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NEW PRODUCT DEVELOPMENT (NPD)

One of the most important aspects of product


strategy relates to the issues of the development
of new products.
Activities in new product development may not
always be related to production of brand new
products.
It relates to the development & modification of
existing products, which can be classified into
TWO CATEGORIES.
1) MAJOR INNOVATIONS
2) NEW SERVICE LINES

MAJOR INNOVATIONS:
Products which are new to the organisation &
market. Offer greater potential in terms of
returns, but more risky since they require
a higher level of investment &
many involve moving into areas of
comparative inexperience (kurang pengalaman).
High cost/need bigger capital
Spend a lot of time/hours (R&D)

NEW SERVICE LINE:


Products which are new to the organisation, but
not new to the market. Moving into familiar
product, although there are competing products
already in the market.(deregulation removed
many of the barriers).
E.g. Tier-1 status banks in Msia are given more
flexibility in offering a wider range of products
& services, of which Tier-2 banks are prohibited.
When a bank attains Tier-1 status, they can
offer similar services that may already be in the
market but is new with regard to the bank itself
Etc. c/card,hp, pl (b.pertanian), kembara,
serindit,

3.4.1 New Product Development Process

There is a variety of frameworks that guide new


product development.
In a study of companies with successful new
product records, it was found that these
companies are likely to have a formal development
process.
The process acts as a road map, providing
direction to product development efforts. The
specific blueprint can vary by company, h/ever the
common & essential elements of the process is
discussed as follows.

PERINGKAT2 DLM PROSES


PEMBANGUNAN PRODUK BARU
1.Penghasilan idea
2.Penapisan idea
3.Analisis perniagaan
4.Pembangunan prototaip & Ujian
pasaran
6.Komersial
5

FIGURE 3.4 NEW PRODUCT DEVELOPMET PROCESS

1
Idea
generation

2
Idea
Screening

3
Business
Analysis

4
Development
& testing

5
Product
Launch

NEW PRODUCT STRATEGY:


Any exercise in new product development must be
systematically organised in order to ensure that
effort & resources are devoted to the development
in areas where the organisation regards as
strategically important.
e.g. The process may be oriented towards taking
advantage of new market segments,
continue competitiveness of the organisation &
maintaining profitability .

1. IDEA GENERATION:
While many ideas are not derived directly from a
new product strategy, the strategy should be known
to people who are searching for ideas or are likely
to encounter new product opportunities.
Major sources of ideas include:
research & development by organisation,
user suggestions @ complaints,
analysis of competitive products
published information,
contact with customers through the front line
staff &
brainstorming.

Cth: R & D penyelidik2 di Dykt


Sony telah berjaya menghasilkan
produk inovatif seperti walkman &
perakam video kaset yg begitu
popular sekali di kalangan
pengguna remaja & dewasa.

2. IDEA SCREENING :
Idea generation would have created a large
number of propositions. As product development
costs rise greatly in later stages, the current
exercise is to reduce these to manageable few
worthy of further consideration.
This can MINIMISE drop errors, whereby a
product with real potential gets dropped from
consideration; &
go errors, whereby the organisation decides to go
with a product that later fails.

2. IDEA SCREENING :
The evaluation of the idea will be against set of
general criteria (with a rating scale & weights
associated with each item) covering:
i) product characteristics,
ii) marketing characteristics &
iii) production characteristics

This will provide a Quantitative Index of


Success of the product, in addition

to identifying areas where actions can be taken


improve (value added) the probability of
success.

Product Addition Criterion

Weight

Rating

Economic criteria:
Low invest. Level

0.3

0.9

Low risk level

0.3

0.9

Positive inf. On existing line


Mktg criteria:

0.3

Strong appeal to present


segments

0.5

Low probability of
competitive resp.

0.5

2.0

Large, growing potential mkt

0.5

2.5

0.5

2.5

Promotable attributes
Good distribution channel
Product criteria:

0.5

Lenghtly product life cycle

0.2

Good fit with prod. Capabties

0.2

Easily produces features

0.2

Few service problems

0.2

TOTAL GRAND (16.3 / 21)

1.2
X

2.5

1.0
1.0
X

0.6
0.4

0.8

16.3

3. BUSINESS ANALYSIS :
Once mgt has decided on its product concept &
mktg strategy, it can evaluate the business
attractiveness of the proposal.
A reviews of the sales, costs & profit
projections for a new product is done in order to
find out if it satisfies company objectives.

1
An industry
analysis can
determine the
products
attractiveness;
2
customer analysis
to assess the size &
growth of the
segments in the
industry as well as
satisfaction &
problems with current
products (if any)

BUSINESS
ANALYSIS

Competitors
analysis that
anticipates the
reactions to a
new product
introduction
4

Internal analysis that


Evaluate the companys
ability to compete in the
market segment.

4. DEVELOPMET & TESTING :


The ideas that have passed the rigorous process will
then be translated into specific service concepts -which
are a specific set of features & attributes which the
product will display that may have existed only as a
word description prior to this stage
To test this newly defined product to identify consumer
& market reactions in order to make any necessary
modifications before it is LAUNCHED COMMERCIALLY.
The problem with test mktg is that it gives competitors
advance warning of an organisations latest ideas &
offers competitors the opportunity to imitate (to copy
company idea.!).
H/ever this may offer feedback to the development of
an appropriate mktg campaign to guide the product
launch, in terms of brand name, packaging &
advertising.

Cth: Procter & Ganble menghabiskan


lebih kurang 400,000 jam di makmal
semasa membangunkan produk
sabun pencuci liquid tide.. Ini kerana
prototaip yg dibentuk terpaksa
melalui beberapa peringkat
perubahan sebelum produk akhir dpt
dihasilkan.
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5. PRODUCT LAUNCH
The product launch is the final stage & the true test
of any newly developed product: & the point at which
the organisation makes a full scale business
commitment to the product.
The major decisions are essentially operational in
nature i.g. decisions regarding timing & geographical
location of the launch & the specific mktg tactics to
be used in support of the launch
Cth: McDonalds mengambil masa dua tahun sebelum
pelancaran Chicken McNuggets keluarannya.

The intangibility, heterogeneity & inseparability


of services inevitability create some difficulties
in the process of developing an appropriate
product strategy.
Particular strategies dealing with these
problems include the association of tangible
items with the intangible service & focusing on
the r/ship between the service provider &
consumer.

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CONCLUSION:
The process of NPD in the fin. Services sector has
tended to concentrate on the redesigning of existing
products within an organisations portfolio & the
development of products which are new to the
organisation, though NOT NECESSARILY NEW TO
THE SECTOR!.
The problem faced by the provider of financial service
products is the ease with such products may be copied
& the consequent importance of ensuring rapid market
penetration in the desired segment when new products
are launched.

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