An introduction to New Product Development (NPD)

An introduction to New Product Development (NPD)New products Development: Considerations when developing an NPD strategyModule Code and Module TitleTitle of Slides1Asia Pacific University of Technology and Innovation#New Product Development- Considerations when developing NPD strategyLearning ObjectivesUnderstand the contribution market research can make to the new product development processRecognize the benefits and weaknesses of consumer new product testingRecognize the powerful influence of the installed base effect on new product introductionsUnderstand the significance of discontinuous productsUnderstand the role of switching costs in new product introduction

Module Code and Module TitleTitle of SlidesThe Purpose of New Product TestingEstimate market reaction to the new product under considerationprior to expensive production and promotional costsThe marketCurrent buying patternsExisting segmentsCustomer view of the products availablePurchase intention:Trial and repeat purchaseBarriers to changing brandsSwitching cost3. Improvements to the new productOverall product conceptFeatures of the product concept

Module Code and Module TitleTitle of SlidesType of Customer NeedsBasic needs e.g. A customer would expect a new car to start every timeArticulated needs- A customer can readily express e.g. A customer may express a desire for additional features on a motor carExciting needs that will surprise customers e.g. new financial packages enabling easy and quick purchase of a new carModule Code and Module TitleTitle of SlidesMarket Research ActivitiesEnsure that companies are consumer orientedNew products are more successful if they are designed to satisfy a perceived need rather than taking advantage of technologyWith sufficient research, chances of failures are significantly reducedOnce a product has been carried through the early stages, it is sometimes painful to raise questions once money has been spentModule Code and Module TitleTitle of SlidesTechniques Used in Testing New ProductsConcept TestsQualitative techniques, especially group discussions, are used to obtain target customer reactions to a new idea or product:

Understanding and believability in the productIdeas about what it would look likeIdeas about how it would be usedIdeas about when and who it might be used

Module Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsThe most common way to assess purchase intention is to provide a description of the product or provide the product to respondent:Definitely would buyProbably would buyMight or might not buyProbably would not buyDefinitely would not buy

Module Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsTest CentersUsed for product testing when product is too largeToo expensive or complicated to be taken to consumers for testingConsumers to be brought to the test centre for exposure to product and reaction testingModule Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsHall Tests/Mobile ShopsUsed for product testing or testing other aspects of marketing mix such as advertising price, packaging ectRepresentatives sample of consumers is recruitedE.g. Shopping mall or mobile caravan Representatives are exposed to test material and asked questions about itModule Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsProduct-use TestsFrequently used in business-to-business markets(B2B)Use of the product for a limited period of timeTechnical people watch how these customers use the productManufacturer learns about customer training and servicing requirementsCustomer asked detailed question about the intent of the purchase

Module Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsTrade ShowsDraw a large numbers of buyers who view new products in a few daysSee how buyers react to various products on displayConvenient and deliver in depth knowledge of the marketBuyers views may differ considerably from end user consumers

Module Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsMonadic TestsRespondents given only one product to try and asked of their opinionConsumer tries new product and draws on recent experience with the product they usually useNot very sensitive in comparing the test productsModule Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsPaired ComparisonsA respondent is asked to try two or more products in pairs and asked Less real in terms of the way consumers normally use productsDeliberately tested against others

In-Home Placement TestImpression of how product performs in normal use is requiredRespondent are asked to use the product in the normal way and complete a questionnaireTested comparatively or sequentiallyModule Code and Module TitleTitle of SlidesTechniques Used in Consumer Testing of New ProductsTest PanelsRepresentative panels are recruited and used for product testingTest material and questionnaires are sent through post to reduce cost of conducting in home placement testB2B firms may use test panels of customers or intermediaries with whom new product or service ideas or prototypes can be testedModule Code and Module TitleTitle of SlidesDiscontinuous New ProductsMajor innovationsreferred to as discontinuous new products when they differ from existing products in that fieldCould be entire new markets and changes in behavior patternsE.g. 3Ms Post-It notes

Major Difficulties in market researchThe problem of selection of respondentsThe problem of the understanding of the major innovationModule Code and Module TitleTitle of SlidesBarrier to Discontinuous Product Adoption Technology-Intensive ProductsInstalled BaseMassive inertial effect of an existing technology e.g. User prefers QWERTY keyboards despite DVORAK which has shown to provide up to 40% faster typing speedsSwitching CostOne time cost for buyer to switch to new productCompatibility issuesBuyers may have to develop routines and procedures for dealing with a specific vendor that will need to be modifiedModule Code and Module TitleTitle of SlidesBreaking with convention and winning new marketscustomers are notoriously lacking in foresight. Ten or fifteen years ago, how many of us were asking for cellular telephones, fax machines and copiers at home, 24 hour discount brokerage accounts, multivalue automobile engines, video dial tone ect?Module Code and Module TitleTitle of SlidesWhen it may be correct to ignore your customers?Critics of market oriented approach see consumer research act as an expensive obstacle course to product developmentthe significance of discontinuous new products is often overlooked Marones (1993)

Module Code and Module TitleTitle of SlidesStriking the balance between new technology and market researchFalse Dichotomies That you must either lead or follow customersThat you cannot stay close to both current and potential customersThat technology push cannot be balanced with market-pullModule Code and Module TitleTitle of SlidesTutorialExplain why consumer market testing might not always be beneficial?Discuss the dilemma faced by all firms of trying to listen to customers needs and wants and yet also trying to develop new products for those customers that they do not yet serve.Explain why some writers argue that organizations are the graveyard of product innovations rather than the birthplace.Module Code and Module TitleTitle of Slides