new product developmet

New Product Development Process


Presented to:

Sir Mohsin-ul-Mulk


Presented By:Haseeb Murtaza

Shoaib AsifMehmona Saeed

Muhammad Shahid


Presentation OutlineNew product definitionTypes of new productsNeed for new Product developmentNew product development processProduct life cycleCauses of New product’s failureExamples (Pakistan’s perspective)References


New products may be defined as

Any product, service, or idea not currently made or marketed by a company

OR

which the consumer may perceive as new.


New Product Definition

Types of new productsChanges to Augmented ProductsCore Product RevisionLine ExtensionNew Product LinesRepositionsCompletely New


Need for new ProductsTo keep maximum market shareTo retain customersCreate Competitive edge over competitorsRapid change in technologyHowever, firms must innovate in order to surviveTherefore, managing the new product development process is a key to a healthy organizationIn competitive markets, the best and strongest firms sustain growth throughthe introduction of new products andservicesto meet the changing needs of the consumers


Systematic Product Development Process:New product development process consists on the following stages

Idea GenerationIdea screeningConcept development and testingMarketing strategyBusiness analysisProduct developmentTest MarketingCommercialization


1-Idea Generation:It is the systematic search for new- product ideasMajor sources of new product ideas include Internal source and External sourcesInternal Sources– Formal research in the company– Brains of executives, scientists, engineers,

manufacturing staff, sales people– Development of entrepreneurial programs for employees

within the company– 3M’s well known “15 percent Rule” allows employees to

work on projects of their own interest External Sources– Watching and listening customers– Competitors– Distributors– Suppliers


2-Idea Screening:

Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible

The purpose of the idea screening is to reduce the number of ideas

Product development costs rise greatly in later stages, so the company wants to go ahead only with the product ideas that will turn into profitable products


3-Concept Development and TestingIn includes product idea, product concept and product imageA Product Idea is an idea for a possible product that the company can see itself offering to the marketA Product concept is a detailed version of the

idea stated in meaningful consumer termsA Product image is the way consumers perceive an actual or potential productConcept Testing refers to testing new-product concepts with a group pf target consumers to find out if the concepts have strong consumer appealVirtual reality is used as a tool to test the product concept


4-Marketing Strategy Development

In this stage, an initial marketing strategy is designed for the new product based on the product conceptMarketing strategy statement includes there parts First part of the marketing strategy focuses on – Target market– Planned product positioning– Sales– Market share– Profit goals for next three or five years


Second part of the marketing strategy focuses on – Products planned price– Distribution channels– Marketing budget

Third part of the marketing strategy focuses on – Planned long-run sales– Profit goals– Marketing mix strategy


5-Business AnalysisIn this stage, main focus is on the review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives

Minimum sales and maximum sales, nature of the risksManagement takes decisions about the new product on the basis of sales and cost figures, degree of risk and new products financial attractiveness


6-Product DevelopmentDeveloping the product concept into a physical product in order to ensure that the product idea can be turned into a workable product

In this stage , product concept is shaped up into the physical form

R&D and engineers work on the new product to bring it into the physical form


7-Test Marketing

After the functional and customer test, a new product comes in the stage of test marketingTest Marketing is the stage of the new-product development in which product marketing programare tested in more realistic market settingsTest Marketing gives the marketer experience with marketing the product before going to the great expense of full introductionIt lets the company test the product and its entire marketing program e.g positioning strategy, advertising, distribution, pricing, branding and packages, and budget levels


Approaches used in the Test Marketingare – Standard Test Marketing– Simulated Test Markets

In Standard Test Marketing, company selects– A small number of representative cities– Conducts full marketing campaigns in these

cities– Uses store audits– Distributor surveys

And the results are used to- Forecast national sales and profits– Discover potential product problems– Fine-tune the marketing campaigns


In Simulated Test Markets , companies or research firms (like ACNielson) – Show adds and promotions for a variety of

products including the new product– A sample of customers is selected and they are

given some money and are invited in the laboratory or real store where they use the money to buy items

– The researcher notes down how many customers bought new products and competing brands

– Researcher asks questions to the customers about their purchases and non purchases


8-Commercialization

In the new product development process, commercialization is the final stage in which the new product is introduced in the real market.


Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Product Life Cycle

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low sales Low sales

High cost per customerHigh cost per customer

NegativeNegativeCreate product awareness

and trialCreate product awareness

and trialOffer a basic productOffer a basic product

Use cost-plus Use cost-plus

DistributionDistribution Build selective distributionBuild selective distribution

AdvertisingAdvertising Build product awareness among early adopters and dealers

Build product awareness among early adopters and dealers

Introduction stage of the product life cycle

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Rapidly rising sales Rapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profits

Maximize market shareMaximize market shareOffer product extensions,

service, warrantyOffer product extensions,

service, warrantyPrice to penetrate marketPrice to penetrate market

DistributionDistribution Build intensive distributionBuild intensive distribution

AdvertisingAdvertising Build awareness and interest in the mass market

Build awareness and interest in the mass market

Growth stage of Product life cycle

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Peak salesPeak sales

Low cost per customerLow cost per customer

High profitsHigh profitsMaximize profit while defending

market shareMaximize profit while defending

market shareDiversify brand and modelsDiversify brand and models

Price to match or best competitors

Price to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefits

Stress brand differences and benefits

Maturity stage of Product life cycle

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profitsReduce expenditure and milk the

brandReduce expenditure and milk the

brandPhase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers

Decline stage of the Product life cycle

Causes of failure of new products

Poor managementUnexpected delays and time to market too longIdea good but market overestimatedInsufficient demand for the product or serviceNot as well designed as it should have been

Incorrectly positionedIncorrectly pricedCompetitors fight back more aggressively than

expected.


To create successful new products, the company must:

Understand it’s customers, markets and competitors Develop products that deliver superior value to

customers.

References• www.learnthat.com• www.tutor2u.net• www.management-hub.com• www.adept-plm.com• www.answer.com


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