New Product Development NPD The 4 Elements of
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New Product Development (NPD)
The 4 Elements of The Marketing Mix
Defining “Product” Anything that you can “sell”
Marketing applies to a broad range of “products” • • • Physical product Service Events People Ideas Places
Most “products” are combinations of goods and service Pure good Pure service
Core. . . Actual. . . Augmented product
Successful firms. . . • Fully understand the core benefit sought by customers and start with that concept • Consider the enhanced product including delivery, service and complementary goods
The 8 -Stage New Product Development (NPD) Process
New Product Development Key: Recognize when you are in an NPD environment
New Product Development (NPD)
1. Idea Generation & 2. Idea Screening • Generation: Firms are always on the look-out • Screening: • Fit with manufacturing and distribution expertise • Feasibility
3. Concept Screening • Prototype or storyboard • Focus group: Would you be interested in a service that. . . • Approximation of willingness to pay
4. Marketing Strategy Development and 5. Business Analysis • Marketing strategy: • Developing credible marketing plans with positioning, target and Marketing Mix • Business analysis: • Is there a high chance of a good payoff?
6. Product Development • E. g. battery life in i. Pod
7. Market Testing • Some firms (“fashion goods”) don’t test the market: Put it out there, see if people buy it (the costs of this must be small) = “Market test by roll out” • Simulated test market (dummy store) new product is mixed in with familiars • Test markets: Several cities let us tweak the Marketing Mix … but rivals may attempt disruption
8. Possible “roll-out” strategies during “commercialization” • By geography • By market size • By customer type (business/consumer/government) • By channel of distribution (Rx/OTC) • By use (special occasion/every day) • By benefit sought
The model for new product adoption applies during “roll out” Awareness Interest Trial If we are not an instant hit, do the research Repeat
Most New Products Fail? • Consumer packaged goods fail most often • Brand extensions not sought by consumer (“new” colors, flavors, packaging) • Products that attempt to meet a need that few consumer have (e. g. combination products)
Two forces for NPD Consumer needs When the two align, you have a winner! Technological advances
Big firms take a diversified “Portfolio Approach” Potential Payoff New product to new markets New product to existing markets Add feature to existing product Improve performance of existing product Risk
Three keys to NPD 1. Recognize when you are in an NPD situation 2. Understand that there’ll be many ideas, and a few winners. 3. Tolerate a “portfolio” of products A few (only a few) high risk products And some no-brainers (with low payoff)