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NEW PRODUCT DEVELOPMENT

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NEW PRODUCT DEVELOPMENT. Importance of NPD. PLC (and PEC) indicate NEW PRODUCTS ARE NEEDED. About 1/2 ... wait and pounce, same market/same product, new markets ... – PowerPoint PPT presentation

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Title: NEW PRODUCT DEVELOPMENT


1
NEW PRODUCT DEVELOPMENT
2
Importance of NPD
  • PLC (and PEC) indicate NEW PRODUCTS ARE NEEDED
  • About 1/2 of all profits come from products less
    than 10 years old
  • RISK is present New Products Fail (33, 80)
  • Not clear whether failure rate is too high
  • What is the optimal failure rate??
  • New Product Development is Expensive

3
Paths to New Products
  • Acquisition
  • Buy product line/license
  • Buy business
  • Develop
  • Basic Research
  • Applied Research
  • Copy cat strategy (fast but second)
  • wait and pounce, same market/same product, new
    markets

4
Two Major Approaches to New Product Development
  • Need Pull
  • Find out what people want and then develop
  • Technology Push
  • Develop technology and then figure out ways to
    apply to needs/wants

5
NPD Preliminaries
  • Structure -
  • New product committee
  • Product Managers
  • New Venture Groups
  • Strategic Guidelines? Product Innovation Charters
  • What ideas should be sought/avoided?

6
NEW PRODUCT DEVELOPMENT PROCESS
  • STEP 1. Idea Generation and Capture
  • Idea Sources
  • Internal Service personnel, engineering and RD,
    sales force, marketing, other employees
  • Boundary Organizations Distributors, suppliers,
    competitors, customers
  • External Organizations Inventors, NASA,
    universities, think tanks
  • Capture versus Generation

7
  • STEP 2. Idea Screening
  • Cost 1000/idea
  • DROP Errors IBM, Kodak, and Xerox (copiers)
    Radio and RCA, Victor Talking Machines
  • GO Errors Fords Edsel, RCAs SelectaVision
    videodisc player, TIs home computers

8
  • STEP 3. Concept Development and Testing
  • Cost/idea 20,000
  • a. Flesh out product idea into more specific
    product concepts (add positioning)
  • b. Have members of appropriate target group
    evaluate product concepts

9
The following Two Steps Should NOT be
Independent!!
  • STEP 4. Marketing Strategy Development
  • Target group identification, position
    identification, 4 Ps
  • STEP 5. Business Analysis
  • NPV

10
  • STEP 6. Product Development
  • Cost 200,000/idea
  • Physical prototypes are developed and subjected
    to functional tests
  • STEP 7. Test Marketing
  • Cost 500,000
  • Not always done f(risks, uncertainty)
  • Of acceptance and competitive considerations
  • Standard Test Markets
  • Controlled Test Markets
  • Simulated Test Markets

11
  • STEP 8. Commercialization
  • Cost (national launch) 5,000,000
  • When?
  • F(competition, buying cycles, etc.)
  • Where?
  • F(market potential, company presence, etc.)
  • To Whom?
  • Channel considerations, early adopters
  • How?
  • Samples, discounts, heavy advertising, etc.

12
Speeding Up New-Product Development
  • Standard presentation Sequential development
  • Simultaneous development stages are worked on
    simultaneously
  • Expeditionary Marketing Lots of products
    generated and thrown at market (shotgun versus
    rifle approach)

13
COMMENTS
  • 1. Dont minimize failures - maximize values
  • 2. Note that successive stages become more
    expensive
  • 3. NPD is an investment decision
  • 4. New products are needed
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