New Product Development Strategies

New Product Development and Product Life-Cycle Strategies

• New product development encompasses developing original products, improving existing products, modifying products, or creating new brands through a company's own R&D efforts.
• Companies develop new products due to current products becoming obsolete due to changing consumer needs or superior competing products. Existing products may become less desirable and profitable. New products can be lifesaving. A company may introduce new products even as market leader to attract and retain more customers.
• Product development follows a series of stages.
  • Idea generation: Finding new product ideas internally (e.g., through in-house teams) and externally (e.g., focus groups, surveys).
  • Idea screening: Evaluating ideas, eliminating poor ones.
  • Concept development and testing: Creating detailed descriptions of ideas. Testing the concepts with potential customers to assess consumer appeal.
  • Marketing strategy development: Formulating the target market, value proposition, and short- and long-term goals. Including price, distribution, and marketing budget details.
  • Business analysis: Estimating sales, costs, and profits to determine whether product objectives are met. Using historical sales data and surveys of potential customers.
  • Product development: Converting ideas into tangible products. Thorough testing is important to verify safety and effective performance.
  • Test marketing: Testing the product and marketing plans in realistic market settings. Assessing advertising, distribution, pricing, and budget levels.
  • Commercialization: Launching the product into the market. Includes choosing timing of the launch, selection of a launch region (local, regional, national, or international), and possible use of TV advertising.

Product Life Cycle

• A product's life cycle tracks its sales and profits over time. 
• Not all products follow the stages consistently. Some have short lifecycles.
• Stages include introduction, growth, maturity, and decline.
  • Introduction: Low sales, high customer acquisition costs, and negative/low profits initially, but promotional activities may build awareness and start initial demand. One or a few product variants are offered at first, keeping initial costs low.
  • Growth: Rapidly rising sales, increasing profits, and growing competition. More product variants are added. Customers are acquired more easily. More aggressive promotional activities.
  • Maturity: Peak sales, low customer acquisition costs, and high profits, followed by a decline in growth. Brand differentiation and advertising are crucial for maintaining demand.
  • Decline: Falling sales, declining profits, and reduced competition. In this stage, companies may cut unprofitable outlets or reduce distribution channels to increase profit margins and reduce costs. A strategy for innovative new products should also be in place.

Product Development Stages

• This stage occurs where large investments in R&D are made, preparing necessary marketing strategies, product idea development occurs, and there are initially zero sales, while high costs and negative profits occur.