What information?A sample counter was created to get the benefit of in House OnlineBanking system.

A sample team has been sent to India to be trained by the experts of thesoftware developers. After finishing the training sample team had been

deployed in the Motijheel Branch to start the sample kiosk to get theresponses of the consumers in the branch to do banking.

COMMERCIALIZATION-THE FINAL PROCESS TO IGNITE SERVICE

Usually Commercialization is the process to take the final steps toreach the market in a progressive way. In this regard, Prime Bank wasdeveloping the product to refine the whole banking service in a veryquick and fabricated version. The bank has succeeded to get theattention of prolonged benefits from the market. In typical

commercialization process, these steps are generally followed:

a) Launch the productb) Produce and place advertisements and other promotionsc) Fill the distribution pipeline with productd) Critical path analysis is most useful at this stage

When: Right after the testing process has been finished the servicewas introduced to the consumers of Prime Bank Limited. For PrimeBank the service was First Entry. From the text possible entries are:

a) First entry

b) Parallel entryc) Late entry

Whereas for the marker it is a late entry for existing competitors the use of online

service is very common for them.

Where: All branches of Prime Bank have been covered under thisfacility to provide the benefit to all of its consumers.



24/26

To Whom: Existing and prosperous consumers were in the target ofPBL to introduce the online banking system inside its house.

How: The media coverage has done to attract the customer attention.

CONCLUSION

The most important requirement for banking applications is that ofSecurity, particularly if the customer interactions are to happenthrough an insecure channel like the Internet. The primary aspects of

security in Internet Banking would be Authentication and Non-Repudiation apart from Privacy. It is also well known that only usingPublic Key Infrastructures and the features like digital signatures theyoffer needs can satisfy such a gamut of security. All the other tentativemeasures used like passwords. The biggest inter-banking initiative tilldate rides on a well-defined policy. Specific rules regulation fromcentral bank and government regulation are necessary to defendfinancial institutes or Banks to strengthen their ability to prevent themwhen any party involved in a transaction denying after it took place.

THE END



25/26

SOURCE OF REFERENCES:

1. www.wikipedia.org2. Urban and Regional Innovation Research Unit, Aristotle University of

Thessaloniki

3. Prime Bank Ltd, Dhaka, Bangladesh.4. Marketing Management by Philip Kotler5. Stage-Gate Research paper.6.The Marketing Book by Michael J. Baker & Susan J. Hart7. Marketing Presentation - New Product development (http://tutor2u.net)

http://www.wikipedia.org/http://www.scribd.com/doc/15040347/Marketing-Management-by-Philip-Kotlerhttp://www.wikipedia.org/http://www.scribd.com/doc/15040347/Marketing-Management-by-Philip-Kotler


26/26

"Dreams are not what you see when you sleep; dreams are whatkeep you from sleeping.!!!


new product development process by tamzidul amin

Documents