New Product Development (NPD)

The 4 Elements of The Marketing Mix

Product Price Place Prom otion

M arketing M ix

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 service

Pure good

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 iPod

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” strategiesduring “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 Repeat

If we are not an instant hit, do the

research

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

Technological advances

When the two align, you have a winner!

Big firms take a diversified“Portfolio Approach”

Risk

Potential Payoff

Improve performance of existing product

Add feature to existing product

New product to existing markets

New product to new markets

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)