New Product Development (NPD) Process Theory

New Product Development (NPD) Process Theory According to the linear view, new product development (NPD) process begins with ideas, proceed with idea screening, concept development and testing, marketing strategy development, business analysis, product development and test marketing, ends when the product actually commercialization and creates wealth (Kotler and Armstrong, 2011). To bridge the theory into practice, we worked as a team to develop a new, branded product, and formulate the marketing strategy to find and meet the niche market requirement in the UK. As an important consumer sector of FMCGs, personal care products constitute a large part of the British market, but meanwhile the competition in this field is fierce, firms have to keep supplying new products to meet the rapidly changing needs of their customers (Trott, 2008). This report described both the NPD process theory and our practice of the theory from idea generation through to launch and roll out, and then analyzed the benefits and disadvantage of the process. New Product Development Process Idea Generation and Screening The purpose of the idea generation process and idea screening process are systematic search new ideas and then reduce the number of ideas to spot the good ones (Kotler and Armstrong, 2011). Ideas may come from many different sources, it contains internal sources such as traditional research and development department and employees, and external sources such as distributors and suppliers, competitors, and customers themselves (Ritter and Gemunden, 2003). After a large number of ideas were created via different sources, managers need to evaluate these ideas and look closely at the prospects in the marketplace. Although the difference of decision criteria may affect the screening of new ideas greatly (Carbomell et al., 2004; Hart et al., 2003), scholars propose a unified R-W-W framework to effectively identify potential problems and control risks. The R-W-W framework asks three fundamental questions about new ideas: Is the market and product real?, Can the product and our company win?, and Is the product worth doing? (Day, 2007), and the company should be able to answer all of them before further development the idea. Based on the idea generation and screening theory, at first our team analysis the feasibility of our new ideas and decide to choose the idea of Freshies deodorant wipe within existing company Unilever. Firstly, regular users of deodorant are a huge potential consumer group all over the world, and the deodorant market in the UK has a good momentum of growth. Secondly, existing deodorant wipes brands do not have a good balance between the price and quality of their production, and the main competitors of Unilever do not give more attention to this field, which means the competition of deodorant products are less than mainstream personal care products. Finally, Unilever is an established and reliable brand in personal care market and has great experience about relative products, thus Unilever would not face the challenge of convincing consumers that they are better than a traditional deodorant, which means the cost and risk of entering the market is lower. Concept Development and Testing After screening ideas, marketers need to embody the detail of ideas to state in meaningful consumer terms, develop the idea into alternative product concepts and determine the most attractive concept to customers (Kotler and Armstrong, 2011). The selected concept also needs to be tested with some target consumers before further development. This may include some preliminary market research to find the market need, niche, and attractiveness (Page, 1993). Through the preliminary market research, it would also reveal the most promising features of the new products and assess the purchase intent of customers (Trott, 2005). Because the brand identifies of Unilever was developed around  the concept of adding vitality to life, we have created a concept shortlist for building a brand which is cost effective, relevant for all markets, convenient or healthy. At first we share the concept with our paired group to get primary advices of our product, by this we determined that our concept is to build a new, biodegradable, portable deodorant wipe. Then we conducted a survey of some in-store deodorant brands and evaluate their sale status. Finally, we did a market research for deodorant sales at online platform such as Amazon and eBay. The result of our investigation shows that although deodorant belonging to an industry that is highly saturated, wipes can open up a whole new market that has not been penetrated to its full potential.  Therefore, our product may have strong consumer appeal if implemented properly. Marketing Strategy Development Consumer purchase behaviors are influenced strongly by cultural, social, personal, and psychological characteristics (Kotler and Armstrong, 2011). Thus marketers need to research the internal and external marketing environments before designing the initial marketing strategy for a new product. Moreover, marketers need to recognize that they cannot attract all buyers in the marketplace, thus they must divide the market into smaller segments and offer different strategies to the separate market. After that, marketers need to evaluate and select some suitable segments to build their market targeting. The final two pivotal stages concern about how to offer superior values for the target customers and make a differentiation with competitors. According to the level of customer demand, there are four levels of new product: the core product, the expected product, the augmented product and the potential product (Levitt, 1986). Based on the different demand level, an appropriate product positi oning strategy can make the difference between success and failure (Trott, 2005). Product positioning requires marketers to arrange a clear, distinctive and desirable positioning in the minds of target consumers (Kotler and Armstrong, 2011). Specifically, Wind (1982) offers six bases that related to how target customers make choices in position product fields: product feature, benefits, use occasion, user category, against another product or by dissociation from all the other products. To determine the best concept for our Freshies deodorant wipes, we at first use PESTLE analysis, Porters Five Forces analysis and SWOT analysis to evaluate the marketing environment. The result shows that Freshies can be mass produced as an innovative product. It has high potential for the industry and suits for the image of building a conscious society in the UK. Based on the behavioral and demographic factors, we defined that our market segmentation as 18-34 age group and users of mass deodorant. Our target market is on-the-go young adults who live busy lifestyles. Our differentiation is portable than other roll-on deodorant, thus customers can use it when they do not want to take their handbag, such as participate in sports or go to a party after work. Our market position is to offer freshness anytime and anywhere. Initial Business Analysis: Year 1 Projections According to the theory of Kotler and Armstrong, business analysis involves the sales, costs and profit projections for a new product. It can help marketers estimate the expected costs and profits within each stage and analyse whether the new product has financial attractiveness and satisfy the objective of the company. Marketers need to make a marketing strategy statement outlines the planned price, distribution, and marketing budget for the first year (2011). Based on the theory of Kotler and Armstrong, we designed a one year projection for our Freshies deodorant. According to the data of Office for National Statistics (2012), the population of 18-34 age people in UK was approximately 14 million. We set the product price as  £2.00 for 10-pack, and assume that the forecast market penetration rate would be 5%. Afterwards the purchase frequency would be 12 times per annum. Therefore, the net sales would reach to  £16.8 million in year 1, and the brand profitability would be about  £ 0.87 million in year 1. For more details, see our sales forecast from in the appendix. Product Development When the new product finishes the business test, it moves into product development. Booz, Allen and Hamilton (1982) identify the commonly accepted categories of NPDs: new-to-the-world products; new product lines; additions to existing lines; improvements and revisions to existing products and repositioning products. The purpose of product development is to develop the product concept into a physical product to insure that new concepts can be transformed into a workable market offering (Kotler and Armstrong, 2011). The product development process requires much greater integration of different departments (Trott, 2005). For instance, the RD department provides ideas, the engineering department will then take the ideas and develops possible prototypes; the manufacturing department will seek possible ways to produce a feasible product capable of mass manufacture; the marketing department will then be brought in to plan and conduct the launch. In light of Unilever already had the product line of deodorants and wipes, we pay more attention to developing the product strategy for our marketing plan. At first we determined that our product must follow the unique selling proposition of on-the-go, convenient and wipes on freshness, and then we designed our packing strategy to boxed, individually wrapped and pack of 5, 10 and 25 to fit the proposition. Finally, we invited our paired team to simulate our actual customers to collect the preliminary feedbacks of our product. Commercialisation The final step of NPD process is commercialisation the product into the market. Commercialization refers to the development of the product concept, its successful launch, and interaction with potential buyers (Jolly, 1997; Pellikka and Virtanen 2009). Successful commercialisation is associated with growth market share and improved performance in new markets (Cooper and Kleinschmidt, 2007). It requires marketer to accurately grasp the entry timing and scale (Trott, 2005). In addition, commercialising a new product contains a number of new activities, such as build price, place and promotion strategy (Aarikka-Stenroos and Sandberg, 2012) Our place strategy will start from selective large cities in the UK. We plan to make Freshies available to purchase in large retail stores such as Boots, Superdrug, Waitrose, Topshop and River Island in most major cities in the UK. The set price is  £2 for 10-pack. The promotion methods we plan to use include a mix of public relations such as consumer led press and celeb endorsements, advertising such as 30 second ads on television channels or outdoor and press- Cosmo/GQ, social media marketing such as on Facebook, Twitter and Instagram, and sales promotions such as discounts and coupons. Three Year Business Plan The importance of a successful marketing objectives not only knowing their customers, but also ensure the effective implementation of their marketing efforts (Hamm, 2007). The three year marketing strategy statement describes the planned long-run sales, profit goals and market shares. These are brief summarizing of our goals: Build net sales to 12 million by Year 3 Build consumer penetration to 7% by Year 3 Build frequency of purchase to 16x per year by Year 3 Build market share to 5% by Year 3 To achieve this, brand profitability need to be improved, thus although the costs of marketing research will be reduced after the first year, total marketing spend will be raised in the second and third years. In order to increase profits, we planned to maintain the product price but increase the average purchase frequency of customers from 12 times in year 1 to 16 times in the year 3. For more details, see our sales forecast from in the appendix. Critiques The simple linear model of NPD is ingrained in the minds of many people. The model shows the formation and development of an idea prior to its taking any physical form. In most industries it is from this point onwards that costs will rise significantly (Trott, 2005). The subsequent stages involve adding to the concept as those involved with the development (manufacturing engineers, product designers and marketers) begin to make decisions regarding how best to manufacture the product, what materials to use, possible designs and the potential markets evaluations. The NPD process model can reduce the risk associated with new product introduction and to increase the possibility of commercial success through implementation of a step-wise procedure (Crawford, 1997). It comprehensively analysis the key activities involved in the process, from idea to commercialization of the product. Firstly, ideas and prototypes are tested to ensure that the new product will meet target market needs and wa nts. Secondly, there is a test launch during the test marketing stage. It not only saves time and resources of the full market launch, but also helps managers decide to stop or go before large investing. Finally, the commercialization stage involves careful planning to avoid the uncontrolled influencing factors. However, NPD process has changed significantly over the past 30 years (Griffin, 1997). All those actually involved with the development of new products dismiss such simple linear models as not being a true representation of reality. For example, more recent research suggests that the process needs to be viewed as a simultaneous and concurrent process with cross-functional interaction (Hart, 1993), and Olson et al. (1995) demonstrated that cross-functional teams helped shorten the development of times of truly innovative products. Another disadvantage is that the model just focuses on certain key activities, but overlook the activities such as negotiate with retailers, set up customer service department. Many new brands fail not because the quality of their products, but the reason is the parties cannot negotiate well with each other (Davies, 1990) or poor customer service (Chablo, 2000). Reference Aarikka-Stenroos, L., and Sandberg, B. (2012). From new-product development to commercialization through networks.  Journal of Business Research,  65(2), pp. 198-206. Booz, Allen and Hamilton (1982) New Product Management for the 1980s, New York: Booz, Allen and Hamilton. Brierley, S. (2002).  The advertising handbook. London: Routledge. Carbomell, P., Escudero, A.I.R. and Aleman, J.L.M. (2004), Technology newness and impact of go/no-go criteria on new product success, Marketing Letters, 15(1), pp. 81-97. Chablo, E. (2000). The importance of marketing data intelligence in delivering successful CRM.  DM Review,  3(1), pp. 25-31. Cooper, R.G. and Kleinschmidt, E.J. (2007) Winning business in product development: the critical success factors. Research and Technology Management, 50(3), pp. 52-66. Crawford, M.C. (1977). Marketing Research and the New Product Failure Rate, Journal of Marketing, 41(2). pp. 51-61. Day, G. S. (2007). Is it real? Can we win? Is it worth doing? Managing risk and reward in an innovation portfolio.  Harvard business review,  85(12), pp. 110-120. Davies, G. (1990). Marketing to retailers: a battle for distribution?.  Long Range Planning,  23(6), pp. 101-108. Griffin, A. (1997). PDMA research on new product development practices: updating trends and benchmarking best practices.  Journal of product innovation management,  14(6), pp. 429-458. Hamm, S. (2007). Children of the Web; How the Second-Generation Internet Is Spawning a Global Youth Culture and What Business Can Do to Cash In. Business Week,  2(1), pp. 50-57 Hart, S. (1993). Dimensions of success in new product development: an exploratory investigation. Journal of Marketing Management, 9(9), pp. 23-41. Hart, S., Hultink, E.J., Tzokas, N. and Commnadeur, H.R. (2003), Industrial companiesevaluation criteria in new product development gates, Journal of Product Innovation Management, 20(1), pp. 22-36. Jolly VK. (1997). Commercializing new technologies: Getting form mind to market. Boston: Harvard Business Press Kotler and Armstrong, G. (2011). Principles of marketing, 14th edition, New Jersey: Pearson Education. Levitt, T. (1986) The Marketing Imagination, New York: The Free Press. Mu, J. and Di Benedetto, C. (2011). Strategic orientations and new product commercialization: mediator, moderator, and interplay,  RD Management, 41(4), pp. 337-359 Pellikka, J. and Virtanen, M. (2009). Problems of commercialization in small technology-based à ¯Ã‚ ¬Ã‚ rms. International Journal Entrepreneurship and Innovation Management 9(1), pp. 267-84. Page, A. L. (1993). Assessing new product development practices and performance: establishing crucial norms.  Journal of Product Innovation Management,  10(4), pp. 273-290. Population. (2012) Office for National Statistics, [Online] Available at: http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Population [Accessed 20 January 2013] Ritter, T. and Gemà ¼nden, HG. (2003). Network competence: its impact on innovation success and its antecedents. Journal of Business Research 56(1), pp.745-755. Trott, P. (2008).  Innovation management and new product development. New Jersey: Prentice Hall. Wind, Y. (1982) Product Policy, Reading: Addison-Wesley.