New Product Development Strategy

New Product Development Strategy Page 1
Course Name : BA (HONS)
Module Name : Global Marketing Management
Module Code: MG603
Assignment No. : CW003
Assignment on : New Product Development Strategy
Submitted by : Sajedul Islam Chy
ID No. – 21414464
Submitted to : Sandhya S Thirunagari
Submission Date : 21th May 2014

Table of Contents
Introduction................................................................................................................................ 3
New product development........................................................................................................... 4
Critical success factors............................................................................................................. 5
Metrics.................................................................................................................................... 6
Idea Generation........................................................................................................................... 7
Idea Screening............................................................................................................................. 8
Concept development and testing ................................................................................................ 9
Brainstorming ......................................................................................................................... 9
The Idea Game .......................................................................................................................10
Morphological Analysis...........................................................................................................10
Archival Analysis....................................................................................................................10
Concept Testing......................................................................................................................11
Marketing strategy development.................................................................................................11
Business Analysis........................................................................................................................13
Product Development.................................................................................................................14
Test Marketing...........................................................................................................................15
Commercialisation............................................................................Error! Bookmark not defined.
Conclusion..................................................................................................................................16

Introduction
Successful new product development (NPD) is a critical cornerstone of firm success.
Significant incentives exist for firms to continuously introduce possible new products to the
markets they serve. The financial payoff from successful new product introductions can help
many firms overcome the slowing growth and profitability of existing products and services that
are approaching the maturity stages of their life cycles. A 1990 study sponsored by the
Marketing Science Institute found that 25% of successful firm’s current sales were derived, on
average from new products introduced in the last three years. New product development can also
be a potential source of significant economies of scale for the firm. New products may be able to
use many of the same raw material inputs as the firm’s existing products, and may be able to use
many of the same raw material inputs as the firm’s existing sales force- resulting in substantially
lower unit cost for the firm. Furthermore, new product development can be an important source
of leverage for the firm to use in its relationships with its distribution channel partners.
In the last few decades, the number of new product introductions increased dramatically as
the industry became more aware of the importance of new products to business.
Correspondingly, managing the NPD process has become a challenge for firms as it requires
extensive financial and human resources and is time sensitive. The cruel realities are that the
majority of new products never make it to market and those that do face a failure rate somewhere
in order of 25% to 45% . For every seven new product ideas, about four enters in development
phase, one and a half are launched, and only one succeeds. Despite the extensive research on
how to achieve success in NPD, firms continue to deliver products that fail and therefore NPD
ranks among the riskiest and most confusing tasks for most companies.
Unfortunately, new product development is an extremely challenging and complex process.
Innovation is inherently risky, and firms may invest considerable time and money in new product
ideas with new product development landscape is littered with expensive examples. Although
Henry Ford led the way in developing the automobile market, the Ford Motor Company in the
1950s introduced the Edsel and lost more than $100 million.

Idea Generation
Idea Screening
ConceptDevelopmentand
Testing
Marketing Strategy
Development
Business Analysis
Product Development
MarketTesting
Commercialization
New product development
The NPD strategy consists of the activities carried out by firms when developing and
launching new products. A new product that is introduced on the market develops over a
sequence of stages, beginning with an initial product concept or idea that is evaluated,
developed, tested and launched on the market. This sequence of activities can also be viewed as
a series of information gathering and evaluation stages. In effect, as the new product evolves,
management becomes increasingly more knowledgeable (or less uncertain) about the product
and can assess and reconsider its initial decision to undertake development or launch. Following
this process of information gathering and evaluation can lead to improved new product decisions
on the part of firms by limiting the level of risk and minimizing the resources committed to
products that eventually fail. The NPD strategies differs from industry to industry and from firm
to firm. Indeed it should be adapted to each firm in order to meet specific company resources and
needs.
Figure: New Product DevelopmentProcess

Many researchers have tried to develop a strategy that captures the relevant stages of the
NPD process. A number of detailed NPD strategies have been developed over the years. It is
based on extensive surveys, in depth interviews, and case studies and, as such, appears to be a
fairly good representation of prevailing practices in industry.
The stages of the process are as follows:
 Idea generation: Searches for product ideas that meet company objectives.
 Idea Screening: Comprises of an initial analysis to determine which ideas are pertinent
and merit more detailed study.
 Concept development and testing: Product concepts provide detail versions of new
product ideas. Concept tests ask target consumers to evaluate product concepts.
 Marketing strategy development: Defines the target market, product positioning, sales,
share and profit goals for the first few years. Also identifies long run sales and profit
goals and the marketing mix strategy.
 Business Analysis: Further evaluates the ideas on the basis of quantitative factors, such
as profits, Return-on-investment (ROI), and sales volume.
 Product Development: Turns an idea on paper into a product that is demonstrable and
producible.
 Market testing: Is the stage of new product development in which the product and
marketing program are tested in realistic market settings..
 Commercialization: Launches products.
Critical success factors
Over the last two decades, several studies have examined the determinants of NPD success
and identified many factors that distinguish successful products from unsuccessful ones. Factors
that are necessary and guarantee commercial success are termed as critical success factors (CSF).
It is imperative to reflect on how one can benefit from each and how one can translate each into
an operational feature of the NPD strategies. Daniel (1961) and Rockart (1979) proposed that
organizations need to identify factors that are critical to the success of that organization, and they
suggested that the failure to achieve goals associated with those factors would result in
organizational failure. In fact, it is even suggested that NPD itself is a CSF for many
organizations. Given that this is now a well-known fact, the idea is to determine what factors in
NPD are essential for success, and how to measure the extent of this success. The challenge is to

design a process for successful product innovation - a process whereby new product projects can
move quickly and effectively from the idea stage to a successful launch and beyond.
Metrics
A metric tracks performance and allows a firm to measure the impact of process
improvement over time. Metrics can play an important role in helping companies to enhance
their NPD efforts and are important for at least three reasons.
 First : Metrics document the value of NPD and are used to justify investments in this
fundamental, long term, and risky venture.
 Second: Good metrics enable Chief Executive Officers and Chief Technical Officers to
evaluate people, objectives, programs, and projects in order to allocate resources
effectively.
 Third: Metrics affect behaviour. When scientists, engineers, managers, and other NPD
employees are evaluated on specific metrics, they often make decisions, take actions, and
otherwise alter their behaviour in order to improve the metrics. The right metrics align
employees' goals with those of the corporation; wrong metrics are counterproductive and
lead to narrow, short-term, risk-avoiding decisions and actions.
Any metric that might be applied to NPD will often focus on one function or another or on
the entire NPD process. But no one function is the sole contributor to the process that produces
new products. A metric for the productivity of the R&D organization, for example, may show
constant improvement. In spite of this improvement, however, there may be no improvement in
the rate at which new products reach the market. What is important to measure is the
effectiveness of the stages of NPD process in a mutually dependent fashion. If companies had
reliable metrics to estimate their performance, then specific problem areas could be addressed
and managers might see the same improvement in their NPD efforts that they come to expect
from their quantifiable total quality management programs.

Idea Generation
After setting a well-defined NPS for NPD, the idea generation stage begins, where the search
for product ideas is made to meet company objectives. The idea generation concerns the birth,
development, and maturation of a concrete idea. After defining the markets and segments based
on the NPS it wishes to target, the firm must advance and nurture ideas wherever they occur to
take advantage of the identified opportunities. As per the study done by Booz, Allen and
Hamilton (1982), a firm has to generate at least seven ideas to generate one successful.
The main purpose of this stage is to create a number of different ideas from which the firm
can select the most feasible and promising one(s). A greater likelihood of achieving success
depends in part on the number of ideas generated. Firms that are effective at idea generation are
those that do not focus solely on the first source to generate ideas, i.e. ideas that are originated
from inside the firm, but that concentrate on all potential idea sources. There is a multitude of
sources as well as many different methods to generate ideas. Two sources of new ideas can be
identified:
 Internal idea sources: the company finds new ideas internally. That means R&D, but also
contributions from employees.
 External idea sources: the company finds new ideas externally. This refers to all kinds of
external sources, e.g. distributors and suppliers, but also competitors. The most important
external source are customers, because the new product development process should focus
on creating customer value.

Idea Screening
Idea screening means nothing else than filtering the ideas to pick out good ones. In other
words, all ideas generated are screened to spot good ones and drop poor ones as soon as possible.
While the purpose of idea generation was to create a large number of ideas, the purpose of the
succeeding stages is to reduce that number. The reason is that product development costs rise
greatly in later stages. Therefore, the company would like to go ahead only with those product
ideas that will turn into profitable products. Dropping the poor ideas as soon as possible is,
consequently, of crucial importance. Here are some facts to consider during screening ideas –
 Does the product represent something completely new and different from anything out
there in the marketplace? Would it likely appeal to a specialty/niche segment of people?
 Does the idea have a unique design to it, that’ll make it appeal to more people than a
comparable product does now?
 Will this idea offer a noticeably superior quality in comparison to competitive offerings?
If so, can it remain in the same price range as those competitive products?
 If it’s a popular item (in terms of category volume), would you be able to noticeably
lower its price without affecting its quality?
 Is the idea able to offer enough new features to differentiate it from the competition? If
so, to what degree would these additional features be of value or seen as advantageous?
 For popular products, would the idea enable to produce and distribute it faster than the
competition? Importantly, will this matter? Popular competitive products may carry a
strong brand appeal which may be too high a hurdle. However, if the product category is
a bit more commoditized, then speed to market will definitely be a strong advantage.
 How much longevity does the product idea have? Is it part of an established category of
products, a trend, or a fad? Having a grip on this is crucial
 Similar to #7, how new is this idea compared to existing products in portfolio or
pipeline? Buyers are likely to be approached next season by similar products with the
additional features and attributes would be pitching. But ultimately, new idea should try
and have additional, newer concepts in development pipeline.

Concept development and testing
The third step in New product development is Concept Development and Testing. An
attractive idea has to be developed into a Product concept. As opposed to a product idea that is
an idea for a product that the company can see itself marketing to customers, a product concept
is a detailed version of the idea stated in meaningful consumer terms. This is different again from
a product image, which is the consumers’ perception of an actual or potential product. Once the
concepts are developed, these need to be tested with consumers either symbolically or
physically. For some concept tests, a word or a picture may be sufficient; however, a physical
presentation will increase the reliability of the concept test.
Therefore, at the Concept development stage, the premium, at least initially, is variety. The
more different “spaces” are explored, the higher the probability that the best ideas will be good
ideas that can position the organization to satisfy customer needs in new and creative ways. A
wide variety of ideation methods have been proposed, including brainstorming, and incentive-
compatible ideation, morphological analysis, forced relationships, systems approaches, varied
perspectives, and archival analysis.
Brainstorming
Brainstorming is a method of shared problem solving in which all members of a
group spontaneously contribute ideas, including seemingly unrealistic ideas – which
often serve as a catalyst that stimulates the generation of additional, more-realistic ideas.
Brainstorming participants are instructed to accept any and all ideas as useful inputs to
the process. An alternative approach – called brain writing – can overcome some of the
limitations of conventional brainstorming. With brain writing, participants arrange
themselves in a circle and write down their ideas instead of calling them out in front of
the group. Typically, a set of index cards is provided to all participants. When a
participant has written down two or three ideas on a card, the card is then passed to the
adjacent person. That person reads the ideas and either tries to elaborate on them, or tries
to use them to generate additional ideas. Cards are repeatedly and continuously passed
around the group – making it nearly impossible to determine the original source of the
idea.

The Idea Game
As the Internet becomes more prevalent and accepted for management processes,
idea generation has moved to web-based methods.
 First- by using the web in an asynchronous game, participants can
post ideas, expand ideas, and comment on ideas at their
convenience from anywhere in the world; they do not all have to
be in the same room at the same time.
 Second- ideas are organized in threads so that participants can
easily build upon other ideas.
 Third- the incentives are balanced so that respondents think hard
and post only those ideas that are new, different, and incremental.
Participants earn rewards for posting new ideas, but the largest
rewards come when other participants build on your idea.
Morphological Analysis
Morphological Analysis is a method for identifying and investigating the total set of
interesting new combinations of product attributes and features. In this technique, the
NPD team first lists the key attributes of the given product or service. For the coffee-
maker example, the attributes might include capacity, color, style, shut down methods,
turn on methods, filter shape, material, and clock attributes. After listing all possible
attributes, the NPD team creates a table using each of these attributes as column
headings, and generates as many existing and potential variations of each individual
attribute as possible. The resulting table should shows all possible variations of each
attribute.
Archival Analysis
Archival analysis involves critically and judiciously gathering and analyzing the ideas of
others who have solved problems in other domains in order to help solve the problem on
hand. It attempts to document and summarize all solutions to problems that are relevant
to the firm or the NPD team. It then creates a universal table or template that lists
possible solutions to potential problems facing the NPD team. Using the coffee maker
example, if the design team desires the machine to be strong, lightweight, and stain
resistant, they could look at a list of possibilities generated by archival analysis and
determine that titanium should be considered for use as the basic material.

Concept Testing
Concept testing is a essential step that plays a vital role in the new product development
process. Here, new product concepts are screened with potential customers using both
quantitative and qualitative research methods. Evaluations on such measures as
consumer relevance (how important is the consumer need being addressed by the
innovation), consumer purchase interest, and dissatisfaction with currently available
products are used to prioritize ideas for further testing, evaluation, and funding. After
exposing the concept to the group of target consumers, they will be asked to answer
questions in order to find out the consumer appeal and customer value of each concept.
Marketing strategy development
The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is time to design an
initial marketing strategy for the new product based on the product concept for introducing this
new product to the market.
Having a strong marketing strategy process in place helps to ensure that your marketing
activities remain aligned with your business goals, maximizing the business return from your
marketing efforts. There are few steps should follow to create and execute a winning marketing
strategy.

.
• Understanding Customer
• Analyze the Market
• Analyze the Competition
• ResearchDistribution Channels
• Define Marketing Mix
.
• Analyze the Financials
.
• Review and Revise
 Understanding customer: Develop a clear picture of your target customer using market
research and analysis. Understand their pain points and the benefits for solution.
 Analyze the Market: Some basic market research should allow to find market data such
as total available market, market growth, market trends etc.
 Analyze the Competition: Define what other choices of target customers have to solve
their pain points. Research and assess the strength and weaknesses of each.
 ResearchDistribution Channels: Find out what is the best way to deliver product or
service to target customer. This will impact on sales strategy and financials, as well as on
marketing mix.
 Define Marketing Mix: Research about new developed product, price, place and
promotion.
 Analyze the Financials: Put together marketing budget and evaluate projected marketing
RIO, customer acquisition cost, etc.
 Review and Revise: Continuously evaluate the effectiveness of marketing strategy, and
revise or extend as needed.
Figure: Developing Marketing Strategy

Business Analysis
Once decided upon a product concept and marketing strategy, management can evaluate the
business attractiveness of the proposed new product. The fifth step in the new product
development process involves a review of the sales, costs and profit projections for the new
product to find out whether these factors satisfy the company’s objectives. If they do, the product
can be moved on to the product development stage.
In the screening stage, initial analysis is done based on the NPS, resources and competition,
while in the business analysis stage, ideas are evaluated using quantitative performance criteria.
After gathering enough new product ideas through various sources from the idea generation
stage, which ideas to pursue will be selected based on the business value they bring. Making a
good selection is critical to the future health and success of the business. The point is that
product development costs rise substantially with each successive stage in the NPD process. The
ideas that have been classified as “Go” ideas must be screened further using criteria set up by top
management. These ideas must be described on a standard form that can be accessed by a new
product committee. The committee then assesses each idea against a set of criteria, which verify
the attractiveness and visibility of the idea as well as its fit with the company’s strategy,
objectives and resources. The ultimate result from screening and evaluation is a ranking of NPD
proposals, such that the resources can be allocated to the projects that seem most promising.
After screening, the business analysis is the detailed investigation stage that clearly defines the
product and verifies the attractiveness of the project prior to heavy spending.
In every successive stage of the NPD process, as estimates become more refined and
accurate, companies should continue conducting financial evaluation throughout the NPD
process, but at this stage it is critical. A review of a costs, potential sales and profit projections of
the new product are undertaken in order to determine whether these factors satisfy the
company’s objectives or not. If a result from this stage shows that the product meets the
objectives, then the new product concept can move to the development stage. The final
component of the business analysis stage is the action plan. A detailed plan of action is created
for the next stage and tentative plans are developed for all subsequent stages. This critical stage
opens the door to a significant commitment of resources and to a full-fledged development
program based on financial analysis which forms the base for the CSF and its metrics proposed
for this stage.

Product Development
Once the results of the business case of the new product conform to company objectives, the
new product team can move on to the development stage, which is made up of activities that
range from prototype development to volume ramp up and test marketing. The interaction
between the program and project manager is no longer one of selling or buying the concept, but
rather one of bringing the product to market on time, within budget, and to the required
specifications. What is critical for success at this stage to move through development to launch
as quickly as possible and to ensure that the product prototype or final design does indeed meet
customer requirements, which requires seeking customer input and feedback throughout the
entire development stage. It is important to gain competitive advantage and to enjoy the
product’s revenues as soon as possible and it also minimizes the impact of a changing
environment.
Thus, as the product proceeds from one step of the development stage to the next, the new
product team should reassess the market, position, product, and technology in order to increase
chances of delivering a successful product. Marketing and R&D functions in particular should
collaborate because, while marketing can express the needs of customers, R&D has the capacity
of turning a product concept into an actual physical entity. Therefore they should work together
to ensure the product meets customer requirements. Cross-functional teams are widely used in
companies to help in identifying and solving problems efficiently by coordination of resources
and ideas. Customer input and feedback is a critical activity throughout development, both to
ensure that the product is right and also to speed development toward a correctly defined target.
The R&D department will develop and test one or more physical versions of the product
concept. Developing a successful prototype, however, can take days, weeks, months or even
years, depending on the product and prototype methods.

Test Marketing
Once a firm has refined its product concepts, developed prototypes, and can produce its
products in limited quantities, it needs to test the full benefit proposition that includes the
physical product, service, distribution, and marketing actions such as advertising, detailing, sales
force presentations, word-of-mouth, and publicity. We call such testing either pre test-market or
pre-launch forecasting. In a typical pre test-market analysis, potential customers are shown
products in a setting that is chosen to simulate the purchase experience. For consumer products
they might be shown television advertising, magazine articles, tapes of other consumers talking
about the product, sales force presentations, consumer magazine reports or whatever media are
appropriate to the product category. They might be recruited at a mall, brought to a room to see
advertising, then brought to another room that simulates a grocery store. They would be asked
questions about perceptions, preferences, and purchase intentions and allowed to make an actual
purchase in the simulated store.
In recent years the set of possible product categories has broadened tremendously with
applications ranging from frequently purchased products (candy, soda, deodorants) to consumer
durables (personal computers). In some situations, such as automobiles, the NPD team wants to
test the market before launch, but after the production facilities have been built. Although
volume is less of an issue, the team needs to know what it will take to sell the product. It needs
an estimate of the required investment in advertising, dealer incentives, and promotion. To the
extent that production is flexible, it also wants to know how many items it will likely produce
with each set of features such as global-positioning and mapping systems, premium sound
systems, or even metallic paint.
Commercialization
Test marketing has given management the information needed to make the final decision:
launch or do not launch the new product. The final stage in the new product development process
is commercialization. Commercialization means nothing else than introducing a new product
into the market. At this point, the highest costs are incurred: the company may need to build or
rent a manufacturing facility. Large amounts may be spent on advertising, sales promotion and
other marketing efforts in the first year.

Some factors should be considered before the product is commercialized:
 Introduction timing. For instance, if the economy is down, it might be wise to wait until the
following year to launch the product. However, if competitors are ready to introduce their
own products, the company should push to introduce the new product sooner.
 Introduction place. Where to launch the new product? Should it be launched in a single
location, a region, the national market, or the international market? Normally, companies
don’t have the confidence, capital and capacity to launch new products into full national or
international distribution from the start. Instead, they usually develop a planned market
rollout over time.
Conclusion
New product success still remains the critical challenge for companies. Many companies are
aware of the major role new products must play in their future and quest for prosperity:
companies are constantly searching for ways to revitalize, restructure and redesign their NPD
practices and processes for better results. This framework proposes that to achieve success, NPD
firms should have a clear and well communicated new product strategy. These firms should have
well defined new product arenas along with long term trust, with clear goals. Successful
businesses and teams of NPD have a dedication towards the voice of the customer. It is critical
that firm should gather as many ideas as possible and a large number of these should come from
customers so that the firm can be in a position to design and develop winning new products. Up-
front homework prior to the initiation of product design and development is found to be a key
factor in a firm’s success.

New Product Development Strategy

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