New Product Development (NPD)

Improving and updating product lines is crucial for the success for any
organisation. Failure for an organisation to change could result in a
decline in sales and with competitors racing ahead. The process of NPD
is crucial within an organisation. Products go through the stages of their
lifecycle and will eventually have to be replaced There are eight stages
of new product development. These stages will be discussed briefly
below:
Stage 1: Idea generation
New product ideas have to come from somewhere. But where do
organisations get their ideas for NPD? Some sources include:
• Within the company i.e. employees
• Competitors.
• Customers
• Distributors, Supplies and others.
Stage 2: Idea Screening
This process involves shifting through the ideas generated above and
selecting ones which are feasible and workable to develop. Pursing non
feasible ideas can clearly be costly for the company.
Stage 3: Concept Development and Testing
The organisation may have come across what they believe to be a
feasible idea, however, the idea needs to be taken to the target
audience. What do they think about the idea? Will it be practical and
feasible? Will it offer the benefit that the organisation hopes it will? or
have they overlooked certain issues? Note the idea and concept is
taken to the target audience not a working prototype at this stage.
Stage 4: Marketing Strategy and Development
How will the product/service idea be launched within the market? A
proposed marketing strategy will be written laying out the marketing
mix strategy of the product, the segmentation, targeting and
positioning strategy sales and profits that are expected.

Stage 5: Business Analysis

The company has a great idea, the marketing strategy seems feasible,
but will the product be financially worth while in the long run? The
business analysis stage looks more deeply into the cashflow the
product could generate, what the cost will be, how much market
shares the product may achieve and the expected life of the product.
Stage 6: Product Development
Finally it is at this stage that a prototype is finally produced. The
prototype will clearly run through all the desired tests, and be
presented to the target audience to see if changes need to be made.
Stage 7: Test Marketing
Test marketing means testing the product within a specific area. The
product will be launched within a particular region so the marketing
mix strategy can be monitored and if needed, be modified before
national launch.
Stage 8: Commercialization
If the test marketing stage has been successful then the product will
go for national launch. There are certain factors that need to be taken
into consideration before a product is launched nationally. These are
timing, how the product will be launched, where the product will be
launched, will there be a national roll out or will it be region by region?
Causes of new product failure
• Overestimation of Market Size
• Product Design Problems
• Product Incorrectly Positioned, Priced or Advertised
• Costs of Product Development
• Competitive Actions

• To create successful new products, the company

must:
– understand it’s customers, markets and
competitors
– develop products that deliver superior value to
customers.
New
New Product
Product Development
Development Process
Process
Step
Step 1.
1. Idea
Idea Generation
Generation

Systematic Search for New

Product Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
New
New Product
Product Development
Development Process
Process
Step
Step 2.
2. Idea
Idea Screening
Screening

• Process to spot good ideas and drop poor ones

• Criteria
– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
New
New Product
Product Development
Development Process
Process
Step
Step 3.
3. Concept
Concept Development
Development &
& Testing
Testing

1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theBest
BestOne
One
New
New Product
Product Development
Development Process
Process
Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
Marketing Strategy Statement Formulation

Part
Part One
One -- Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share

Part
Part Two
Two -- Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
New
New Product
Product Development
Development Process
Process
Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development
Business
Business Analysis
Analysis

Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
They Meet
Meet Company
Company Objectives
Objectives

IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

IfIf Yes,
Yes, Move
Move to
to
Product
Product Development
Development
New
New Product
Product Development
Development Process
Process
Step
Step 7.
7. Test
Test Marketing
Marketing

Standard
Standard Controlled
Controlled
Test
Test Market
Market Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign AAfew
fewstores
storesthat
thathave
have
in
inaasmall
smallnumber
numberofof agreed
agreedto
tocarry
carrynew
new
representative cities.
representative cities. products
productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testin
inaasimulated
simulated
shopping
shoppingenvironment
environment
to
toaasample
sampleofof
consumers.
consumers.
 Introduction to PLC

Sales
Sales Low
Low sales
sales
Costs
Costs High
High cost
cost per
per customer
customer
Profits
Profits Negative
Negative
Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product
Price
Price Use
Use cost-plus
cost-plus
Distribution
Distribution Build
Build selective
selective distribution
distribution
Advertising Build
Build product
product awareness
awareness among
among
Advertising early
early adopters
adopters and
and dealers
dealers
 Growth Stage

Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Offer
Offer product
product extensions,
extensions,
Product
Product service,
service, warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market
Distribution
Distribution Build
Build intensive
intensive distribution
distribution
Advertising Build
Build awareness
awareness and
and interest
interest in
in
Advertising the
the mass
mass market
market
 Maturity Stage

Sales
Sales Peak
Peak sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits High
High profits
profits
Marketing Maximize
Maximize profit
profit while
while defending
defending
Marketing Objectives
Objectives
market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models
Price
Price to
to match
match oror best
best
Price
Price competitors
competitors
Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution
Advertising Stress
Stress brand
brand differences
differences and
and
Advertising benefits
benefits
 Decline Stage

Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing Reduce
Reduce expenditure
expenditure and
and milk
milk the
the
Marketing Objectives
Objectives
brand
brand
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Go
Go selective:
selective: phase
phase out
out
Distribution
Distribution unprofitable
unprofitable outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed toto retain
retain
hard-core
hard-core loyal
loyal customers
customers