New Product Development

New Product Development Presented by Rudra Desai

Submitted to Prof. G.M. Subba Rao

Roll no. 12

• New product development – The development of new brands, original products, product improvements or modifications, through the efforts of the firm’s R&D.

Introduction: New products • All products have a finite life span and this is influenced by the type of product, its innovativeness, the management of the product through its life cycle, as well as the markets in which it is sold. • All products will eventually decline and need to be replaced by new ones and companies need to be adept at adapting marketing strategies to respond to the dynamics of the environment, so as to manage the product through its life cycle effectively.

Introduction: New products • New products are the lifeblood of the organisation but they are extremely vulnerable and the majority never reach commercialisation. • In competitive markets, the best and strongest firms sustain growth through the introduction of new products and services to meet the changing needs of the consumers.

Six Categories of new product development • • • •

1. New-to the-world products 2. New product lines 3. Additions to existing product lines 4. Improvements and revisions of existing products • 5. Repositionings • 6. Cost reductions

New product development decision process 1. Idea Generation No

Yes 2. Idea Screening

No

Yes 3.Concept development and testing Yes

No

4. Marketing Strategy development

Drop

Yes

No

5. Business Analysis No

Yes 6. Product development Yes 7. Market testing Yes 8. Commercialisation

Yes

Send the Product back

No No Yes

Modify the product

No No

Risks and returns in new-product development • About 90% of new products developed fail. • Only 40% of new consumer products that are brought to market will be around 5 years later. • Risk management essential. • Research indicates that success depends primarily upon the amount of time and effort a company is prepared to invest in making sure the new product fits its market.

Factors hindering new product development • Shortage of important ideas in certain areas • Fragmented markets • Social and governmental constraints • Cost of development • Capital shortages • Faster required development time • Shorter product life cycles

Why do new products fail? • • • • • • • •

New product development is too expensive Unexpected delays and time to market too long Idea good but market overestimated Insufficient demand for the product or service Not as well designed as it should have been Incorrectly positioned Incorrectly priced Competitors fight back more aggressively than expected.

New-Product Failures • • •

Only 10% of new products still on the market and profitable after 3 years. Failure rate for industrial products as high as 30%. Why? – Overestimation of market size – Design problems – Incorrectly positioned, priced, or advertised – Pushed despite poor marketing research findings – Development costs – Competition

What influences new product success? • Development of a unique superior product – Better quality, new features and greater value • Clearly defined market and product concept • Meeting market needs • Senior management commitment • Relentless pursuit of innovation • New product planning • Systematic new product development process

Criteria for New Products • there must be adequate market demand: necessary but not sufficient for success • must satisfy key financial criteria • must be compatible with environmental standards • must fit with the company’s marketing structure • should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives