Description
In business and engineering, new product development (NPD) is the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis.
New Product Development
Causes of New Product Failures
• Overestimation of Market Size • Product Design Problems • Product Incorrectly Positioned, Priced or Advertised • Costs of Product Development • Competitive Actions
What stops NPD ?
• • • • • • • Lack of ideas Social and govt. constraints Technological constraints High developmental costs Capital shortage Faster time required from idea to product Shorter PLC
Criteria for NPD
• • • • Specific time frame Optimum potential market and growth rate Min. return on sales and ROIs Should lead to mkt leadership position
To create successful new products, the company must
• understand it’s customers, markets and competitors • develop products that deliver superior value to customers.
New Product Development Process
• • • • • • • Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas Information Exchange interaction – Int./Ext. sources – Customers, Competitors, Distributors, Suppliers
Creativity techniques – attribute listing, mind mapping
New Product Development Process
Step 2. Idea Screening
• Process to spot good ideas and drop poor ones • Criteria – Market Size – Product Price – Development Time & Costs – Manufacturing Costs – Rate of Return
Idea Screening
Overall Probability of success = Prob. Of technical completion * probability of commercialization given tech. completion * probability of economic success given commercialization
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
New Product Development Process
Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One - Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two - Short-Term:
Product’s Planned Price Distribution Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals Marketing Mix Strategy
New Product Development Process
Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If No, Eliminate Product Concept If Yes, Move to Product Development
New Product Development Process
Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry new products for a fee.
Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.
Commercialization
• Timing
– First entry – Parallel entry – Late Entry
• Geographic strategy – where to ? • Who are target market - To whom ? • Introductory mktg strategy – how to ?
Product Life Cycle
Sales and Profits ($) Sales
Profits Time Product Development Introduction Growth Maturity Decline
Losses/ Investments ($)
Introduction Stage of the PLC
Sales
Low sales High cost per customer
Costs
Profits
Marketing Objectives
Negative Create product awareness and trial Offer a basic product
Use cost-plus Build selective distribution Build product awareness among early adopters and dealers
Product
Price Distribution
Advertising
Growth Stage of the PLC
Sales
Rapidly rising sales
Average cost per customer
Costs
Profits
Marketing Objectives
Rising profits
Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market
Product
Price
Distribution Advertising
Maturity Stage of the PLC
Sales
Peak sales
Low cost per customer
Costs
Profits
Marketing Objectives
High profits
Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
Product
Price
Distribution Advertising
Decline Stage of the PLC
Sales
Declining sales
Low cost per customer
Costs
Profits
Marketing Objectives
Declining profits
Reduce expenditure and milk the brand Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers
Product
Price
Distribution Advertising
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Digital cameras Mini-disc
Electric cars
DVD VR*
*= virtual reality
The time at each stage varies greatly
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
The seller tries to stimulate demand Promotion campaigns to get increase public awareness
Explain how the product is used,
• Features Advantages Benefits
You will lose money, but you expect to make profits in the future
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
•Sales are low, and profits are below the line because your costs are greater than the amount of money you make
•you have “negative” profit
•Need to spend a lot of money on promotion
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
A lot is sold - The seller tries to sell as much as possible Other competitor companies watch, and decide about joining in with a competitor product “success breeds imitation” (Text) Growth will continue until too many competitors in the market - and the market is saturated
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
•At the end of the growth stage, profits start to decline when competition means you have to spend more money on promotion to keep sales going. •Spending money on promotion cuts into your profit
Stages in the Product Life Cycle
Introduction Maturity Growth Maturity Decline
Many competitors have joined - the market is saturated
The only way to sell is to begin to lower the price - and profits decrease It is difficult to tell the different between products since most have the same F.A.B. - Features, Advantages & Benefits Competition can get “Nasty” and commercials are intense
Stages in the Product Life Cycle
Introduction Maturity Growth Maturity Decline
“Persuasive Promotion” becomes more important during this stage
That is to say, you have commercials almost begging the customer to still buy your product because you still make it just as good.
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
Newer products are now more attractive - even a low low price does not make consumers want to buy.
Profit margin declines - and so the only way to make money is to sell a high volume
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
To increase volume you try to 1. Increase the number of customers - get new customers
2. Increase the amount each customer uses
Extending the Product Life Cycle
Market Modification
1. Increase frequency of use by present customers
2. Add new users
3. Find new uses
Product Modification 4. Change product quality or packaging
Purpose: to sell more product and cover original investment
Extending the product Cycle
• to prevent the product going into decline you modify the market
MARKET MODIFICATION • you look for new consumers by changing the product so it has new users - and then new customers( So
Soft , vaseline)
Extending the product Cycle
• MARKET MODIFICATION examples Mortein Ease –Bang for cleaning ceramics Lemons for hair colouring Different usage – dettol drops in water gym bag, sports’ bag etc.
Extending the product Cycle
• to prevent the product going into decline you modify the product
PRODUCT MODIFICATION • adding new features, variations, model varieties will change the consumer reaction - create more demand • therefore you attract more users
Extending the product Cycle
• • • • • • •
PRODUCT MODIFICATION examples soaps - colours, features CD players chip flavours - many kinds flavoured tongue depressors couples seats at movie theatre
Extending the product Cycle
• PRODUCT MODIFICATION • examples continued • digital sound at theatres
Overlap of Life Cycle for Products A and B
WINDOWS 3.1
WINDOWS 95
1991
1995
1996
1997
Length of Cycle Stages
• Products move through the cycle at different speeds • sometimes introduction is very long, or very short, depending on how easy it is for the public to understand the F.A.B. • Not all products follow the same pattern
Life Cycle Length
• Some products move very fast because they are new and have no competition so the intro stage is short, and they go direct to growth stage.
Life Cycle Length
Because of • technology and • globalization • the introduction stage is getting very short • some cycles more quickly to maturity, then have many product modifications so the decline stage drags on and on
Speed of the PLC
• Since the Intro Stage is getting shorter, and sometimes the Growth Stage doesn’t last too long (because competitors move in) companies must continually come up with new products • You can tell when they are in the growth stage because this is when they introduce new model variations, and some improvements to the product
Alternative Product Life Cycles
Pocket pagers Tamagachi
Failures that do not go through the 4 steps
• Fashions - currently popular products that tend to follow recurring life cycles eg. Wide lapels, 3 button suits, high heels vs. wedge heel • “the currently acceptable style”
• Fads - Fashions with abbreviated life cycles - only popular with certain groups • - music • - fast food • - children’s toys • - “adult toys”
Eg. Watches w red straps
Product Life Cycle Considerations in Marketing Strategy
• Understand that profits have a predictable pattern • in the early stages, focus is on product information • in the later stages, focus is on brand promotion • use market segmentation in maturity stage to maintain strong core customer basis
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Digital cameras Mini-disc
Electric cars
Monopoly
*= virtual reality
Monopolistic
Oligopoly
Pure Competition
The time at each stage varies greatly
doc_716488782.pdf
In business and engineering, new product development (NPD) is the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis.
New Product Development
Causes of New Product Failures
• Overestimation of Market Size • Product Design Problems • Product Incorrectly Positioned, Priced or Advertised • Costs of Product Development • Competitive Actions
What stops NPD ?
• • • • • • • Lack of ideas Social and govt. constraints Technological constraints High developmental costs Capital shortage Faster time required from idea to product Shorter PLC
Criteria for NPD
• • • • Specific time frame Optimum potential market and growth rate Min. return on sales and ROIs Should lead to mkt leadership position
To create successful new products, the company must
• understand it’s customers, markets and competitors • develop products that deliver superior value to customers.
New Product Development Process
• • • • • • • Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas Information Exchange interaction – Int./Ext. sources – Customers, Competitors, Distributors, Suppliers
Creativity techniques – attribute listing, mind mapping
New Product Development Process
Step 2. Idea Screening
• Process to spot good ideas and drop poor ones • Criteria – Market Size – Product Price – Development Time & Costs – Manufacturing Costs – Rate of Return
Idea Screening
Overall Probability of success = Prob. Of technical completion * probability of commercialization given tech. completion * probability of economic success given commercialization
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
New Product Development Process
Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One - Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two - Short-Term:
Product’s Planned Price Distribution Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals Marketing Mix Strategy
New Product Development Process
Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If No, Eliminate Product Concept If Yes, Move to Product Development
New Product Development Process
Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry new products for a fee.
Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.
Commercialization
• Timing
– First entry – Parallel entry – Late Entry
• Geographic strategy – where to ? • Who are target market - To whom ? • Introductory mktg strategy – how to ?
Product Life Cycle
Sales and Profits ($) Sales
Profits Time Product Development Introduction Growth Maturity Decline
Losses/ Investments ($)
Introduction Stage of the PLC
Sales
Low sales High cost per customer
Costs
Profits
Marketing Objectives
Negative Create product awareness and trial Offer a basic product
Use cost-plus Build selective distribution Build product awareness among early adopters and dealers
Product
Price Distribution
Advertising
Growth Stage of the PLC
Sales
Rapidly rising sales
Average cost per customer
Costs
Profits
Marketing Objectives
Rising profits
Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market
Product
Price
Distribution Advertising
Maturity Stage of the PLC
Sales
Peak sales
Low cost per customer
Costs
Profits
Marketing Objectives
High profits
Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
Product
Price
Distribution Advertising
Decline Stage of the PLC
Sales
Declining sales
Low cost per customer
Costs
Profits
Marketing Objectives
Declining profits
Reduce expenditure and milk the brand Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers
Product
Price
Distribution Advertising
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Digital cameras Mini-disc
Electric cars
DVD VR*
*= virtual reality
The time at each stage varies greatly
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
The seller tries to stimulate demand Promotion campaigns to get increase public awareness
Explain how the product is used,
• Features Advantages Benefits
You will lose money, but you expect to make profits in the future
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
•Sales are low, and profits are below the line because your costs are greater than the amount of money you make
•you have “negative” profit
•Need to spend a lot of money on promotion
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
A lot is sold - The seller tries to sell as much as possible Other competitor companies watch, and decide about joining in with a competitor product “success breeds imitation” (Text) Growth will continue until too many competitors in the market - and the market is saturated
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
•At the end of the growth stage, profits start to decline when competition means you have to spend more money on promotion to keep sales going. •Spending money on promotion cuts into your profit
Stages in the Product Life Cycle
Introduction Maturity Growth Maturity Decline
Many competitors have joined - the market is saturated
The only way to sell is to begin to lower the price - and profits decrease It is difficult to tell the different between products since most have the same F.A.B. - Features, Advantages & Benefits Competition can get “Nasty” and commercials are intense
Stages in the Product Life Cycle
Introduction Maturity Growth Maturity Decline
“Persuasive Promotion” becomes more important during this stage
That is to say, you have commercials almost begging the customer to still buy your product because you still make it just as good.
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
Newer products are now more attractive - even a low low price does not make consumers want to buy.
Profit margin declines - and so the only way to make money is to sell a high volume
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
To increase volume you try to 1. Increase the number of customers - get new customers
2. Increase the amount each customer uses
Extending the Product Life Cycle
Market Modification
1. Increase frequency of use by present customers
2. Add new users
3. Find new uses
Product Modification 4. Change product quality or packaging
Purpose: to sell more product and cover original investment
Extending the product Cycle
• to prevent the product going into decline you modify the market
MARKET MODIFICATION • you look for new consumers by changing the product so it has new users - and then new customers( So
Soft , vaseline)
Extending the product Cycle
• MARKET MODIFICATION examples Mortein Ease –Bang for cleaning ceramics Lemons for hair colouring Different usage – dettol drops in water gym bag, sports’ bag etc.
Extending the product Cycle
• to prevent the product going into decline you modify the product
PRODUCT MODIFICATION • adding new features, variations, model varieties will change the consumer reaction - create more demand • therefore you attract more users
Extending the product Cycle
• • • • • • •
PRODUCT MODIFICATION examples soaps - colours, features CD players chip flavours - many kinds flavoured tongue depressors couples seats at movie theatre
Extending the product Cycle
• PRODUCT MODIFICATION • examples continued • digital sound at theatres
Overlap of Life Cycle for Products A and B
WINDOWS 3.1
WINDOWS 95
1991
1995
1996
1997
Length of Cycle Stages
• Products move through the cycle at different speeds • sometimes introduction is very long, or very short, depending on how easy it is for the public to understand the F.A.B. • Not all products follow the same pattern
Life Cycle Length
• Some products move very fast because they are new and have no competition so the intro stage is short, and they go direct to growth stage.
Life Cycle Length
Because of • technology and • globalization • the introduction stage is getting very short • some cycles more quickly to maturity, then have many product modifications so the decline stage drags on and on
Speed of the PLC
• Since the Intro Stage is getting shorter, and sometimes the Growth Stage doesn’t last too long (because competitors move in) companies must continually come up with new products • You can tell when they are in the growth stage because this is when they introduce new model variations, and some improvements to the product
Alternative Product Life Cycles
Pocket pagers Tamagachi
Failures that do not go through the 4 steps
• Fashions - currently popular products that tend to follow recurring life cycles eg. Wide lapels, 3 button suits, high heels vs. wedge heel • “the currently acceptable style”
• Fads - Fashions with abbreviated life cycles - only popular with certain groups • - music • - fast food • - children’s toys • - “adult toys”
Eg. Watches w red straps
Product Life Cycle Considerations in Marketing Strategy
• Understand that profits have a predictable pattern • in the early stages, focus is on product information • in the later stages, focus is on brand promotion • use market segmentation in maturity stage to maintain strong core customer basis
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Digital cameras Mini-disc
Electric cars
Monopoly
*= virtual reality
Monopolistic
Oligopoly
Pure Competition
The time at each stage varies greatly
doc_716488782.pdf