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New Product Development

New Product Development

The Need for New Products

In dynamic markets companies must constantly introduce new products and services to keep up with changing consumer wants and needs.


Discuss the common challenges of developing successful new products


Key Points

  • A company must establish a series of successful products over time if it wants to maintain a consistent stream of sales, or grow sales over time.
  • New product generation involves multiple stages and a high level of financial investment, and has no guarantee of success.
  • When a new product is introduced, companies must still convince buyers to adopt them into their routines, in order for sales to be consistent.
  • Innovation may be ‘continuous’ or ‘discontinuous’ – the former occurring in established markets, while the latter has the potential to create new markets or consumer behaviors.

Key Terms

  • obsolescence: The process of becoming obsolete, outmoded or out of date.
  • innovation: As used here, innovation describes an idea or product that is new to the company in question.
  • planned obsolescence: a policy of deliberately planning or designing a product with a limited useful life, so it will become obsolete or nonfunctional after a certain period
  • new product: a good or service that was previously not offered by the company

The marketplace is never static: it is dynamic and fast changing, and demand for products is constantly shifting as needs, wants, and technology all change. As a result, companies must always evaluate their existing product line and look for ways to ensure that it is up to date and in line with consumer desires. Continuous decisions must be made about whether new products should be added (and whether old products should be removed).

For instance, the graph in shows how an organization must establish a series of successful products if it wants to maintain a consistent stream of sales, or grow sales over time. As shown in the graph, no product lasts forever, and sales levels can fluctuate dramatically over time. This fictitious company has marketed eight different products over time.


Company Sales: Sales of individual products and total company sales for a fictitious company with multiple products.

In the past, four of these products have been deleted as they near obsolescence (the products labeled as A, B, C, and F). As a result, the sales level in the most current period depends upon the success of the remaining four products. If the firm has a goal to increase sales in the coming years, then it is imperative for that firm to introduce a new group of successful products.

Organizations invest a lot of money to create new products that perform effectively. Nonetheless, firms often struggle to convince people to try out these products, and to use them on a regular basis (and thus incorporate them into their habits and routines). For example, it took 18 years for microwave ovens to gain acceptance in Greece. The ultimate success of new products depends on consumers accepting them.


‘Innovation’ is used here to describe an idea or product that is new to the company. A ‘continuous innovation’ introduces a new entrant into an existing category, and does not challenge established patterns of consumer behavior. An example of this is a new, technologically advanced cell phone. A ‘discontinuous innovation’ may alter existing consumption patterns, and even create new ones. For example, portable audio equipment has evolved from the radio, to the cassette tape player, to the compact disk player, and to the digital audio player – and now, to Cloud-based systems. Discontinuous innovation has the potential to radically shift consumer habits and thus create new demand for a whole category of products and services, but understandably entails more risk for the organization.

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