New Product

Development

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Reasons
 Customer needs & tastes are changing.
 Technologies are changing.
 PLCs are short.
 Increasing competition.
At the same time new product development is

risky. There are high chances of failure

associated with it. Reasons for failure are:
 Idea is good but market size is
overestimated.
 Product is not well designed.
 Product is incorrectly positioned.
 Competitors fight back harder than expected.
 Social & governmental constraints (consumer
safety & environmental concerns).
 Shortage of funds.
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Reasons & types

 Eg: Coke, one of the biggest beverage

companies, came up with vanilla coke.
The product failed miserably in India.
Activity – Identify some new products that

have failed in the recent past.

Types of new products:

 Really innovative – Computer, photocopy

machine. 3M comes up with many
innovations.
 Significantly different – Mobile phones,
digital cameras.
 Imitative – New to the company but not
new to the market. Eg: new models of
automobiles.
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 Process
Idea Generation Commercialization

Idea Screening Market Testing

Concept Development & Testing Product Development

Marketing Strategy Business Analysis

Development

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Process
Idea Generation:
 Analyzing customer needs. Eg: Officials at 3M
conducted focus group interviews across USA
to find out what problems people face with
steel wool/ traditional soap pads. They found
out that the main problem was that utensils
got scratched. Thus the idea of Scotch Brite
came.
 Learning from competitors’ products.
 Sales representatives – a good source of ideas as
they are in direct contact with customers.
Idea Screening: Evaluating different new ideas &

deciding which one needs attention. Company

has to avoid two types of errors.
 Drop error – when company dismisses a good
idea. People generally find fault with other’s
ideas.
 Go error – when company permits a poor idea to
go into development & commercialization. 5
Process

Concept development & testing: A product

idea is a possible product the company
might offer. A product concept is an
elaborated version of the idea expressed in
meaningful consumer terms.
Eg: Idea – Health drink; Concept may be

1.Instant breakfast
2.Tasty snack drink for children.
3.Health supplement for elderly.
Concept testing involves presenting the

concept to target consumers & getting

their reactions. After receiving information
consumers respond to the following
questions:
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 Process
Question Product dimension measured
Are the benefits clear to you? Communicability
Is it filling your need? Need level
Do other products meet this Gap level
need?
Is price reasonable in relation Perceived value
to value?
Would you buy the product? Purchase intention
How often would you buy the Purchase frequency
product?
Marketing strategy development: After testing the
product manager must develop a preliminary marketing
strategy. Consists of three parts:
1.Define target market size, positioning.
2.Outline the planned price, distribution strategy &
marketing budget for the first year.
3.Describes the long-run sales & profit goals.

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Process
Business Analysis: Here the company evaluates the
business attractiveness by the following:
1. Estimating sales – management must decide
whether sales will be high enough to yield
satisfactory profits-depends on whether the
product is one time purchased product or a
frequently purchased product.
In the first case sales rise at the beginning, peak &

then fall as the no. of potential buyers is

exhausted. In the second case the sales rise, fall
slightly & then plateaus as repeat purchase
occurs.
2. Estimating costs & profits – costs can be had

from R&D, manufacturing, marketing & finance

departments. Break-even analysis is the
commonest technique used.
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Process
Product development: The R&D or engineering


department converts the idea/ concept into a

physical product. They change the desired customer
attributes to engineering/ R&D attributes. Eg: In the
health drink example

Customer attributes R&D attributes
Snack drink for children Tasty
Health supplement for Vital nutrients
elderly
C o m p a n ie s m a y g o fo r a lp h a te stin g
( testing within the firm to see how it
p e rfo rm s) & b e ta te stin g ( e n listin g a g ro u p
o f cu sto m e rs to u se th e p ro to typ e &g ive
fe e d b a ck ).

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Process
Market testing: product is given a brand name,
package & put to market test. Not all companies
go for it. Eg: Revlon, as most of their cosmetics
are highly priced.
Consumer goods market testing –

1. Sales wave research-consumers who initially try

the product at no cost are reoffered the
product at lower prices. Process repeated to
see how many select again.
2. Simulated test marketing-consumers are shown
ads of running products as well as new
product & given some money & asked to
shop. Company notes how many of them buy
the new product.
3. Controlled test marketing-some stores are
selected that carry out the new product for a
fee. Response can be judged by sales data.
4. Test markets-few cities are selected & product is
promoted there. After looking at the result
the product is launched in the whole country. 10
Process & Adoption

Commercialization: some factors are

important.
When (timing)- first entry, parallel entry,

late entry.
Where (location)-a specific zone or whole

country.
To whom (prospects)-targeting the best

prospects (health drink example-

children/elderly/adults) .


 Consumer adoption – an individual’s 11

Adoption process

Stage Activity
Awareness Exposed to the product, becomes a prospect
Interest Interested enough to seek information
Evaluation Compares with other products
Trial Tries a sample
Adoption Decides to use it
Confirmation Becomes a user after assuring that the
purchase decision was correct

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