New Product Development

(NPD)

The 4 Elements of The Marketing

Mix

M a r k e t in g M ix
P ro d u c t

P ric e

P la c e

P ro m o tio n

Defining Product
Anything that you can sell

Marketing applies to a broad

range of products
Physical product
Service
Events
People
Ideas
Places

Most products are combinations

of goods and service

Pure
good

Pure
service

Core ... Actual ... Augmented product

Successful firms . . .

Fully understand the core benefit

sought by customers and start with
that concept
Consider the enhanced product
including delivery, service and
complementary goods

The 8-Stage New Product

Development (NPD) Process

New Product Development

Key: Recognize when you are
in an NPD environment

New Product Development (NPD)

1. Idea Generation & 2. Idea Screening

Generation: Firms are always on
the look-out
Screening:
Fit with manufacturing and
distribution expertise
Feasibility

3. Concept Screening
Prototype or storyboard
Focus group: Would you be
interested in a service that . . .
Approximation of willingness to pay

4. Marketing Strategy Development

and 5. Business Analysis
Marketing strategy:
Developing credible marketing
plans with positioning, target and
Marketing Mix
Business analysis:
Is there a high chance of a good
payoff?

6. Product Development
E.g. battery life in iPod

7. Market Testing
Some firms (fashion goods) dont test the
market: Put it out there, see if people buy it
(the costs of this must be small)
= Market test by roll out
Simulated test market (dummy store) new
product is mixed in with familiars
Test markets: Several cities let us tweak
the Marketing Mix but rivals may
attempt disruption

8. Possible roll-out strategies

during commercialization
By geography
By market size
By customer type
(business/consumer/government)
By channel of distribution (Rx/OTC)
By use (special occasion/every day)
By benefit sought

The model for new product adoption

applies during roll out

Awareness

Interest

If we are not an
instant hit, do the
research

Trial

Repeat

Most New Products Fail?

Consumer packaged goods fail most often
Brand extensions not sought by
consumer (new colors, flavors,
packaging)
Products that attempt to meet a need
that few consumer have (e.g.
combination products)

Two forces for NPD

Consume
r needs

When the
two align,
you have a
winner!

Technological
advances

Big firms take a diversified

Portfolio Approach
Potential Payof
New product to new markets
New product to existing markets
Add feature to existing product
Improve performance of existing product

Risk

Three keys to NPD

1. Recognize when you are in an NPD
situation
2. Understand that therell be many
ideas, and a few winners.
3. Tolerate a portfolio of products
A few (only a few) high risk products
And some no-brainers (with low
payoff)