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In business and engineering,
new product development
(NPD) is the term used to describe the
complete process of bringing a new product or service to market. There are two parallel paths involved
in the NPD process : one involves the idea generation, product design, and detail engineering ; the other
involves market research and marketing analysis. Companies typically see new product development as
the first stage in generating and commercializing new products within the overall strategic process of
product life cycle management used to maintain or grow their market share.

Categories of new products:

Six categories of new products in terms of their newness to the company and to the market

New-to-the-world products
• new products that create an entirely mew market
New product-lines
• new products that allow a company to enter an established market for the first time
Additions to existing product-lines
• new products that supplement a company’s established product lines (package sizes, flavors,
so on)
Improvements or revisions to existing products
• new products that provide improved performance or greater perceived value and replace
existing products
• existing products that are targeted to new markets or new market segments
Cost reductions
• new products that provide similar performance at lower cost

Issues in new product development:

The companies need the development of original products, product improvements, product
modifications & new brands on a consistent basis to survive competition but most new products fail.
• New-product failure
– nearly 80% of new packaged consumer goods & line extensions fail
– nearly 33% of new industrial products fail at launch
• New successful products
– are unique superior products
higher quality, new features & offer higher value
– have well-defined concept
by carefully defining and assessing the target markets, product requirements & benefits
To remain successful companies must continuously develop new products - but the odds weigh heavily
against success. The solution lies in strong new-product planning

Successful new products are the ones;

that have relative advantage
have compatibility with other technology and distribution systems

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allow trialability / divisibility for buyers to try and learn
can be judged through observation
just right in terms of complexity of technology and use
offer value for the price

The new product development process:

Successful new product development process consists of eight major steps;

1. Idea generation:

systematic search for new-product ideas
- internal sources
- customers
- competitors
- distributors
- suppliers
- others

2. Idea screening:

to spot good ideas and drop poor ones
- is the product truly useful to consumers & society
- availability of market
- does it mesh well with company’s objectives & strategies
- do we have the people, skills & resources to make it succeed
- does it deliver more value to customers than competing products
- is it easy to advertise and distribute
- availability of technology
- availability of raw materials
- risk exposure, profitability, cost/benefit
- government priority
- any other factor
3. Concept development & testing

product concept is a detailed version of the new-product idea stated in meaningful consumer
concept development - a new product idea is developed into alternative product concepts
concept testing - calls for testing new-product concepts with groups of target customers
4. Marketing strategy development

describe target market
planned product positioning
planned sales & market share
& profit goals for first few years
5. Business analysis

– a review of the sales, costs & profit projections for a new product to find out whether these
factors satisfy the company’s objectives
– sales forecast
– estimation of costs & profits

6. Product development

7. Test marketing - in realistic market setting
8. Commercialization (launch)
Introducing new products to the world markets:
- Waterfall Model:
- Global phased roll out – new products tickle down in a cascade like manner.
- Sprinkler Model:
- Simultaneous worldwide entry.
- Growing prominence of universal segments.
- Concerns about competitive pre-emption in the foreign markets.
The waterfall strategy of segmentation entry is preferable over the sprinkler model when ;
1. The lifecycle of the products is relatively long
2. Non-favorable conditions govern the foreign market, such as:
Small foreign markets (compared to home market)
Slow growth
High fixed cost of entry
3. Weak competitive climate exists in the foreign market, because of such things as
• Very weak local competitors
• Competitors willing to cooperate
• No competitors
Superior quality can reduce a customer’s life-cycle ownership costs, enhancing customer loyalty, repeat
buying, and word-of-mouth advertising ISO 9004 suggests the roles that marketing should play:
– Take the lead in establishing quality requirements for the company by determining customer
needs and communicating them throughout the company
– Translate customers needs into specifications including performance and sensory characteristics,
installation configuration, statutory and technical standards, packaging and quality standards
– Set up an information system to monitor customer satisfaction and dissatisfaction, and feedback
such pertinent information to facilitate design and manufacturing changes
– Develop early warning systems to spot performance problems with new-product introductions;
continuously monitor product performance against quality specifications such as reliability and
safety, and track and analyze customer complaints so that corrective action can be taken in design
and manufacturing

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