New Product Development Overview

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Questions and Answers

What is an essential reason for developing new products?

To eliminate competition completely

To respond to changing consumer tastes (correct)

To replace products that are already profitable

To minimize research and development costs

Which stage is NOT part of the new product development process?

Idea generation

Product decline (correct)

Market testing

Concept development

What is one of the internal factors influencing pricing decisions?

Consumer preferences

Manufacturing costs (correct)

Market demand trends

Competitor pricing

Which of the following is a source of new products through acquisition?

Licensing agreements Signup and view all the answers

What major challenge do companies face regarding product life-cycle strategies?

Adapting to technological changes Signup and view all the answers

What is the primary starting point in target costing?

The ideal selling price Signup and view all the answers

Which internal factor is primarily responsible for setting prices in small companies?

Top management Signup and view all the answers

Which type of market is characterized by many competitors offering similar products?

Pure competition Signup and view all the answers

What does the price elasticity of demand measure?

The percentage change in quantity demanded relative to price change Signup and view all the answers

In large companies, who typically sets the prices?

Divisional or product managers Signup and view all the answers

What is the focus of customer-centered new product development?

Finding new ways to solve customer problems Signup and view all the answers

What occurs during the business analysis stage of the new product development process?

Reviewing sales, costs, and profit projections Signup and view all the answers

Which stage involves developing a product concept into a physical product?

Product Development Signup and view all the answers

What is a key reason for using alternative test markets?

To reduce costs and speed up the process Signup and view all the answers

When commercializing a new product, which consideration is NOT typically addressed?

The need for market research Signup and view all the answers

What is the primary goal of the test marketing stage?

To gather market feedback on the product and its marketing Signup and view all the answers

Which of the following best defines systematic new product development?

An innovation management system for new product ideas Signup and view all the answers

In the new product development process, which stage requires a large investment and involves introducing a new product to the market?

Commercialization Signup and view all the answers

What primarily determines customer value-based pricing?

Buyers’ perceptions of value Signup and view all the answers

Which pricing strategy aims to provide the right mix of quality and service at a fair price?

Good-value pricing Signup and view all the answers

What is a factor that does NOT affect pricing decisions?

Employee satisfaction Signup and view all the answers

What type of pricing strategy involves setting prices based on competitors’ strategies?

Competition-based pricing Signup and view all the answers

In a competitive market, what must a company assess to understand its pricing position?

Current competitors’ strengths and pricing strategies Signup and view all the answers

What is generally considered an internal factor in pricing decisions?

Overall marketing strategy Signup and view all the answers

Which option describes value-added pricing?

Including extra services or features for a higher price Signup and view all the answers

Which of the following is NOT a common objective for pricing strategy?

Maximizing product development Signup and view all the answers

What is the primary goal of the idea screening stage in new product development?

To identify good ideas and eliminate poor ones Signup and view all the answers

Which of the following factors contributes to the high failure rates of new products?

Underestimated market size Signup and view all the answers

Which sources can be used for idea generation in the new product development process?

Both internal and external sources Signup and view all the answers

What happens during the concept development phase of new product development?

Detailed descriptions of product ideas are created Signup and view all the answers

What is a crucial criterion for the idea screening process?

Is there real demand for the product? Signup and view all the answers

What is the primary focus of the marketing strategy development stage?

To outline the target market and positioning Signup and view all the answers

In concept testing, what is the primary target for feedback?

A group of target consumers Signup and view all the answers

Which of the following new product development stages focuses on systematic idea generation?

Idea Generation Signup and view all the answers

Study Notes

Why New Products?

Companies develop new products to replace aging ones
Two Major Challenges:
- Developing new products to replace aging ones
- Implementing life-cycle strategies - Adapt to changing tastes, technologies, and competition
Importance is based on:
- Company growth
- Remaining competitive
- Keeping up with technological change
- Changing consumer tastes
- Following market trends
3M Company is an example - 60,000 employees and 60,000 products; 200-300 new products every year

New Product Development: Definition

NPD: Development of original products, product improvements, modifications, and new brands
Two Sources of New Products:
- Acquisition: company, patent, license
- New product development
Expensive and risky with high failure rates: 60% for new consumer packaged products, 66% for new product concepts never launched
Possible reasons for failure:
- Market size was overestimated
- Actual product was not designed as well as it should have been
- Incorrectly positioned in the market
- Priced too high
- Advertised poorly
- Costs of NPD were higher than expected
- Competitors fought harder than expected
The challenge is to overcome the high rate of new product failure

Major Stages in New Product Development

Stage 1: Idea Generation - systematic search for new product ideas
- Internal sources: brainstorming, employees from all departments, R & D
- External sources: customers, competitors, distributors, suppliers, and others
- Crowdsourcing: inviting broad communities of people into the new product innovation process
Stage 2: Idea Screening - Identify good ideas and drop poor ones, avoid spending money on developing them
- Criteria Used:
  - Is it real? - real need and desire for the product
  - Can we win? - Competitive advantage; resources
  - Is it worth doing? - Fit company’s growth strategy; sufficient profit potential
Stage 3: Concept Development and Testing - Create a detailed version of the idea stated in meaningful consumer terms
- Concept testing - Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal
Stage 4: Marketing Strategy Development - Design an initial marketing strategy for a new product based on the product concept.
- First statement describes the target market, product positioning, sales, market share, and profit goals for the first few years.
- Sensitivity analysis

Stage 5: Business Analysis

Review of the sales, costs, and profit projections for a new product to determine if they will satisfy company objectives

Stage 6: Product Development

Developing the product concept into a physical product, ensuring it can be done
- Requires large investment
- Building a prototype
- Testing for safety, durability, and acceptability

Stage 7: Test Marketing

Testing the product and marketing program in realistic market settings
- The amount of test marketing needed varies with each new product
- Gives the marketer an experience with marketing a product before full introduction
- Testing takes time, and costs can be high
- Alternatives to standard test markets:
  - Controlled test markets
  - Simulated test markets
- Reasons for using alternative test markets:
  - Reducing costs
  - Speeding up the process

Stage 8: Commercialization

Introducing a new product into the market
- Large investment required
- Considerations for launching a new product:
  - When to launch
  - Where to launch - Single location, region, national market, or international market

Customer-Centered New Product Development

Focus on finding new ways to solve customer problems and create more customer-satisfying experiences

Team-Based New Product Development

Various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness

Systematic New Product Development

Innovation management systems collect, review, evaluate, and manage new product ideas.

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Description

This quiz explores the importance of new product development (NPD) within companies, especially focusing on the challenges and reasons for developing new products. It highlights the role of companies like 3M in innovating and adapting to market trends and consumer preferences. Test your knowledge on the processes, challenges, and outcomes related to NPD.