Lecture 7- New Product Development and Product Life Cycle

what are the 5 stages in new product development?

1. idea generation

2. idea screening

3. idea evaluation

4. development

5. commercialization

what does step 3, idea evaluation, consist of?

1. concept development & testing

2. marketing strategy development

3. business analysis

what does step 4, development, consist of?

1. product development

2. market testing

Step 1: Idea Generation

major idea sources

1. internal (company’s own R&D, management, employees)

2. external (sources outside the company, customers, competitors, etc.)

Step 2: Screening (formula)

Probability of Technical Completion X Probability of Commercialization (given 1) X Probability of Economic Success (given 1 and 2) = Attractiveness of Opportunity

Step 3a: Concept Development & Testing

-An Idea/opportunity converted to a testable version of the product

-Describes/shows the New Product and its Positioning (thus requires a well defined Target Market)

concept testing examples

• verbal description

• sketch

• photograph

• storyboard

• video

• working prototype

Calculating demand forecasting

• Q= M x A x P

Q=sales (annual)

M= market size

A = awareness x availability (fractions)

P= probability of purchase (surveyed)= Cdef x top box + Cprob x second box

Step 3b: Marketing Strategy Development

refers to the initial marketing strategy for introducing the product to the market and includes:

Step 3c: Business Analysis

involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives

Step 4a: Product Development

involves the creation and testing of one or more physical versions by the R&D or engineering departments

Step 4b: Test Marketing

the product and entire marketing program are introduced into more realistic marketing settings

what does test marketing help us understand?

helps to understand how consumers & dealers may handle, purchases, use & repurchases the new products

Step 5: Commercialization

the introduction of new product.

key decisions needed to be made about commercialization

When to Introduce

where to launch

to whom

how: whats the action plan?

PATH 1 FOR NPD

New Use of the Existing Products (New Markets)

PATH 2 FOR NPD

Add Creative New Features to the Existing Products (New Products)

PATH 3 FOR NPD

Expand Products to Services

PATH 4 FOR NPD

Retailers, the New Service Providers

PATH 5 FOR NPD

Technology Enabled New Product and Service

Feature Bloat

• Overload of features detracts from a product’s usability

• Do customers really use that many functions?

• Trade-off between capability and usability