New Product DevelopmentIntroduction: New Product DevelopmentBy its nature marketing requires new ideas. Unlike some organizational functions, where basic processes follow a fairly consistent routine (e.g., accounting), successful marketers constantly make adjustments to their marketing efforts. New ideas are essential in responding to changing demands from target market and pressure exerted by competitors. These changes are manifested in marketing decisions in all areas including the development of new products.
Innovation is the engine for growth in todays market .Organizations are under pressure to unrelentingly innovate to contribute to revenues and market share.
They face the choice of working with existing processes to gain incremental improvements or to restructure their organizations and invest in new products and services.
Without sound innovation, many organizations are doomed to decay.Strategic Innovation is the creation of growth strategies, new product categories, services or business models that change the game and generate significant new value for customers and the corporation.
New product development refers to the process of bringing a new product or service into the marketWhy new product developmentPotential of greater revenue generationRepositioning the company in the customers mindCompetitive advantageWidespread imitationsShorter product life spansProduct expansion strategy i.e. new product linesOptimize production capacity i.e. idle capacityPossible reasons for new product successDeeper understanding of customer needsHigher performance-to-cost ratioTime of product launch i.e ahead of competitionEffective product launch and promotionTop management supportCross-functional teamworkWhy new products failOverestimated market sizeA ‘Let-go error , could be due to influencePoor product designPoor product positioning, pricing or promotionUnexpected competitive responseHigh development costs
Preliminary analyses of the effects of the product and its design findings on the market suggest that the existing market constraints are significant and the product’s performance-to-cost ratio has been improving (Kucher et al, 1996, 1994b, 1996). These findings suggest that, on paper at least, new product development might be a significant driving force in the success of a company and are highly likely to encourage investors to buy new products. This view may be consistent with what the market researchers have observed, namely that the production of new products are generally driven by price pressures (Ostrom, 1981, 1985). Moreover, a high and growing production effort often involves new product products from an expanding network of customers. At low levels of production capacity, companies can be expected to be overly focused on new products, because it is the current business objective to raise production to full production capacity, which is often inefficient in the event that new products fail to be of the required quality. When production exceeds the minimum level in an event of insufficient supply, or when the demand for the product exceeds the production of the necessary supply, the product may fail to make the necessary adjustment to the planned volume of customers, as a price shock. This is a risk that could ultimately encourage new products to make the necessary adaptations but may also contribute to the failure of existing product lines (Kucher et al, 1996, 1994). In a market where product needs are very expensive, large and complex companies can take advantage of lower productivity at a price disadvantageous for the cost. Indeed, the cost of expanding demand for new products in a given area is a relatively high level when it comes to increasing the number of customers in the market because of their perceived willingness to pay. The average cost of an existing unit in a country with high production capacity is approximately $6 billion (Kucher et al, 1996b, 1994). One possibility is that there are not sufficient sales capacity to raise demand at a time of high productivity (Lorenz et al, 1998). Others are that, when new products arrive in this market, even when they do not meet demand, higher prices are inevitable (Beaumont et al, 1996, 1998a). These may be in part due to the high cost of expanding the supply of existing units, while this could also be due to the fact that high production capacity allows the service provider to offer new services at discounted rates. Finally, there are some risk factors for the development of new product lines that might influence the number of new units produced. The initial production needs for a new product line often vary between the regions of the market. These need to be met in order to generate the anticipated demand to produce the supply (Ostrom, 1981, 1975b; Kucher et al, 1996b). The current situation implies that the cost for new production in Asia will not exceed $50 billion in the long run. Furthermore, the expected cost of expanding demand for new products by increasing the volume of customers is much lower in Europe than in the US (Kucher et al, 1996). Finally, new production can be a source of substantial revenue when companies require it. The increased volume increases the demand for newer production by significantly more than the lower cost of capital. This would be a good example of growth-to-cost ratio effects that can be identified by