New Product Development

Ways to Obtain New Products

• Acquisition involves purchasing an entire company, a patent, or a license to manufacture someone else's product.
• New product development involves creating original products, making product improvements or modifications, and introducing new brands developed through the firm's own research and development efforts.

New Product Development Process

• Companies start new product development with lots of good fresh product ideas; Cisco's I-Prize crowdsourcing initiative attracted 824 ideas from 2,900 innovators across 156 countries.
• The new product development process aims to reduce the number of ideas and develop the best ones into profitable products.
• Only a handful of the 824 ideas from Cisco's I-Prize challenge are being developed.
• The stage in which the company searches for new product ideas is called Idea generation.
• The stage in which good ideas are identified and poor ideas are dropped is called Idea screening

Idea Generation

• Idea generation involves systematic search for new product ideas.
• Sources include internal and external sources:
  • Internal sources involve the company's formal research and development, management, staff, and entrepreneurial programs.
  • External sources involve customers, competitors, distributors, suppliers, and outside design firms.
• Crowdsourcing involves inviting broad communities of people into the new product innovation process: customers, employees, independent scientists and researchers, and even the public.
• For example, the LEGO™ Ideas website invites customers to submit new product ideas.

Idea Screening

• The R-W-W screening framework seeks to answer:
  • Is it real?
  • Can we win?
  • Is it worth doing?

Concept Development and Testing

• A product idea represents an idea for a possible product that can be offered to the market.
• A product concept represents a detailed version of the idea stated in meaningful consumer terms.
• A product image refers to the way consumers perceive an actual or potential product.
• Concept testing involves testing new product concepts with groups of target consumers.

Marketing Strategy Development

• Marketing strategy development involves designing an initial marketing strategy for a new product based on the product concept.
• A marketing strategy statement consists of: the target market description, the value proposition planned, sales, market-share, and marketing mix.

Business Analysis

• Business analysis reviews the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives.

Product Development

• Product development develops the product concept into a physical product to ensure that the product idea can be turned into a workable market offering.
• For example, Carhartt has enlisted Groundbreakers: volunteers who participate in live chats with Carhartt designers, reviewing new product concepts, and field-testing products they helped create.

Test Marketing

• Test marketing is the stage in which the product and its proposed marketing program are tested in realistic market settings.
• Test marketing is likely is the new product investment is large
• Test marketing is likely if uncertainty about product or marketing program is present
• Test marketing is unlikely in these situations:
• For simple line extension
• For copy of competitor product
• For low costs
• With high management confidence
• Some companies may shorten or skip test marketing to take advantage of fast-changing market developments.

Commercialization

• Commercialization involves introducing a new product into the market, including decisions about when and where to launch, and planning for market rollout.

Managing New Product Development

• Successful new product development should be customer centered, team based, and systematic.
• Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.
• Team-based new product development involves various company departments working closely together and overlapping the steps in the product development process to save time and increase effectiveness.
• Systematic new product development uses an innovation management system that creates an innovation-oriented company culture and yields a large number of new product ideas.
• Faced with turbulent times, new product development may reduce spending but may become less competitive.

Product Life-Cycle Strategies

• The product life cycle includes these stages: product development, introduction, growth, maturity, and decline.
• During product development, there are zero sales and increasing investment costs.
• During introduction, there are slow sales and nonexistent profits.
• During growth, there is rapid market acceptance and increasing profits.
• During maturity, there is slow sales growth, and profits level off or decline.
• During decline, there is a drop in sales and profits.

Introduction Stage

• The introduction stage involves slow sales growth, little or no profit, and high distribution and promotion expenses.

Growth Stage

• In the growth stage, sales increase; new competitors enter the market; profits increase; economies of scale occur; consumer education takes place; and prices may be lowered to attract more buyers.

Maturity Stage

• In the maturity stage, there is a slowdown in sales, many suppliers, substitute products, overcapacity leading to competition, and increased promotion and R&D to support sales and profits.
• Modification strategies include modifying the market, product, and marketing mix.

Decline Stage

• The decline stage involves maintaining the product, harvesting the product, or dropping the product.

Product Decisions and Social Responsibility

• Public policy and regulations regarding developing and dropping products, patents, quality, safety, and product warranties should be considered carefully.

International Product and Service Marketing

• Key considerations include determining what products and services to introduce in which countries, standardization versus customization, packaging and labeling, and customs, values, and laws.