CHP 1

Introduction to New Product Development (NPD)

• Overview: NPD management involves processes for developing new products and improving existing ones.

• Key Concepts:

  • Original product development.

  • Product improvements and modifications.

  • Creation of new brands through R&D efforts.

Definition of New Products

• Types of New Products:

  • Original products that offer new innovations.

  • Improvements on existing products.

  • Modifications or variations of established products.

  • New brands developed in-house.

• Example: Elon Musk’s innovations provide insight into recent advancements in the industry.

New Product Development (NPD) Strategy

• Acquisition & Development: New products can be developed internally or obtained via acquisitions.

• Challenges: New products often face high failure rates due to various factors.

• Factors Leading to Failure:

  • Overestimation of market size.

  • Design issues or complexities.

  • Misaligned positioning, pricing, or advertising.

  • Launch of products despite inadequate market research.

  • High development costs and strong competition.

Classifications of New Products

• New-to-the-Market Products:

  • Innovations that never existed in the market (e.g., hybrid cars, iPods).

• New-to-the-Category Products:

  • First entries into a new category for the firm (e.g., Altoids, Dove shampoo).

• Repositioned Products:

  • Existing products improved for better use (e.g., Arm & Hammer).

Major Stages in New Product Development

1. Idea Generation: Collect ideas from various sources:

   • Employees

   • Customers

   • Distributors

   • Competitors

   • Suppliers

2. Idea Screening: Identify good ideas and reject poor ones through evaluation criteria (market size, costs, and rate of return).

3. Concept Development & Testing: Further refining product ideas into tangible concepts.

4. Marketing Strategy Development: Define target markets, product positioning, sales goals, pricing, and distribution strategies.

5. Business Analysis: Review sales, costs, and profit projections to ensure they align with company goals.

6. Product Development: Transform concepts into physical prototypes; requires substantial investments.

7. Test Marketing: Introduce product in a realistic market to assess performance before full launch.

8. Commercialization: Finalize rollout plans including timing and locations for product launch.

9. Product Life Cycle Analysis:

   • Stages: Introduction, Growth, Maturity, Decline.

   • Each stage has different implications for sales, market share, costs, and competition.

   • Requires adaptation strategies based on the life cycle stage.

Sequential vs. Simultaneous Approaches in NPD

• Sequential Approach: Complete each stage before proceeding to the next to ensure thorough development.

• Simultaneous Approach: Utilize cross-functional teams to work on overlapping tasks for increasing speed and efficiency.

Case Study

• Revlon Brand Relaunch:

  • Campaign titled "Love Is On".

  • Innovative use of interactive billboards to engage customers by showcasing user-generated content in real-time during special events.