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New product development (NPD). The need for new products Organisations need a flow of new products to keep their: Portfolios fresh. Customers interested. Sales growth. New product development is however a costly and risky process. Degrees of newness New to the company, new to the market.
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The need for new products • Organisations need a flow of new products to keep their: • Portfolios fresh. • Customers interested. • Sales growth. • New product development is however a costly and risky process.
Degrees of newness • New to the company, new to the market. • New to the company, a significant innovation for the market. • New to the company, a minor innovation for the market. • New to the company, no innovation for the market.
The innovation continuum Figure 9.1
Approaches to new product development • Reactive - responding to what others do. • Proactive - seeking out new ideas before the competition step in.
NPD process Figure 9.2
Sources of new ideas • Research and development. • Competitors - actual and potential. • Employees. • Customers. • Licensing. • Organised creativity.
Idea screening • Fit with corporate strategic objectives. • Fit with marketing strategic goals. • Market growth. • Size of target market. • Access to market. • Differential advantage offered. • Profitability potential. • Timing. • Synergy - existing products, technology, skills and assets, etc.
Concept testing A printed or filmed representation of a product or service. It is simply a device to communicate the subject’s benefits, strengths and reasons for being. Schwartz, 1987
Business analysis • There are three main dimensions to consider here: • Marketing strategy. • Production. • Finance. • Competitive response should also be built in - with what ifs.
Test marketing benefits • A real test in a real environment. • Offers a last chance for fine tuning. • Provides an opportunity to vary some of the mix variables. • Allows an assessment of things that are difficult to predict on paper, e.g. propensity to repeat buying.
Reasons not to test market in B2B markets • Market structure. • Buyer–seller relationships and customisation. • Product life span and purchase frequency.
Product launch • Immediate national or international launch (sprinkler strategy). • Rolling launch (the waterfall strategy).
Product failure definitions • Outright failure - lost money. • Partial failure - major negative market response. • Partial failure - failure to make contribution to fixed costs and profit. • Partial failure - failure to achieve its set objectives. • Partial failure - no longer fits organisational strategy.
Reasons for product failure • Target market too small for volumes planned or needed. • Insufficient differentiation from existing offerings. • Poor or inconsistent product quality. • No access to markets. • Poor timing. • Poor marketing - e.g. insufficient or badly allocated spend.
Advantages and disadvantages of organising R&D of new products (1 of 3) Table 9.4
Advantages and disadvantages of organising R&D of new products (2 of 3) Table 9.4 cont.
Advantages and disadvantages of organising R&D of new products (3 of 3) Table 9.4 cont
Organisation for NPD • Product or brand manager. • Market manager. • New product manager. • Venture team. • New product committee. • Cross-functional teams.
