Developing New Products

What is a New Product?

• The meaning of this relative term is
influenced by the perceptions of
marketers and consumers. In
general, it refers to a product new to
a company or any recently
introduced product that offers some
benefit that other products do not.
Categories of new products:
• New-to-the-world products
• New product lines
• Additions to existing product lines
• Improvements and revisions of existing products
• Repositioning
• Cost reductions
 New-Product Development
Principles
• Work with potential customers
• Let employees choose projects
• Give employees ‘dabble’ time
• Know when to let go
 Let’s look at…..
• Launching new products as brand
extensions into related product
categories is one means of
broadening the brand meaning. For
instance Nike started as running-
shoe manufacturer but now
competes in the sports market with
all types of athletic shoes, clothing,
and equipment.
• In an economy of rapid change, continuous
innovation is necessary. Most companies
rarely innovate, some innovate occasionally,
and a few innovate continuously. In the last
category, Sony, Dell, Oracle have been stock-
price gain leaders. These companies have
created a positive attitude toward innovation
and risk taking; they have routinized the
innovation process; they practice teamwork;
and they allow their people to experiment
and even fail.
 Factors tend to hinder new-
product development
• Shortage of important ideas in
certain areas
• Fragmented markets
• Cost of development
• Capital shortages
• Faster required development time
• Shorter product life cycle
• NPD requires senior management to
define business domains, product
categories, and specific criteria.
General Motors has a hefty four
million dollars benchmark it must
apply to new car models-this is what
it costs to get a new vehicle into
production.
 One company established the
following acceptance criteria:
• Product can be introduced within five years.
• The product has a market potential of at least
fifty million dollars and a fifteen percent
growth rate.
• The product would provide at least 30 percent
return on sales and 40 percent on
investment.
• The product would achieve technical or
market leadership.
The Consumer’s Perspective on
Newness
• From a consumer’s perspective, new products
vary in degree of newness. There are three
types of innovations: discontinuous,
dynamically continuous and continuous.
• Discontinuous innovations are pioneering
products so new that no previous product
performed an equivalent function. As a result
of this near-complete newness, new
consumption or usage patterns are required.
For e.g., lithium battery pacemaker.
• Dynamically Continuous Innovation A
product that is different from previously
available products but that does not strikingly
change buying or usage patterns. For e.g.,
hybrid gasoline/electric motor car.
• Continuous innovation is a commonplace
change that is part of an ongoing product
modification effort, such as a minor alteration
of a product or the introduction of an
imitative product. For e.g., flat-panel
computer monitor as it takes up less space.
 The characteristics of
success
• Relative advantage: the ability of a product to
offer clear-cut advantages over competing
offerings.
• Trialability: The ability of a product to be
tested by possible future users with little risk
or effort.
• Distribution of free samples
• Observability: The ability of a product to
display to consumers its advantages over
existing products.
 New-Product Development
Process
Idea Screening Idea Development Commercial
Generation Evaluation -ization
deas from: Strengths Concept R&D Finalize
Customers and testing Develop product and
and users Weaknesses Customer model or marketing
Marketing Fit with reactions service plan
research objectives Rough prototype Start
Competitors Market estimates Test production
Other trends of cost, marketing and
markets Rough ROI sales, mix marketing
Company estimate profits Revise plans “Roll out” in
people as needed select
Middlemen ROI estimate markets
Final ROI
estimate