9 NEW PRODUCT DEVELOPMENT

9. NEW PRODUCT DEVELOPMENT
New Product Development —
The development of original products,
product improvement, product modifications,
and new brands through the firm’s own R&D
effort.
COLLEGE OF BUSINESS ADMINISTRATION
CHUNG-ANG UNIVERSITY
PROF HYUNSUK SUH
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What is “New Product Development ”?
New Product Development

New Product Development:
The development of original products, product improvements, product
modifications, and new brands through the firm’s R&D efforts.
Kotler and Armstrong, 2010, 2013
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The objectives of the current chapter are described below.
Objectives
Explain the how companies find new products and its categories
List and define the steps in the new product development process
Explain the concept of product life cycles
0. Objectives
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Definition: New Product
The product can be new to the world, to the market, to the producer or seller, or to
some combination of these.
(really-new) products (10% of new products): Inventions that create
a whole new market. e.g.: Polaroid camera, Sony Walkman, Palm Pilot,
Rollerblade skates
New to the World
Product
(20%): Products that take a firm into a category new to it.
e.g.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal
credit card, Canon laser printer
New Product
Lines
(26%): Line extensions and flankers in current markets. e.g.: Tide Liquid,
Bud Light, Apple’s iMac, HP LaserJet
Additions to
Existing
Product Line
(26%): Current products made better. e.g.: P&G’s continuing improvements
to Tide detergent, Ivory soap. (e.g. Packaging improvement – Heinz EZ Squirt
Ketchup)
Improvements or
Revisions of
Existing Products
(7%): Products that are retargeted for a new use or application.
e.g.: Arm & Hammer baking soda sold as a refrigerator deodorant;
aspirin repositioned as a safeguard against heart attacks
Repositioned
Products
(11%):This category refers to the products that provide performance similar to

competing brands at a lower price.
Lower Priced
Products
1. New Product Development
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New Product : Types of Innovations
The new product can be differentiated according to the level of different types of
innovations.
Modification of existing product. The consumer does not have to learn anything
new to use a continuous innovation. It is easier to convince consumers to adopt
this kind of new product. (e.g. ergonomically designed computer keyboards,
KNOCK-OFF)
Continuous
Innovations
A change in an existing product that requires a moderate amount of learning
or behavior change. (e.g. cassette player – CD player – MP3 player,
CONVERGENCE)
Dynamically
Continuous
Innovations
Totally new product that creates major changes in the way we live. To use
discontinuous innovation, consumers must engage in a great amount of learning
because no similar product ever been on the market.
(e.g. Airplane, Automobile, etc.)
Discontinuous
Innovation
1. New Product Development
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Marketing Reasons for New Product Failures
Both marketing and non-marketing factors contribute to new product failures.
A distinctive point of difference is essential for a new product to defeat
competitive ones
Insignificant Point
of Difference
New product needs a precise protocol
Incomplete market
and product definition
Every new product manager looks for: a large target market with high
growth and real buyer need
Too little market
Attractiveness
Name, package, price, promotion, distribution all matters
Poor execution of
the marketing mix
The company has to achieve excellent synergies using its R&D
capabilities
Poor synergy or fit with
Company’s manufacturing
and/or marketing ability
The product is introduced too soon, too late or at a time when customer’s
taste shifted dramatically.
Bad timing
1. New Product Development
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IDEA GENERATION
IDEA SCREENING
CONCEPT TEST
BUSINESS ANALYSIS
DEVELOPMENT
TEST MARKETING
COMMERCIALIZATION
NEW PRODUCT
New Product Development Process
A new product strategy is part of the organization’s
overall marketing strategy. It sharpens and focus
and provides general guidelines for generating,
screening, and evaluating new product idea
A new product strategy links the new product development process with the objectives
of the marketing department, the business unit, and the corporation. It must be
comparable with these objectives.
1. New Product Development
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New product ideas come from many resources, including customers, employees,
distributors, competitors, research and development, and consultants. The next stage
is called ‘screening’ which eliminates ideas that are inconsistent with organizations
new product strategy
Idea Generation and Screening
- Executives, scientists, engineers, manufacturing staff, sales people

INTERNAL
SOURCES
- Good new product ideas come from watching and listening to customers

(e.g. Arm & Hammer Baking Soda)
- Competitors are another good source of new-product ideas
EXTERNAL
SOURCES
1. New Product Development
+
=
3M Post-it
Flag Highlighters
3M Post-it Notes Felt Tip Highlighters
-Product development costs
increase substantially in later
stages so poor ideas must
be dropped
-Ideas are evaluated against
criteria; most are eliminated
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An example of concept development and testing is illustrated below.
Concept Development and Testing: An example
제품개념 2
점심 또는 저녁 시간전
간단하게 먹을 수 있는
간식
제품개념 2
점심 또는 저녁 시간전
간단하게 먹을 수 있는
간식
제품개념 1

아침에 시간이 없는 직
장인들을 위한 아침식
사 대용
제품개념 1
아침에 시간이 없는 직
장인들을 위한 아침식
사 대용
제품개념 3
건강을 위해 신경 쓰는
사람들을 위한 건강식
제품개념 3
건강을 위해 신경 쓰는
사람들을 위한 건강식
c
h
o
s
e
n
c
h
o
s
e
n
제품개념 1 의 설명
이 제품은 아침에 시간이 없는 직장인들이 출근하기 전에 먹
을 수 있는 아침식사 대용 달걀이다 . 제품은 한 봉지에 3 개
가 들어 있고 , 개당 칼로리는 250kcal 이며 , 색깔은 아이
보리색에 가격은 1,000 원 이다

1. New Product Development
- Concept development creates a detailed version of the idea stated in meaningful
consumer terms.
- Concept testing asks target consumers to evaluate product concepts.
Example
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To identify very poor concepts so that they can be eliminated.
To estimate (at least crudely) the sales or trial rate the product would enjoy
(buying intentions, early projection of market share).
To help develop the idea (e.g. make tradeoffs among attributes).
The purpose and the examples of the concept test is described below.
Purpose of Concept Testing
1. New Product Development
Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with
a delightful flavor blend of orange, mint, and lime.
It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal
snacks. And, best of all, it contains absolutely no calories.
Comes in 12-ounce cans or bottles and costs 60 cents each.
1. How different, if at all, do you think this diet soft drink would be from other available products now on the market
that might be compared with it?
Very different ( ) ( ) ( ) ( ) Not at all different
2. Assuming you tried the product described above and liked it, about how often do you think you would buy it?
More than once a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy it
Concept Testing: An Example
Example
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The concept test example is illustrated below.
1. New Product Development
Example
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Developing the product concept into a physical product in order to ensure that the
product idea can be turned into a workable product.
Product Development

Creation of prototype

Packaging, branding, labeling

Manufacturing feasibility
1. New Product Development
Types of Prototypes
Physical prototypes are tangible artifacts created to approximate the
product. They include models which look and feel like the product.
Analytical prototypes are intangible and mathematical manner. Interesting
aspects of the product analyzed instead of built (e.g. computer simulation)
PHYSICAL
VS.
ANALYTICAL
Comprehensive prototypes most of attributes of the product. Full scale
and operational version of the product.
Focused prototypes implement one or few attributes of a product.
COMPREHENSIVE
VS.
FOCUSED

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Within a product development project, prototypes are used for following purposes.
Purpose of Prototypes
1. New Product Development
Prototypes are being served as learning tools to answer following
questions, “Will it work?”, “How well does it meet the customer’s needs?”

Learning
Prototypes enrich communication with top management, vendors,
partners, customers, investors, and etc.
Communication
Prototypes are used to ensure that components and subsystems of the
product work together as expected.
Integration
Particularly in the later stages of product development, prototypes are used
to demonstrate that the product has achieved a desired level of
functionality. They provide to ensure goals, progress, and schedules.
Milestone
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Test marketing is the limited introduction of a product and market program to
determine the reactions of potential customers in a market situation.
Types of Test Market
- Company finds small number of representative test cites and conducts full
marketing campaign in these cities. The results are used to forecast national sales
and profits.
(Drawbacks: Costly and they may take a long time)

STANDARD
TEST
MARKETS
- Several research firms keep controlled panels of stores that have agreed to carry
new products for a fee.
(Cost less than standard test market and can be completed much more quickly than
standard test market)
CONTROLLED
TEST
MARKETS
- Companies test new products in a simulated shopping environment. The company
shows ads and promotions for variety of products to sample consumers. It gives
consumers small amount of money and invites them into real or laboratory sotre
where they may keep the money and use it to buy items.
(Cost much less and keep the new product out of competitors’ view)
SIMULATED
TEST
MARKETS
1. New Product Development
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2. Class Exercise
3M’s Greptile Grip: A New Product?
3M Greptile Gloves Grip Tightly –
Even If You Don’t
-
Max Gripping Power with Min Gripping
Pressure
-

Exceptional Grip and Dexterity – in Wet
or Dry Conditions
-
100% Caburetta leather for the
balance of the glove gives a natural,
comfortable fit
-
Greatest innovations in golf design in the
last 25 years.
Take a look at 3M’s innovative Greptile Grip golf glove below. (1-4)
In Class Exercise
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3M Greptile Gripping
Material at key contact
points for the ultimate
grip
Take a look at 3M’s innovative Greptile Grip golf glove below. (2-4)
3M’s Greptile Grip Technology
2. Class Exercise
In Class Exercise
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Increase club
head speed
and distance
Take a look at 3M’s innovative Greptile Grip golf glove below. (3-4)
3M’s Greptile Grip Golf Gloves Sold in Two Versions

2. Class Exercise
In Class Exercise
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“We look around the company for underutilized technologies that can result in exciting new
products for niche markets,” says Dr. Dierberger. The benefits: To help golfers wearing the glove
to hit longer drives and more accurate shots, thus getting lower scores through improved control
of the golf club swing under both wet and dry conditions. Now, 3M Golf launched a premium golf
glove consisting of highest quality Carbretta leather and selling for a suggested retail price of
$16.95 to $19.95.
DISCUSSIONS
1. Describe 3M’s Greptile Grip golf glove in terms of a product attributes.
2. Does 3M’s innovative Greptile Grip golf glove a success or a failure as a new
product? Justify your answer.
3. Describe target markets for 3M’s Greptile Grip golf glove and Greptile technology.
Take a look at 3M’s innovative Greptile Grip golf glove below. (4-4)
Discussions
2. Class Exercise
In Class Exercise