New Product Development (NPD) • 3 inescapable facts about NPD – It is expensive, • • 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 • 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 • 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 . Idea generation Screening Concept testing Business analysis Product development Market testing Commercialisation New product strategy • Marketing Directors value strategic guidance from • • 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 • 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 • 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 • • 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 • • 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 • • 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 • • 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 • 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 • 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.