New Product Development

Prof. Grover
New Product Development - Challenges

New Product Development (6-categories)

• New to world – new products for new markets
(Pentium)
• New to market – repositioning to new markets or
segments (Alto for rural market)
• New to seller – additions to existing product lines
(Alto car)
• New to producer – new product line (Maruti-
Varna)
• New to existing market – new product with
better (lower cost) performance (M-800 with
MPFI)
New Product Development - Challenges

Consumer tastes are changing fast

Cos. need to bring in stream of new products
and services
New Product Strategy must match Co.
objectives
The route to new product are 3 three:
Acquisition (buy another company) (Kelvinator
bought by Whirlpool?)
Acquire patents from another company (Crocin
tablets/ syrup: Glaxo SKF; Cibaca toothpaste:
Glaxo to P&G)
Licensing to manufacture
Produce some one else's’ product
New Product Development - Challenges

New Product: different or new in ANY way

(Computer, iPod, Mobile phone, Any
other ?)
Such products come from own R&D Dept.
Innovation can be very risky due to high
cost.
Ex_ Clorox detergent; new coke;
New product survival rate expected is 20%
It is necessary to reduce this failure rate; by
systematic new product development process
 3
New Product Development: Major Stages

Idea Generation

Idea Screening

Concept Development and Testing

Marketing Strategy

Business Analysis

Product Development

Test Marketing
 New Product Development Process
Stage 1 Idea Generation and Sources
• Customers
• Employees
• Competitors
• Need formal program: R&D
• Any source of idea is good; petrol^food;
books^coffee; ipod^portable-handy
• Ideas can be Promising, Marginal or
Rejects
New Product Development Process (2)
Stage 2 Idea Screening
• In pharmacy, 1 of 5,000 new drug ideas is common
• In autos, 1 of 20 new car concepts is made to
prototype
• In industrial products, 1 in 10 new ideas see the light
of the day
• Why? because brainstorming and research cut them
down.
• Short and long run viability performance
• Social issues:
• Consumer welfare
• Safety
 Areas of Relative Product Product
Success wt. score Rating

Unique 0.4 80 32

High 0.3 60 18
performance
Low 0.3 50 15
competition
New Product Development Process (3)

Stage 3 Concept Development & Testing

1. Concept development
2. Concept testing
3. Concept analysis – Examine
consumer perceptions and
acceptability
New Product Development Process (4)

Stage 4 Marketing strategy

1. To introduce product in market.
2. Target market size, Structure,
Behaviour
3. Consider views of retailers and
wholesaler
4. Evaluate convenient nutritious
inexpensive breakfast
New Product Development Process (5)

Stage 5 Business Analysis

1. Estimating total sales
2. Estimating costs and profits
3. If found viable go to development
stage
New Product Development Process (6)

Stage 6 Product Development (can go hand-in-

hand with business analysis)
1. Product tests (physical proto-types or
virtual, product ranking)
2. Risky: (performance results)
3. Consumer marketing testing
4. Business goods marketing testing
5. Prototype product and marketing
strategy
6. Longest process
New Product Development Process (7)

Stage 7 Test Marketing

1. Standard test markets
2. Controlled test markets
3. Simulated test markets
• How many cities (2-6);
Select Test Cities (Delhi
or Mumbai?); length of
test (few months to a
year).
• Sometimes, line
extensions are not tested
New Product Development Process (8)
Stage 8 Commercialization

WHEN • Timing
WHERE • Geographic strategy
TO WHOM • Target market prospects
• Introductory market strategy
HOW

• Commercialization takes a
substantial amount of
investment (New Coke)
• Some firms “roll out” their
products gradually (movies)
 New Product Development Process (9)
Stage 9 Consumer Adoption Process

What is Adoption?  Factors influencing adoption:

• Adoption is an
individual’s decision to • Readiness to try
become a regular user of
a product. • Characteristics of
innovation;
• Organizational readiness to
adopt innovation
• Some firms “roll out” their
products gradually (movies)
New Product Development Process (9)
Stages in the Adoption Process
Awareness

Interest

Evaluation

Trial

Adoption
Adopter Categorization
Spread of New Products:
Diffusion of Innovation

Innovators (first 2½%)

Early adopters (next 13½% )
Early majority (next 34% )
Late majority (next 34%)
Laggards (last 16% )
 Ansoff’s Matrix (Product/Market Matrix)

Existing New
Markets Markets
Pro duct s
Ex is tin g

Market Market Development

Penetration
Prod ucts

Product Development Diversification

New
Fashion Changes Quickly
How to Have New Product Failure
– New product failure (70-80% of brands; 80%
packaged goods)
– How to fail:
Offer no unique benefit (Pepsi’s clear soda)
Race to market (Netscape)
Give little thought to promotion ( )
Give little thought to competition (Wal-mart’s
impact)
Skip research or conduct half-baked research
Try just one new product (top consumer good
companies average trying 75 new products a
year)
Historic product failures
Diversify with new products
 Summary
Categories of New Products
New Product Development Process
Global / spread of new products
Diffusion of Innovations
New product failures