Branding

What is New Product development (NPD).

“The path to achieving positional advantages in today’s marketplace is through developing and commercialising value generating innovations” (Harmancioglu, N, Droge, C, & Calantone, R 2009, cited in,  Chandy and Tellis 1998;Griffin and Page 1996; Hamel and Getz 2004, pg. 266).  It is evident by the above statement that new product development is crucial in achieving competitive advantage. New Product Development takes many forms. I will list and describe these below. I will give an example of how each one affected the Smartphone market.

Forms of NPD and Innovation.

Radical innovations:

This form of (NPD) creates demand for a product or service that was previously unrecognised by the consumer. This results in creating new markets, new competitors and new marketing actives. (Kumar, S., & Phrommathed, P. 2005).

For example the launch of the I Phone in 2007 was so radical and forward thinking that  after 72 days it sold its 1 millionth unit. This made Apple number one and up until 2011 they had 24% of the smart phone market (Doug Gross 2013).

“Product advantage refers to a product’s superiority relative to other products in the marketplace, due to factors such as quality, benefits and functions. A new product with relative superiority will have greater perceived quality and inspire increased customer satisfaction, thereby leading to higher market acceptance” (Kuen-Hung, T, Chi-Tsun, H, & Mu-Lin, T 2013, cited in, Calantone et al. 2006, pg. 723)

 Imitative innovations:          

These are products that are new to the firm but not new to the market. These products are copying a successful new product in the market. (Kumar, S., & Phrommathed, 2005).

Samsung took on this form when they developed the Samsung Galaxy S line. This NPD was nearly a direct copy of the iPhone. Apples dominance in the market reduced to 14% in 2013. At the same time Androids account for 79%. Many observers say that Apple need to re assert themselves with revolutionary innovations that they have been known for. (Doug Gross 2013). In the illustration below we can see the similarities between Iphome and the Galxy.

 

(Derek Broes, 2013)

Incremental innovation:      

This is an existing product or service that is enhanced by new feathers and benefits. This process can be used as a competitive tool to stay ahead of competitors. The iphone 5S would be an example of this. With new features and benefits to attract new and existing customers. I have some of these listed below.

1)      4-inch, 1136×640, 326ppi display.

2)      16, 32, or 64GB storage.

3)      A7 processor (64-bit)

4)      8MP iSight camera (rear) with 1.5 micron pixels,

5)      1.2MP Face Time HD camera (front). 5)

(Darrell Etherington. (2013).

Not innovating can lose relevance with consumers.

“The only way to achieve real growth is to develop offerings so innovative that they create new categories or subcategories making competitors irrelevant because they lack a “must have” (Aaker, DA 2012, p43).

Continuous innovation goes beyond impeding competitors. It can provide enthusiasm to a category or subcategory as well as the brand, a sense of advance progress consequently creating “must haves” which gives the brand or retailer relevance. (Aaker, DA 2012,)

Below is an example of how a brand lost relevance with customers by not innovating.

Nokia’s former CEO Finnish borne Jorma Ollila, guided Nokia from making paper and gum in 1985, to become the world’s largest innovator in the manufacture of cell phones. He also allowed it to fail. In his book “An Impossible Success,” he admits hat Nokia did not predict consumer’s changing needs. Due to their lack of relevant new products they could not compete effectively with rival smart phones. They even lagged behind clamshell phones. (Matti Huuhtanen, 2013)

He states that Apple in 2007 launched a user experience helped by its applications. “A whole new ecosystem was born which Nokia had been unable to create.”(Jorma Ollila 2013)

 Downsides of New product development.

NPD cannot be taken lightly as some companies have learned. Front End is a crucial part of NPD. Front end is the stage where a concept is being planned and created with an end result in either implementing the concept or scraping it. There is evidence however of how harmful NPD can be to a brand or retailer. Hasselblad a large camera manufacturer was nearly made bankrupt by trying to develop the first ever digital camera for the premium market. Hasselblad terminated the project due to harsh screening processes of the product. The termination allowing players such as Nikon and Canon to complete the product and obtain more of the market share. (Florén, H, & Frishammar, J 2012)

Regardless of the front end NPD needs resources to compete effectively these include technical marketing R&S budget and personal expertise. Without these NPD will not happen and the related company will fall behind its competitors. (Harmancioglu, N, Droge, C, & Calantone, R 2009)

An Illustration of how the Front End works.

Is NPD good for retailers

Consumers tend to look for signals of quality, and often assume that a more innovative product has more quality attributes, and thus are more willing to buy such items

(Akgün et al. 2007; Szymanski et al.)

Many retailers are cautious when taking on new products; this is mainly because of their high failure rate. Retailers depend on the manufacture ability to advertise effective displays and sales promotions. These elements are crucial for a new products success in a grocery store.

In terms of the Grocery retail sector innovation is seen as an effective weapon between Private labels and National brands. Federal Trade Commission (2003) found that retailers are more accepting and supportive towards innovative brands e.g. more shelf space.

However, a study by A McKinsey & Co. revealed at the private Label manufacturers Association (PLMA) Annual Conference. $55 billion worth of sales may move from manufactured brands to PLs once retailers invest in the PLs innovations over the next decade. It was also suggested that NBs market share of 24% could drop to 16% over the same period. (Riell, H 2008, pg. 44)

Regardless of this Gielens states in his conclusion. “The best way to ensure survival is constant innovation and the creation of new products that impress consumers through true product differentiation. The question remains, however, whether PL consumers are indeed interested in such innovations”. (Gielens, K 2012, pg,419)

GTA 5 drives retail sales.

In this article it accredits the console game GTA5 with single handedly saving the console game industry in September 2013. This game single handled pulled in 50% of game software dollars last month.

Previous to the release of GTA 5 the games industry rose 27% year on year which in dollar terms relates to $1.08 million. The NPD group reported that since the release of GTA5 this industry rose to 52% which added $754 million to this market. This is evidence or how NPD in the form of incremental innovation can affect an industry’s value and market share. (Patrick Seitz. 2013).

Conclusion.

 This review has examined how NPD is crucial to a firm’s profitability relevance and market share. We can see this when we look at how Nokia went from a “must have” to yesterday’s favourite. We can also see how Apples radical innovation practically leads and created a new market. This kept them enormously relevant to consumers until competitors like Samsung started to compete with imitative products. Furthermore we can see that the grocery sector is aware of the import ants having innovative NPDs in there stores. Through using the example of the gaming platform GTA5 and how its introduction injected $754 million into its market. Figures like this also increase footfall for retailers. It is evident by literature reviewed that relevant NPD encourage consumers to spend thus enhancing an economy. I will attempt to successfully conclude with this statement. “Business survival also is relevant to employees who must consider the stability of their jobs and to economic policy makers who must be concerned with the long run ability of firms to provide jobs and taxes” (Banbury, C, & Mitchell, W 1995, cited in, Dertouzos, Lester, and Solow, 1989).’ But that said continuous Innovation into NPD is the only way of advancing brands retailers and manufactures. Once this is done these business will be profitable and dependent on one another for there

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