Chapter-2 New Product Development

Meaning- the development of original products, product improvements, product modifications, & new brands through the firms own R &D efforts. New products can be broadly classified into 2 groups1)New products arising out of technical innovations- It includes intrinsically new products having a new functional utility.

2)New Products arising out of MarketingOriented Modifications includes products that come out of marketingoriented innovations , or some changes in design, the addition of a new feature, a change in package in EXISITING PRODUCTS. These are essentially NEW VERSIONS of existing products, the newness may be because of some modification in the ingredients used etc. Repositioning, finding new use for the

existing product, offering the existing product with new sales appeal to new market segment.
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Stages in new product development

Generating new product ideas Idea screening Concept testing Marketing strategy development Business / market analysis Actual product development Test marketing Commercialization

1- Generating new product (NP) ideas

New product ideas may emanate from customers, dealers, in-company sources including the market research group & external research organizations. Consumers problems, are the most fertile ground for the generation of new ideas. Sometimes, NP ideas come emanate just as a matter of happening.

E.g.Walkmanread the Walkman story from Ramaswami, pg.no-337.

2- Idea screening
Screening NP ideas in order to spot good ideas & drop poor ones as soon as possible. Answers are sought to the questions like1)In there any felt need of the product? 2) Is it an improvement over existing product? 3)Is it close to our current line of business? Or is it totally different?

4) Can the existing production & marketing organizations handle the product? or does it need extra expertise in production & marketing front? The most attractive ideas pass on to the concept testing.

3- Concept development & testing

In this step, the product concept itself is tested at this stage. Product concept is a detailed version of the NP idea stated in meaningful consumer terms. Concept testing- testing NP concepts with a group of target consumers to find out if the concept have strong consumer appeal.

Concept testing is of special importance when a totally NP in contrast to a me too product is being planned for introduction. For some concept tests, a word or a picture description might be sufficient. Virtual reality-use of computers & sensory devices (goggles or gloves) to simulate reality. E.g.- hairdressers use virtual reality for years to show consumers how they might look with a new style.

After being exposed to the concept, consumers then may be asked to react to it by answering questions, such as1)Do you understand the product concept? 2)Do you believe the claims about the product? 3)What are the major benefits of the product? 4) What are its advantages compared with other version?

5)What improvements in the products features would you suggest? 6)What should be the reasonable prize to charge for the product? 7)Who would be involved in your decision to buy the product? 8)Would you buy such product? definitely, probably, probably not, definitely not.

4- Marketing strategy development

Designing an initial marketing strategy for a NP based on the product concept. It consists of 3 parts- the 1st part describes target market, product positioning, market share, profit goals sales for the first few years. The 2nd part of the marketing strategy outlines the products planned price, distribution & marketing budget for the

year. The 3rd part describes the planned long-run sales, profit goals, & marketing strategy.

5- Business/market analysis
A review of the sales, costs & profit projections for a NP to find out whether these factors satisfy the companys objectives. This stage is of vital importance since this stage will decide whether the project is worth proceeding with. Factors to be taken into considerationdemand estimate, seasonal patterns, price elasticity of demand, types of

marketing channels, major competitors, their market share, the dominant market segments held by them etc.

6- Actual product development

So far, the product may have existed only as a word description, a drawing or perhaps a crude mock-up. At this stage the product moves into product development. Here R&D develops the product concept into physical product. A pilot production facility is set up. By this time, the firm is by-&-large committed to the NP.

This step calls for the heavy investment. Besides R&D, marketing & production departments are actively involved at this stage.

7- Test marketing
It is the stage of NPD in which the product & marketing program are tested in more realistic market settings. This step lets the company test the product & its entire marketing programpositioning strategy, advertising. Distribution, pricing, branding & packaging, & budget levels. The NP is launched & marketed in a few select test cities/towns.

The selected test markets will be representative of the final market. Its time-consuming process since reliable results require long time. E.g.- when HUL had launched is Organics, the shampoo it sampled 30 million sachets in selected market territories.

8-Commercialisation
Introducing a NP into the market. At this stage, the company takes the decision to go in for a large-scale manufacturing & marketing of the product. The company launching a NP must first decide on introduction timing. E.g.- If DaimlerChryslers new fuel-cell electric car will eat into the sales of the company's other car's, its introduction

may be delayed. _____________**********_______________