New Product Development Process

New Product Development Process

 Presented to:

Sir Mohsin-ul-Mulk

New Product Development Process

 Presented By:
Haseeb Murtaza
Shoaib Asif
Mehmona Saeed
Muhammad Shahid

New Product Development Process

Presentation Outline
New product definition
Types of new products
Need for new Product development
New product development process
Product life cycle
Causes of New product’s failure
Examples (Pakistan’s perspective)
References

New Product Development Process

 New Product Definition

New products may be defined as

Any product, service, or idea not currently made

or marketed by a company

OR

which the consumer may perceive as new.

New Product Development Process

Types of new products
Changes to Augmented Products
Core Product Revision
Line Extension
New Product Lines
Repositions
Completely New

New Product Development Process

New Product Development Process
 Need for new Products
To keep maximum market share
To retain customers
Create Competitive edge over competitors
Rapid change in technology
However, firms must innovate in order to survive
Therefore, managing the new product development process is
a key to a healthy organization
In competitive markets, the best and strongest firms sustain
growth throughthe introduction of new products andservices
to meet the changing needs of the consumers

New Product Development Process

Systematic Product Development Process:
New product development process consists on the following stages
Idea Generation
Idea screening
Concept development and testing
Marketing strategy
Business analysis
Product development
Test Marketing
Commercialization

New Product Development Process

1-Idea Generation:
It is the systematic search for new- product
ideas
Major sources of new product ideas include
Internal source and External sources
Internal Sources
– Formal research in the company
– Brains of executives, scientists, engineers,
manufacturing staff, sales people
– Development of entrepreneurial programs for employees
within the company
– 3M’s well known “15 percent Rule” allows employees to
work on projects of their own interest
External Sources
– Watching and listening customers
– Competitors
– Distributors
– Suppliers

New Product Development Process

2-Idea Screening:

Screening new-product ideas in order to spot

good ideas and drop poor ones as soon as possible

The purpose of the idea screening is to reduce

the number of ideas

Product development costs rise greatly in later

stages, so the company wants to go ahead only
with the product ideas that will turn into
profitable products

New Product Development Process

3-Concept Development and Testing
In includes product idea, product concept and
product image
A Product Idea is an idea for a possible product
that the company can see itself offering to the
market
A Product concept is a detailed version of the
idea stated in meaningful consumer terms
A Product image is the way consumers perceive an
actual or potential product
Concept Testing refers to testing new-product
concepts with a group pf target consumers to find
out if the concepts have strong consumer appeal
Virtual reality is used as a tool to test the
product concept

New Product Development Process

4-Marketing Strategy Development

In this stage, an initial marketing strategy is

designed for the new product based on the
product concept
Marketing strategy statement includes there
parts
First part of the marketing strategy focuses on
– Target market
– Planned product positioning
– Sales
– Market share
– Profit goals for next three or five years

New Product Development Process

Second part of the marketing strategy focuses on
– Products planned price
– Distribution channels
– Marketing budget

Third part of the marketing strategy focuses on

– Planned long-run sales
– Profit goals
– Marketing mix strategy

New Product Development Process

5-Business Analysis
In this stage, main focus is on the review of the
sales, costs, and profit projections for a new
product to find out whether these factors satisfy
the company’s objectives

Minimum sales and maximum sales, nature of the

risks
Management takes decisions about the new
product on the basis of sales and cost figures,
degree of risk and new products financial
attractiveness

New Product Development Process

6-Product Development
Developing the product concept into a physical
product in order to ensure that the product idea
can be turned into a workable product

In this stage , product concept is shaped up into

the physical form

R&D and engineers work on the new product to

bring it into the physical form

New Product Development Process

7-Test Marketing

After the functional and customer test, a new

product comes in the stage of test marketing
Test Marketing is the stage of the new-product
development in which product marketing program
are tested in more realistic market settings
Test Marketing gives the marketer experience
with marketing the product before going to the
great expense of full introduction
It lets the company test the product and its
entire marketing program e.g positioning strategy,
advertising, distribution, pricing, branding and
packages, and budget levels

New Product Development Process

 Approaches used in the Test Marketing
are
– Standard Test Marketing
– Simulated Test Markets
In Standard Test Marketing, company
selects
– A small number of representative cities
– Conducts full marketing campaigns in these
cities
– Uses store audits
– Distributor surveys
And the results are used to
- Forecast national sales and profits
– Discover potential product problems
– Fine-tune the marketing campaigns

New Product Development Process

In Simulated Test Markets , companies
or research firms (like ACNielson)
– Show adds and promotions for a variety of
products including the new product
– A sample of customers is selected and they are
given some money and are invited in the
laboratory or real store where they use the
money to buy items
– The researcher notes down how many
customers bought new products and competing
brands
– Researcher asks questions to the customers
about their purchases and non purchases

New Product Development Process

8-Commercialization

In the new product development process,

commercialization is the final stage in which the
new product is introduced in the real market.

New Product Development Process

 Product Life Cycle

Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments ($)
Introduction stage of the product
life cycle
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 of Product life cycle

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 of Product life cycle

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 of the Product life cycle

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
Causes of failure of new products

Poor management
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 Development Process

To create successful new products,
the company must:

Understand it’s customers, markets and

competitors
Develop products that deliver superior value to
customers.
 References
• www.learnthat.com
• www.tutor2u.net
• www.management-hub.com
• www.adept-plm.com
• www.answer.com

New Product Development Process