New Product Development (NPD)

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New Product Development (NPD)
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The 4 Elements of The Marketing Mix
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Defining Product

• Anything that you can sell

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Marketing applies to a broad range of products

• Physical product
• Service
• Events
• People
• Ideas
• Places

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Most products are combinations of goods and
service
Pure good
Pure service
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Core ... Actual ... Augmented product
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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

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The 8-Stage New Product Development (NPD) Process
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New Product Development

• Key Recognize when you are in an NPD environment

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New Product Development (NPD)
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1. Idea Generation 2. Idea Screening

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

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3. Concept Screening

• Prototype or storyboard
• Focus group Would you be interested in a service
  that . . .
• Approximation of willingness to pay

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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?

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6. Product Development

• E.g. battery life in iPod

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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

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8. Possible roll-out strategiesduring
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

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The model for new product adoption applies during
roll out
Awareness
Interest
Trial
Repeat
If we are not an instant hit, do the research
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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)

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Two forces for NPD
When the two align, you have a winner!
Consumer needs
Technological advances
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Big firms take a diversifiedPortfolio Approach
Potential Payoff
New product to new markets
New product to existing markets
Add feature to existing product
Improve performance of existing product
Risk
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Three keys to NPD

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