New Product Development
Prof. Grover
New Product Development Challenges New Product: different or new in ANY way (Computer, iPod, Mobile phone, Any other ??)
The route to new product are 3 three: Acquisition (buy another company) (Kelvinator bought by ?) Acquire patents from another company (Crocin tablets/ syrup ?? To ??) Licensing to manufacture
New Product Development Challenges New Product Development (6-categories) • New to world – new products for new markets (Pentium) • New to market – repositioning to new markets or segments (Alto for rural market) • New to seller – additions to existing product lines (Alto car) • New to producer – new product line (Maruti-Varna) • New to existing market – new product with better (lower cost) performance (M-800 with MPFI)
New Product Development (2) The Development Process includes: 1. New Product Strategy (to match objectives) 2. Idea Generation and Sources • Customers • Employees • Competitors • Need formal program: R&D • Any source of idea is good; petrol^food; books^coffee; ipod^portable-handy • Ideas can be Promising, Marginal or Rejects
New Product Development (3) 3. Idea Screening • In pharmacy, 1 of 5,000 new drug ideas is common • In autos, 1 of 20 new car concepts is made to prototype • In industrial products, 1 in 10 new ideas see the light of the day • Why? because brainstorming and research cut them down. • Short and long run viability performance • Social issues: • •
Consumer welfare Safety
Areas of Success
Relative wt. Product score
Prod. Rating
Unique
0.4
80
32
High performance
0.3
60
18
Low competition
0.3
50
15
New Product Development (4) 4. Concept Development & Testing 1. Concept development 2. Concept testing 3. Concept analysis – Examine consumer perceptions and acceptability
New Product Development (4) 5. Marketing strategy 1. To introduce product in market. 2. Target market size, Structure, Behaviour 3. Consider views of retailers and wholesaler 4. Evaluate convenient nutritious inexpensive breakfast
New Product Development (5) 6. Business Analysis Estimating total sales Estimating costs and profits If found viable go to development stage
New Product Development (5) 7. Product Development (can go hand-in-hand with analysis) 1. Product tests (physical proto-types or virtual, product ranking) 2. Risky: (performance results) 3. Consumer marketing testing 4. Business goods marketing testing 5. Prototype product and marketing strategy 6. Longest process
New Product Development (6) 8. Test Marketing 1. 2. 3.
Standard test markets Controlled test markets Simulated test markets
• How many cities (2-6); Select Test Cities (Delhi or Mumbai?); length of test (few months to a year). • Sometimes, line extensions are not tested
New Product Development (7) 9. Commercialization WHEN WHERE TO WHOM HOW
• • • •
Timing Geographic strategy Target market prospects Introductory market strategy
• Commercialization takes a substantial amount of investment (New Coke) • Some firms “roll out” their products gradually (movies)
New Product Development (8) Consumer Adoption Process • Stages • • • • •
Awareness Interest Evaluation Trial Adoption
New Product Development (9) Consumer Adoption Process •
Factors influencing adoption • Readiness to try Innovators; Early adopters; Early majority; Late majority; Laggards • Characteristics of innovation; • Organizational readiness to adopt innovation • Some firms “roll out” their products gradually (movies)
Spread of New Products Global and Domestic: Perceived as “new” Diffusion of Innovation Who are you? Early adopter (first 2.5% to adopt) Early majority (next 13.5%) Late majority (next 34%) Laggard (last 16% to adopt)
Fashion Changes Quickly
How to Have New Product Failure – New product failure (70-80% of brands; 80% packaged goods) – How to fail: Offer no unique benefit (Pepsi’s clear soda) Race to market (Netscape) Give little thought to promotion ( ) Give little thought to competition (Wal-mart’s impact) Skip research or conduct sloppy research Try just one new product (top consumer good companies average trying 75 new products a year)
Historic product failures
Diversify with new products
Summary Categories of New Products NPD Process Global/spread of new products Diffusion of Innovations New product failures