New product Development

New product development (NPD) is a process which is designed to develop, test and consider the viability of products which are
new to the market, in order to ensure the growth and survival of the organization.

A new product :

1. A product that opens up an entirely new market.

2. A product that adapts or replaces and existing product.
3. A product that significantly broadens the market for an existing product.
4. An old product introduced in a new market.
5. An old product packaged in a different way.
6. An old product marketed in a different way.

Reasons for new product development:

1. Increase market share by offering more choice or updating older products.

2. Appeal to new segments.
3. Diversify into new markets.
4. Improve relations with distributors.
5. Maintain the firm’s reputation as a leading edge company.
6. Even out peaks and trough in demand.
7. Make better use of the organization’s resources.

Types of New Product:

1. New to the world products-innovative products.

2. New product lines-to allow the firm to enter an existing market.
3. Additions to product line-to supplement the firm’s existing product line.
4. Improvement and revisions of existing products.
5. Repositioned products-existing products targeted at new markets.
6. Cost reductions- new products that provide similar performance at low cost.

Stages of New product development:

1. IDEA GENERATION: Idea generation is a continuous, systematic

search for new product opportunities. It involves delineating
sources of new ideas and methods of generating them.

2.IDEA SCREENING:

✔ Screening of products to spot good ideas

and drop poor ones as soon as possible.
✔ Ideas are checked for technical
feasibility, financial viability and
marketability.
✔ The business analyses the product to evaluate its demand, marketability and profit potential.
✔ Given ideas ratings according to marketing, production and strategic factors.

3.Concept testing:

✔ Concept testing presents the customer with a proposed product and measures attitudes and
intentions at this early stage of development.
✔ It is a quick and effective way of measuring consumer enthusiasm.
✔ It asks the consumer to react to a picture, written statement or an oral description of a product.
✔ This enables a firm to determine initial attitudes prior to expensive, time-consuming prototype
development.
✔

4.Marketing strategy development:

✔ Designing an initial marketing strategy for a new product based on the product concept.
✔ Formal market research is carried out to assess the product’s market potential.

Business analysis:

✔ A review of sales, cost and profit projections for a new product to find out whether these factors
satisfy the firm’s objective.
 ✔ Estimate potential sales, income, breakeven point, profit, return on investment from new ideas.
✔ Projecting probable costs and sales; will profits reach the firm targets

Product Development:

✔ Research and development turns ideas into product.

✔ Engineering and production issues are resolved.
✔ Concerned with design, materials processes and 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 development of the prototype.

Test marketing:

✔ Launching a product in a small geographical area.

✔ A field experiment in a realistic market setting.
✔ Releasing the product into a small representative market where consumer reactions can be accessed
and the marketing mix checked and adjusted.
✔ Aims:
• To forecast likely results of a national launch
• To test the operational effectiveness of the marketing plan
• To identify possible problems
• To access consumer reactions

Commercialization/product launch:

✔ Introducing new product into the market.

✔ Timing is critical success.
✔ There will be heavy promotional expenditure at the launch
✔ Choice of skim or penetration pricing
✔ The product has to well targeted and position.

There are three ways to introduce new products:-

1. Line extension -Using an existing brand name on products within the same category.
2. Brand extension-Using an existing brand name on products in a new category but within the same broadly defined
market.
3. Brand stretching- Using an existing name on a product in a different market.

Factors of new product success:-

1. Development of unique, superior product

2. Differential from rivals
3. Well conceived, properly executed launch
4. Top management backing
5. Market attractiveness-the product should be aimed at attractive markets
6. Resources must be in place
7. Speed and timely
8. Quality
9. Market driven, customer focus

Reasons for failure of launched products:

1. Neglect of market Research

2. Inaccurate market Research
3. Poor marketing after launch
4. Poor distribution
5. Product performance below expectation
6. Product too complex
 7. Unforeseen events
8. Market not ready for the product
9. Inadequate support for the product

HOW NEW PRODUCT DEVELOPMENT DIFFERS FROM A NEW PRODUCT DEVELOPMENT:

Development Stages New Product Development New Service development

Problem Identification Contact with users helps identify the Contact with users and service staff can
problem help identify the problems

Idea Generation Various idea generation techniques have Similar techniques could be used, but
been used and the user may be involved. participation of both service staff and
users will be beneficial.

Concept Development and Evaluation Formulation of basic concept definition It is important to seek both user and
and presenting users with verbal service staff descriptions for the concept.
descriptions and or sketches to get their Evaluation should involve both groups
reactions

Business Analysis Analysis of financial, technical and
manufacturing issues.
Development and Testing Construction of product prototype
(technical, marketing, manufacturing,
research and development, design
functions) and testing
Analysis of economic, technological and
operational issues (which includes cost
of hiring and training service staff, facility
changes and delivery system
enhancements).
A challenging step in the case of
intangibles (technical, marketing, human
resources, operations, logistics) - again
essential for service staff to play a part.

Market Testing Tangible product tested on a limited Standard approaches are difficult;
market. therefore, internal testing, simulations or
role-playing may be used.

Commercialisation Internal and external launch preparations Excellent internal marketing required to
required maintain enthusiasm for the new service,
due to slow new service adoption by
users.

Post evaluation Consider minor modifications and Customer satisfaction surveys. The
improvements to product based on service concept definition may provide a
market reaction. focus point for improvements to service
quality.

Role of users in services:

Both service and manufacturing organizations try to satisfy identifiable user needs. The satisfaction of needs in
each case requires stages of development (well defined and well-researched in the case of goods, but not services)
for the creation, purchase, use and evaluation of the new product/service. The difference between services and
goods lies in the distinctiveness or separability of the steps and the degree of involvement between the user and
service staff in each step. The partnership of the service staff and the user is a direct result of the unique
characteristics of services. This leads to important issues of process management of the service staff and users.
The two main causes of service failures have been found to be poor, or lack of, market research and process.

Differences in the User Interactions in the Development Processes for Products and Services.
 Products(Goods) Services

Customer is not involved in the Customer is a part of the production phase.

production process. Production is not Most of the process is visible (hence, service
Productio visible to the customer (hence facility is important)
n/ manufacturing facility is unimportant to
customer)
Assembly

Production can be standardized and

controlled.
Assembly cannot be easily standardized.
Purchase Production takes place at a separate
location and time from use. Assembly and use occur simultaneously.
Use
Purchase is separated in time from use.

The customer controls the use of the Purchase and use occur simultaneously
product. The firm may provide
guidelines, but is outside the process The supplier is integrated into the use of
when it actually happens. process and can control this.