NPD

(1)

New Product Development

(2)

Why NPD?



_{Every company must develop new products.}



New-product development shapes the

_{New-product development shapes the}

company’s future.



_{Replacement products must be created to}

maintain or build sales.



_{Customers want new products, and}

(3)

How?

 _{A company can add new products through}_{A company can add new products through}

acquisition or development. acquisition or development.

 _The_The_acquisition_acquisition_{route can take three forms:}_{route can take three forms:}

1.

1. the company can buy other companies, the company can buy other companies,

2.

2. it can acquire patents from other companies, it can acquire patents from other companies,

3.

3. or it can buy a license or franchise from another or it can buy a license or franchise from another

company. company.

 _The_The_development_development_{route can take two forms.}_{route can take two forms.}

1.

1. the company can develop new products in its own the company can develop new products in its own

laboratories. laboratories.

2.

2. or it can contract with independent researchers or or it can contract with independent researchers or

new-product-development firms to develop specific new-product-development firms to develop specific

(4)

Categories of New Products

Booz, Allen & Hamilton has identified six categories of new Booz, Allen & Hamilton has identified six categories of new

products: products:

1.

1. New-to-the-world products:New-to-the-world products: New products that create an New products that create an entirely new market.

entirely new market.

2.

2. New product lines:New product lines: New products that allow a company to New products that allow a company to enter an established market for the first time.

enter an established market for the first time.

3.

3. Additions to existing product lines:Additions to existing product lines: New products that New products that

supplement a company’s established product lines (package supplement a company’s established product lines (package

sizes, flavors, and so on). sizes, flavors, and so on).

4.

4. Improvements and revisions of existing products:Improvements and revisions of existing products: New New products that provide improved performance or greater products that provide improved performance or greater

perceived value and replace existing products. perceived value and replace existing products.

5.

5. RepositioningsRepositionings: : Existing products that are targeted to new Existing products that are targeted to new markets or market segments.

markets or market segments.

6.

6. Cost reductions:Cost reductions: New products that provide similar New products that provide similar performance at lower cost.

(5)

Why do new products fail?

 _{A high-level executive pushes a favorite idea through}_{A high-level executive pushes a favorite idea through}

in spite of negative market research findings. in spite of negative market research findings.

 _{The idea is good, but the market size is}_{The idea is good, but the market size is}

overestimated. overestimated.

 _{The product is not well designed.}_{The product is not well designed.}

 _{The product is incorrectly positioned in the market,}_{The product is incorrectly positioned in the market,}

not advertised effectively, or overpriced. not advertised effectively, or overpriced.

(6)

Several other factors hinder NPD…

 _{Shortage of important ideas in certain areas:}_{Shortage of important ideas in certain areas:}

 _{Fragmented markets:}_{Fragmented markets:}

 _{Social and governmental constraints:}_{Social and governmental constraints:}

 _{Costliness of the development process:}_{Costliness of the development process:}

 _{Capital shortages:}_{Capital shortages:}

(7)

NPD Process

(8)

Steps in NPD Process

1.

Idea Generation

2.

Idea Screening

3.

Concept Development & Testing

4.

Market Strategy Development

5.

Business Analysis

6.

Product development

7.

Market Testing

8.

(9)

Idea Generation



_{Interacting with others}

(10)

Interacting with Others



_Customers



Scientists

_Scientists



_Competitors



_Employees

(11)

Creative Techniques



_{Forced Relationship}



Morphological Analysis

_{Morphological Analysis}



_{Reverse Assumption Analysis}



_{Attribute Listing}

(12)

Idea Screening



_Go-error

(13)

DROP-error

A

DROP-error

occurs

(14)

GO-error

A GO-error occurs when the company permits a poor idea to move into

development

(15)

Three types of product failures



_An

_{absolute product failure}

_{loses money; its}

sales do not cover variable costs.



_A

_{partial product failure}

_{loses money, but its}

sales cover all its variable costs and some of

its fixed costs.



_A

_{relative product failure}

_{yields a profit that is}

(16)

Concept Development



_{Concept 1:}

_{An instant breakfast drink for}

adults who want a quick nutritious breakfast

without preparing a breakfast.



_{Concept 2:}

_{A tasty snack drink for children to}

drink as a midday refreshment.



_{Concept 3:}

_{A health supplement for older}

(17)

Concept Testing

Concept Testing involves presenting

the product concept to target

consumers and getting their reactions.

Concept testing entails presenting

consumers with an elaborated version

(18)

Our product is a powdered mixture that is

added to milk to make an instant

breakfast that gives the person all the

needed nutrition along with good taste

and high convenience. The product

would be offered in three flavors

(chocolate, vanilla and strawberry) and

would come in individual packets, six to

a box at Rs. 150 a box.

(19)

Measurement of Product

Dimensions



_{Communicability and Believability}



Need Level

_{Need Level}



_{Gap Level}



_{Perceived Value}



_{Purchase Intention}



_{User targets, purchase occasions, purchasing}

(20)

Conjoint Analysis



_{Consumer preferences for alternative product}

concepts can be measured through conjoint

analysis…



_{It is a method for deriving the utility values}

that consumers attach to varying levels of a

(21)



_{Three package designs (A, B, C)}



Three brand names (K2R, Glory, Bissell)



_{Three prices (Rs. 20, Rs. 25, Rs. 30)}

(22)

The marketer now uses a statistical

program to derive the consumer’s

utility functions

(23)

A B C 1.0 0 Package Design U til ity

K2R Glory Bissell 1.0 0 Brand Name U til ity

Rs. 20 Rs. 25 Rs. 30 1.0

0

Retail Price

No Yes 1.0

0

Good Housekeeping Seal?

1.0

0

No Yes

U til ity U til ity

Money Back Guarantee?

U

til

(24)

 Utility ranges between zero and one;

 _{The higher the utility, the stronger the consumer’s}

preference for that level of the attribute.

 _{Looking at packaging, we see that package B is the}

most favored, followed by C and then A (A hardly has any utility).

 The preferred names are Bissell, K2R, and Glory, in

that order.

 The consumer’s utility varies inversely with price.  _{A Good Housekeeping seal is preferred, but it does}

not add that much utility and may not be worth the effort to obtain it.

(25)

Putting these results together, we can

see that the consumer’s most desired

offer would be package design B, with

the brand name Bissell, selling at the

price of Rs. 25, with a Good

(26)

Product Development

&

Testing

(27)

Product Development



The job of translating target customer

requirements into a working prototype is

helped by a set of methods known as

quality

function deployment

(QFD).



This methodology takes the list of desired

customer attributes

(CAs) generated by market

research and turns them into a list of

(28)

Testing

When the prototypes are ready, they

are put through rigorous

functional

(29)

Functional tests



_{Alpha Testing}

(30)

Alpha testing

…means testing the product within the

firm to see how it performs in

different applications.

After refining the prototype further,

the company moves to

beta testing,

enlisting customers to use the

(31)

Beta testing

…is most useful when the potential

customers are heterogeneous, the

potential applications are not fully

known, several decision makers are

involved in purchasing the product, and

opinion leadership from early adopters is

(32)

Consumer testing

…can take a variety of forms, from

bringing consumers into a laboratory

to giving them samples to use in their

homes. In-home placement tests are

common with products ranging from

(33)

Market Testing

After management is satisfied with

functional and psychological

performance, the product is ready to

be dressed up with a brand name and

(34)

Types of Market Testing



_{Consumer-goods market testing}

(35)

Consumer-Goods Market Testing



_{Sales-wave research}



_{Simulated test marketing}



_{Controlled test marketing}

(36)

Business-Goods Market Testing

 _{Business goods can also benefit from market testing.}

Expensive industrial goods and new technologies will normally undergo both alpha and beta testing.

 _{In addition, new business products are sometimes}

market-tested at trade shows.

 _{The vendor can observe how much interest buyers}

show in the new product, how they react to various features and terms, and how many express purchase intentions or place orders.

 _{The disadvantage of trade shows is that they reveal}

the product to competitors; therefore, the vendor

(37)

Commercialization



_{When (timing).}



Where (geographic strategy)

(38)

THE CONSUMER ADOPTION

PROCESS



_Adoption

_{is an individual’s decision to become}

a regular user of a product.



_{The consumer-adoption process focuses on the}

(39)

Innovation Diffusion Process

Rogers defines the

innovation diffusion process

as “the

spread of a new idea from its source of

invention or

(40)

Stages in the Adoption Process

 awareness (consumer becomes aware of the

innovation but has no information about it);

 interest (consumer is stimulated to seek information

about the innovation);

 evaluation (consumer considers whether to try the

innovation);

 trial (consumer tries the innovation to estimate its

value; and

 adoption (consumer decides to make full and regular

(41)

Product Diffusion

(42)

The Consumer Adoption Process



Adoption process

: Stages that

consumers go through in learning about

a new product, trying it, and deciding

whether to purchase it again.

 AwarenessAwareness  InterestInterest

 EvaluationEvaluation  TrialTrial

(43)



Consumer innovator

: People who

purchase new products almost as soon

as the products reach the market



Diffusion process

: Process by which

new goods or services are accepted in

the marketplace

(44)

Categories of Adopters Based on Relative Times of

Adoption

(45)

Factors Influencing the Adoption

Process

 _{Innovators are the first to adopt something new, while}

laggards are the last.

 _{Rogers defines a person’s innovativeness as “the}

degree to which an individual is relatively earlier in adopting new ideas than the other members of his social system.”

 _{Because people differ in their readiness to try new}

products, there are consumption pioneers and early adopters for each product.

 _{After a slow start, an increasing number of people}

(46)

Five characteristics influence the rate of

adoption of an innovation

 relative advantage—the degree to which the

innovation appears superior to existing products;

 compatibility—the degree to which the innovation

matches the values and experiences of the individuals;

 complexity—the degree to which the innovation is

relatively difficult to understand or use;

 divisibility—the degree to which the innovation can

be tried on a limited basis; and

 communicability—the degree to which the beneficial