NPD: New Product Development

Why New Products?

• Sustain growth• Increase revenues and profits• Replace obsolete items• Innovative Firms– Apple– Google– Microsoft– IBM– Toyota

New technologies lead to NPD

New Products

• New to the world (discontinuous innovations)– Create an entirely new market– Smallest category

• New Product Lines• Additions to existing Product Lines• Modifications• Repositioned products• Lower-Priced

NPD Process

• Idea Generation• Idea Screening• Business Analysis• Development• Test Marketing• Commercialization

Idea Generation

• Customers• Employees• Distributors• Vendors• Competitors R&D• Consultants

Idea Screening

• MOST IMPORTANT STEP• Weed out bad ideas• Another group performs a review• Concept testing– Does not predict success

Business Analysis

• Survived Screening process• Estimate– Demand– Cost– Sales– Profitability

• CDSTEP

Development

• Prototype by engineering– Start marketing strategy

• Can take a long time– Crest 10 years– Polaroid in color 15 years– Xenox 15 years– Minute Rice 18 Years

• Work out the kinks • All departments work at once - Simultaneous

Test Marketing

• Limited introduction– Tests customer reaction– Marketing strategy

• Costly• Alternatives– Lab testing– Internet to assess demand

Commercialization

• Decision to go full Launch• Manufacturing large scale– Order materials/equipment– Inventories– Shipping– Etc.

Diffusion of Innovations

Diffusion in numbers

In a more serious tone…

• Innovators: eager to try new ideas; obsession• Early adopters: group oriented, opinion leaders• Early majority: weighs pros & cons• Late majority: most of their friends have it• Laggards: low SES; adopt when obsolete; luddites

How Product influences adoption

• Complexity• Compatibility• Relative Advantage• Observability• Trialability

Product Life Cycle

Product Life Cycle