New Product Development (NPD)
• 3 inescapable facts about NPD – It is expensive,
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risky and time consuming
For example, Gillette spent in excess of £100
million over more than ten years developing its
sensor razor brand
Had the brand failed, Gillette’s position in the
shaving market could have been damaged
irreparably.
New Product Development
• Managing the process of NPD is an important
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factor in reducing cost, time and risk
Studies have shown that having a formal
process with review points, clear new product
goals and a strong marketing orientation
underlying the process leads to greater
success, whether the product is a physical
good or a service
New Product Development
• An eight step new product development
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process to provide these characteristics is
shown in the next slide.
Each stage leads to a greater likelihood of
developing a product that not only works but
also confers customer benefits.
New Product Development8 stage NPD process
New product strategy
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Idea generation
Screening
Concept testing
Business analysis
Product development
Market testing
Commercialisation
New product strategy
• Marketing Directors value strategic guidance from
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senior management about their vision and
priorities for NPD.
Key objectives such as profitability, technological
leadership, etc. impact and help to evaluate
decision making.
Example of a clearly developed new product
strategy – Mars which developed ice cream
products that capitalized on the brand equity of its
confectionery brand names, such as Twix, Mars
and Milky Way
Idea generation
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Successful new product ideas are not necessarily
based on technological innovation.
Often based on novel applications of existing
technology (e.g.velcro poppers on disposable
nappies)
Levi Strauss – vision of repositioning jeans, which
were originally used as working clothes, as a
fashion statement through its 501 brand
Brainstorming is a technique often used to create
new ideas
Consumers also are a rich source of ideas
Screening
• New ideas need to be screened to evaluate their
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commercial worth. Some companies use formal
checklists to help them judge whether the product
idea should be rejected or accepted for further
evaluation.
Other criteria focus on cost/benefit analysis,
expected return on investment, uniqueness of the
product, and primary market research results
Concept testing
• Once the product idea has been accepted as
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worthy of further investigation, it can be framed in
a specific concept for testing with potential
customers.
Group discussion can be used to develop and test
product concepts
A questionnaire is often used to ascertain the
extent of liking/disliking, the kind of
person/organization that might buy the product, its
price acceptability, and how likely they would be to
buy the product.
Business analysis
• Based on the results of the concept test and
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considerable management judgement, estimates of
sales, costs and profits will be made.
Business analysis will focus on the target market,
its size and projected product acceptance over a
number of years. Sales and profit forecasts will
also be calculated.
If the product concept appears commercially
feasible, marketing and product development
budgets will be established to gain customer
awareness and trial, and the work required to turn
the concept into a marketable product.
Product development
• There are 6 key principles
• Mission: senior management must agree to a clear
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mission through a project charter that lays out
broad objectives
Organisation: the appointment of an experienced
project leader and a core team consisting of one
member for every core function in the company.
Project plan: creation by the project leader and
core team of a contract book, which includes a
work plan, resource requirements and objectives
against which it is willing to be evaluated.
Product development
• Project leadership: project leader becomes a
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product champion and spends time talking to
customers, distributors and key influencers
Responsibilities: all core members share
responsibility for the overall success of the project
as well as their own functional responsibilities
Executive sponsorship: an executive sponsor in
senior management is required to act as a channel
for communication with top management and to
act as a coach and mentor for the project and its
leader
Commercialization
• Commercialization is all about launching the new
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product and ensuring that the target market,
segmentation and positioning are all correctly
researched and selected.
The optimal marketing strategy has to be selected
to provide a differential advantage in the
marketplace.
New Product Development (NPD)
• In groups of two, discuss products that have been
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a complete flop and explain why this is so.
In your groups discuss products that have been
real winners and explain why this is the case.