An introduction to New

Product Development (NPD)

New products Development:
Product Strategy
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New Product Development- Managing
Innovation within firms
Learning Objectives

Recognize that new products serve a variety of purposes
depending on what is seen to be strategic imperative
Examine the concept of platforms in new product development
Assess the importance of brand strategy in product
development
Explain how differentiation and positioning contribute to a
products success in the market place
Recognize the importance of marketing research in the
effective development of new products



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Product Development Opportunities
New product platforms
Involves major development effort to create a new
family of products based on new common platform
e.g. Digital photography
Derivatives of existing platforms
Develop existing platform usually to ensure existing
products are updated e.g. Honda develop small petrol
engines and apply this technology to various
application such as lawn mower and motorcycles
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Product Development Opportunities
Incremental improvements to existing products
Involve adding or modifying features of existing
products to keep the product line
Keep product updated and competitive e.g.
Packaging or changing design
Fundamentally new products
Taking product to new and unfamiliar markets
More risky but may help to secure long term future of
the firm e.g. Breathable fabric


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Product Strategy
Competitive Strategy Short Term(tactic)
Filling out product lines with different product sizes or
added features to deter entrant to market
Minor product changes can be employed to secure
distributors' loyalty rather than stocking rival offerings
Unlikely to employ full NPD process
Limited research or market testing
Limited to determining acceptable price levels or
alternative advertising messages
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Product Strategy
Competitive Strategy Long Term
Seek more profound contribution from new products
New product categories to be develop within the
same, related, or new technology areas
Seek new customer segments or traditional customer
base
Radical product development through marketing,
technical research, development and testing
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Product Strategy
Product Portfolios
Analyzing the organizations total collection as a
portfolio
Share growth matrix or Boston Matrix
Clustering of the portfolio in one quadrant (e.g. high
share/high growth) can be viewed as unhealthy.
Different portfolio models: To give the strategist an
overview that could reveal current or potential
problems or opportunities in product strategy
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The Competitive Environment
Speculation of the external environment
deals with the following issues:
1. Estimates would be needed about what would be
change
2. How the industry competitive structure may alter
3. How regulatory framework may evolve
4. Customer needs may be a further area in which to
speculate

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Differentiation and Positioning
Differentiation
Value for money proposition
Based upon superior quality
Superior quality
Better materials
Better performance
New features
Availability of better service

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Product Differentiation
Levitts idea
The core product- comprise the essential basics
needed to compete in a product market
The expected product- adds in what customers have
become accustomed to as normal in the product market
The augmented product- offers features, services or
benefits that go beyond normal expectations
The potential product- would include all the features
and services that could be envisaged as beneficial to
customer
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Product Positioning
Refers to the perceptions customers have about the
product e.g. Innovative, functional, old fashioned,
exclusive, frivolous, fun
Selecting an appropriate positioning can make a
difference to success or failures
It determines what the organization tells the market
about the product
Who it tells and how it tells
E.g. P&G position 2 identical product very differently.
Sure target at young males 18 to 25 and Secret target
young females 12 to 24.
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Examples of Product Positioning
Strategy
1. Pricing Examples
2. Quality examples
3. Service examples
4. Distribution examples
5. Packaging examples
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Product Positioning
Positioning studies
1. Begin with determining a relevant set of
products
2. The criterion for inclusion on how they may
be perceived by customer to be choice
alternatives
3. A list of determinant attributes is generated
4. Identify the list of attributes that are salient in
discrimination among the alternatives
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Product Strategies
Product Strategy Firm How
Product
Proliferation
Honda On entering the European motorcycle market
Honda offered an enormously wide range of
engine sizes
Value Toyota Offer a high quality product with emphasis on
reliability
Design Sony/
Apple
Emphasize good design in all of their
products, frequently pioneering unique styles
and offering elegance and easy to use
products
Innovation 3M Develop reputations for product innovation
with strong technology culture
Service American
Express
Forefront of service development and
pioneering many service offerings
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Product Performance Factors
Performance in operation
Reliability
Sale price
Efficient delivery
Technical sophistication
Quality of after sales
service
Durability
Ease of use
Safety in use
Ease of maintenance
Parts availability and cost
Attractive
appearance/shape
Flexibility and adaptability
in use
Advertising and promotion
Operator comfort
Design
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Brand Extension
The use of an established brand name on a new
product in the same product field or in a related
field
Take advantage of carry over effects from the
original brand
Pool of goodwill among consumers and
distributors
E.g. Unconventional size e.g. Giant, Jumbo, Fun

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Brand Extension
Carry Over Effect
1. Expertise- Original product had established and maintained itself,
the product is like to have accrued a reputation for high level
competence in its field. Users therefore feel comfortable and
assured in making repeat buys

2. Prestige- Some customers envisage certain images and confer
status on the use of them. Brands benefit from particular kinds of
associations and symbolism which they have become

3. Access- Well established original product have access to the best
suppliers and distributors. Extension would capitalize these
relationship to its initial launch
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What is Market Entry?
Activities related with the bringing a
product or services to a target market.
During the planning stage, a company will
consider ;
The barriers to enter the market
The cost of marketing
Sales & delivery
Expected outcomes of entering the market.


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Failure to Market Entry
Lack of products meeting the local
demand & needs
Failure to differentiate from existing
retailers.
Lack of market research.
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Market Entry
Entry Timing- Pioneer or First mover advantage

Pioneers can set the standards, establish a distinctive
quality position, take the lead in the continuing evolution
of technology, and gain valuable experience in
manufacturing and distribution(buzzell and Gale, 1987)
A weak, tentative first mover, without the motivation
or resources to grow the market, can spend years
making losses only to be superseded by a stronger
follower.(green et al 1995)
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Launch and Continuing Improvement
1. Product platform evolution and brand extensions
What is the next generation of the product? Can the
basic product platform be enhanced and should this
lead to brand extension?
2. Market evolution Will there be a lengthy
introductory period before any rapid growth? Will new
market segment become apparent or can they be
created? What is the geographic scope be widened?
3. Competitive Evolution How soon will competitors
arrive? How Predictable is their entry? What distinction
ect
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Withdrawing Products
Chronic poor sales performance is a good
indicator of withdrawing products
Investigation should focus on how organization
managed its efforts
Exit cost would feature strongly e.g. Contract
with suppliers/distributors/lease
Consider active commitment to stay in declining
industry in anticipation of increasing market
share
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Tutorial
Would you agree that product portfolio
analysis is too simplistic to be of much
value?