**2. New product development (NPD)**

basic strategies and tactics in seven main categories, can be described as 7 N to emphasize the importance of managing the innovation process in marketing. **Figure 1** explains the transition process from 7P to 7 N and the marketing success because of mutual interactive interaction of 7P and 7 N. **Figure 1** illustrates the need to not only reactively implement but also proactively implement marketing mix elements. Mutually and integrally, management and implementation of the marketing mix elements are also important for handling new products, new prices, new places, new

According to Fojt [1], the general view about new product development (NPD) is that it brings considerable profits to the businesses if new product is introduced to the market at the right time, is priced at the suitable amount and targets suitable customer group. Accuracy of this view was questioned by Fojt [1], and it was stated that NPD can result in new profit or loss. It is advised that various questions should be answered by the managers before new product decisions to determine whether NPD will bring profit or loss to the business. These questions are:

There are several descriptions made for product term in the literature. Few descriptions will

Product is defined as an entity that is brought to a market for attention, acquisition, use or consumption which meets a need of consumers. Product does not mean only tangible items such as houses, foods and computers but also intangible items such as services including thoughts, events, organizations, persons, places, etc. or a mixture of these. Services are the form of product that consists of activities, benefits or satisfactions offered for sale. Therefore, product is a broad term which defines all those things [2]. **Figure 2** summarizes the elements of a product.

promotions, new physical environment, new processes and new people.

• What markets are they looking at?

58 Marketing

**Figure 1.** Components of marketing mix.

• What types of products or services should they offer? • Is the product new to the business or its customers?

be given here to make clear what it is meant by product.

Various definitions and explanations of its boundaries about 'new product' have been made in the literature. New product is defined by Crawford as 'a product for which the company needs a new marketing, and in which the substantial changes are conveyed but excludes any changes that may require simple promotions' [4].

To make NPD effective, there should be a coordination between the manufacturing, engineering, research and development (R&D), marketing, finance and purchasing departments. Marketing department first has to make an assessment about new product, and then a crossfunctional team created for the new product has to come into the scene for development of new product [5].

There are several types of classifications for 'new product'. One of these categorized new product into four groups. These are [6]:

**1. Major innovations.** Major innovations are absolutely new in the market. They are created by new technological developments and provide new experiences to the customers. For example, phones, smart phones, computers and tablets were not present before they were released for the first time. They created new markets instead of old ones as a result of attracting potential customers by claiming to ease their lives with if they use these products. However, there is a risk about attracting potential customers to major innovation product as potential customers may doubt about its worth. They can hesitate to spend money on something which did not yet prove its reliability and usefulness. Therefore, the business that created new product has to find ways to convince them that they need this product. Even though it is risky to produce a major innovation product, it can bring to the business several benefits in addition to the profit such as increased reputation of business among customers, employees, shareholders and potential investors.

offer quite different or marginal benefits to the customers. Technological breakthrough products are the result of continuous product and marketing researches. These products

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**2. Significant improvements**: These products are made by considerable improvement of existing products in the market. This improvement increases the value of product and benefits both businesses and customers. For example, instant coffee replaces the usual brewed coffee. While customers enjoy making coffee easier and faster for breakfast, businesses

**3. Modified products**: These products are created by making insignificant improvements in the existing products such as adding new smell to the detergent or increasing/decreasing (fries, smart phones) sizes of products. The 'new' here is made to enhance the product experience. **4. Products new to the business**: These are imitated products which are already sold in the market, but business produces them for the first time. Business uses an existing market to

**5. Repositioning**: These products are produced currently by the business in a given market,

**6. Cost reductions**: Business releases the same products but with less prices to the market.

NPD completes in eight stages. At the end of each stage, business should make a decision, continue to the next stage, leave to develop products or look for extra information. **Figure 3** illustrates the process. The eight stages shown in **Figure 3** are (1) generation of new product ideas, (2) screening and evaluation of ideas, (3) concept development and testing, (4) marketing strategy, (5) business analysis, (6) product development, (7) test marketing and (8) com-

bring considerable benefits to the businesses produced.

sell these products and tries to attract competitors' customers.

and this business starts to produce it for new markets.

increase the sales.

mercialization [3].

**Figure 3.** New product development process.


New product is categorized under the six groups by Booz, Allen and Hamilton. The 'new' feature of product is considered relevant to the business and the market [3]:

**1. Technological breakthroughs**: This group of new products is one-of-a-kind product such as anticancer or AIDS vaccines or new technologic products such as flying cars. These products are new experiences for customers at the time of their release to the market. They offer quite different or marginal benefits to the customers. Technological breakthrough products are the result of continuous product and marketing researches. These products bring considerable benefits to the businesses produced.


NPD completes in eight stages. At the end of each stage, business should make a decision, continue to the next stage, leave to develop products or look for extra information. **Figure 3** illustrates the process. The eight stages shown in **Figure 3** are (1) generation of new product ideas, (2) screening and evaluation of ideas, (3) concept development and testing, (4) marketing strategy, (5) business analysis, (6) product development, (7) test marketing and (8) commercialization [3].

**Figure 3.** New product development process.

**1. Major innovations.** Major innovations are absolutely new in the market. They are created by new technological developments and provide new experiences to the customers. For example, phones, smart phones, computers and tablets were not present before they were released for the first time. They created new markets instead of old ones as a result of attracting potential customers by claiming to ease their lives with if they use these products. However, there is a risk about attracting potential customers to major innovation product as potential customers may doubt about its worth. They can hesitate to spend money on something which did not yet prove its reliability and usefulness. Therefore, the business that created new product has to find ways to convince them that they need this product. Even though it is risky to produce a major innovation product, it can bring to the business several benefits in addition to the profit such as increased reputation of business among

**2. Product improvements**. Contrary to the 'major innovation' group, products in 'product improvement' group are not produced with the aim of creating new market. Instead, they target customers of competitors in the market. This kind of new products is popular in cosmetics, chemistry (especially detergent products) and food (diet, fat-free, allergen-free products) industries. Businesses in these industries try to attract customers to their prod-

**3. Product additions.** These are imitation products which use the market created by the producers of original products. Even though these products may claim new features, benefits (which are what customers experience differently to the original product) will be limited. This kind of new product is usually chosen by small businesses which have limited resources to create an original product. Therefore, they use original product's existing market and sell with lower prices because of less costs for production of these products without product development costs. In this situation, business that produced original product will face with imitation products with lower prices which will attract customers and will endure product development costs. Because of this, businesses producing original products try to prevent imitation products by using marketing countermeasures. Therefore, it is

ucts by differentiating their products from competitors' products in the market.

difficult to find a distribution line in this market for imitation product businesses.

interested in sports.

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**4. Repositioned products.** Repositioned products are promoted in a new way to attract different kinds of customers. These are not new products, are not new formulations or are not new features, but they are positioned in a different way in the market for attracting different groups of customers. For example, Lucozade energy drink business changed the product's image from a drink for recovering people from an illness to a drink for people

New product is categorized under the six groups by Booz, Allen and Hamilton. The 'new'

**1. Technological breakthroughs**: This group of new products is one-of-a-kind product such as anticancer or AIDS vaccines or new technologic products such as flying cars. These products are new experiences for customers at the time of their release to the market. They

feature of product is considered relevant to the business and the market [3]:

customers, employees, shareholders and potential investors.

Suppose that there is a business which produces doors and has an idea of producing a door that opens with a face recognition system. The stages of the marketing process for this door should be planned and implemented following the new product development process categorized below.

Then, concept testing will be applied to the developed product concepts. At this test, the thoughts of selected customer groups about new product concepts will be taken, and the product concept that received the best score will be selected as a new product to be developed.

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At this stage, a marketing strategy will be created for the selected concept. Marketing strategy

• Identify which market will new product concept be sold, how much profit is targeted from new product concept and what are its planned value proposition, sales and market share

• Identify the price new product concept will be sold, how it will be distributed in the market

• Identify how much new product concept will be sold in the long term, how much profit is targeted from long-term sale and what will be long-term marketing mix strategy.

• The first step is projection of new product concept sales. Sales can be projected by market research and review of similar products' sale numbers in the past. Then, business calculates

• The second one is projection of cost and profit. All costs involved in new product development such as investment, operation, marketing, R&D costs and profits from sales of new product are estimated at this stage. Calculated numbers will indicate financial attractive-

If these projections are compatible with the business's objectives, it will be moved to the next

A sample or samples of new product will be created by the R&D department of the business. Then, samples will be tested to assess new product concept whether it is attractive for customers; it can be produced at expected cost and time. Several tests are made to samples to ensure the safety, attractiveness and effectiveness of new product concept; therefore, test process may take a while to choose the most suitable sample. Businesses either do tests themselves or

At this stage, tests will be made to identify how marketing of new product concept must be conducted for the best results before enduring costs for unsuitable marketing strategies. All

**Stage 4: Marketing strategy**

for the first few years.

**Stage 5: Business strategy**

ness of new product.

**Stage 6: Product development**

get a service from another business.

**Stage 7: Test marketing**

stage.

Business strategy is created in two steps:

is created in three steps. These steps are:

and what will marketing budget be for the first year.

risk by estimating minimum and maximum sales.

New product development processes under eight stages are explained below [3]:

#### **Stage 1: Generation of new product ideas**

To initiate a new product development, first, there has to be an idea beforehand to create it. A lot of ideas are generated till the business finds the most suitable ones. Businesses use internal sources like R&D department, external sources like customers and competitors and other sources like seminars, universities, investors, etc. to generate ideas for new product development. It was shown in a survey including 750 interviews of CEOs in global businesses that 41% of new product ideas were generated by employees, 36% of ideas were generated by customers and only 14% of ideas were generated by R&D department.

#### **Stage 2: Screening and evaluation of ideas**

At this stage, all generated ideas in Stage 1 are screened and evaluated to limit ideas to a manageable number including most useful ideas in order to ease new product development process in later stages and reduce costs and time spent for not useful ideas. Firstly, all ideas are screened to distinguish more useful ideas from less useful ones. Secondly, three questions that are involved in new product screening framework created by a marketing expert are applied to selected ideas. These questions are defined in a sum as R-W-W ('real, win, worth doing'), and business must give all these questions 'yes' answers:


#### **Stage 3: Concept development and testing**

After the most useful product ideas that are selected at Stage 2, product concepts will be developed. The selected product ideas will be presented in a detailed and meaningful way as product concepts.

Then, concept testing will be applied to the developed product concepts. At this test, the thoughts of selected customer groups about new product concepts will be taken, and the product concept that received the best score will be selected as a new product to be developed.

#### **Stage 4: Marketing strategy**

Suppose that there is a business which produces doors and has an idea of producing a door that opens with a face recognition system. The stages of the marketing process for this door should be planned and implemented following the new product development process cat-

New product development processes under eight stages are explained below [3]:

customers and only 14% of ideas were generated by R&D department.

To initiate a new product development, first, there has to be an idea beforehand to create it. A lot of ideas are generated till the business finds the most suitable ones. Businesses use internal sources like R&D department, external sources like customers and competitors and other sources like seminars, universities, investors, etc. to generate ideas for new product development. It was shown in a survey including 750 interviews of CEOs in global businesses that 41% of new product ideas were generated by employees, 36% of ideas were generated by

At this stage, all generated ideas in Stage 1 are screened and evaluated to limit ideas to a manageable number including most useful ideas in order to ease new product development process in later stages and reduce costs and time spent for not useful ideas. Firstly, all ideas are screened to distinguish more useful ideas from less useful ones. Secondly, three questions that are involved in new product screening framework created by a marketing expert are applied to selected ideas. These questions are defined in a sum as R-W-W ('real, win, worth doing'),

• Can we win? Does it provide a considerable benefit for the business? Are there enough

After the most useful product ideas that are selected at Stage 2, product concepts will be developed. The selected product ideas will be presented in a detailed and meaningful way as

• Is it worth doing? Is this product compatible with the business's growth strategy?

**Stage 1: Generation of new product ideas**

**Stage 2: Screening and evaluation of ideas**

and business must give all these questions 'yes' answers:

resources to make new product successful?

**Stage 3: Concept development and testing**

product concepts.

• Is it real? Is there a need that will force customers to buy it?

egorized below.

62 Marketing

At this stage, a marketing strategy will be created for the selected concept. Marketing strategy is created in three steps. These steps are:


#### **Stage 5: Business strategy**

Business strategy is created in two steps:


If these projections are compatible with the business's objectives, it will be moved to the next stage.

#### **Stage 6: Product development**

A sample or samples of new product will be created by the R&D department of the business. Then, samples will be tested to assess new product concept whether it is attractive for customers; it can be produced at expected cost and time. Several tests are made to samples to ensure the safety, attractiveness and effectiveness of new product concept; therefore, test process may take a while to choose the most suitable sample. Businesses either do tests themselves or get a service from another business.

#### **Stage 7: Test marketing**

At this stage, tests will be made to identify how marketing of new product concept must be conducted for the best results before enduring costs for unsuitable marketing strategies. All marketing elements such as new product concept's target market, position in the market, advertisement, distribution, packaging, costs, etc.

business may object to do cross-selling such as selling HP printers and cartridges. In addition, business may object to avoid profit losses in case of economic problems by creating different brands with different prices such as Gap which has several brands (Gap, Old Navy and Banana Republic) addressing customers with different income levels. If a business has several product lines, it has a product portfolio. A product portfolio has four major dimensions which are width, length, depth and consistency [2]. For example, the portfolio of Nine West business includes hundreds of products. It has four major product lines which are shoes, bags, wallet and accessory and several sublines such as shoes line consisting of heeled shoes, flat shoes,

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Product mix width refers to the number of different product lines the company carries. Nine

Product mix length refers to the total number of items a company carries within its product lines. Nine West's product mix length is eight as heeled shoes, flat shoes, spore shoes, buskin,

Product mix depth refers to the number of versions offered for each product in the line. Nine West's product mix depth is eight within its heeled shoes as open-toed heeled shoes, padded high heels, rear high heels, pointed nose, abiye shoes, platform shoes, short-heeled shoes and

The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels or some other way. Nine West as a company has many product lines which are completely dependent on each other. Thus, the

West's product mix width is four as shoes, bags, wallet and accessory.

stiletto, boot, sandals and slippers within its shoe product lines.

stilettos, etc. They are shown in **Figure 4**.

filler heel slippers.

product mix consistency is high.

**Figure 4.** Product mix (portfolio) of a shoe business.

Marketing test provides businesses a suitable marketing strategy for new product concept to be commercialized at the next stage. Passing marketing test and going to commercialization directly may make business face with more than expected costs till the level of exceeding profit. Therefore, it is crucial for the businesses to conduct marketing test before going for commercialization at the next stage.

#### **Stage 8: Commercialization**

The first thing to be done at this stage is determining the time when new product concept will be commercialized or introduced to the market. Then, at in which scale new product concept will be introduced to the market, at a small scale such as a city, medium scale such as a region, or at a big scale such as the national market, or the international market. Usually, most businesses prefer to introduce new products into the market at small or medium scales and expand the market in the process as introduction of new product at a big scale requires more capital, confidence and capacity which only few businesses have.
