Success Factors of New Product Development

Seminar Paper, 2005

23 Pages, Grade: 1,6



Table of contents

1 Why do we look at the success of new product launches?

2 Problems in defining "success" and "New Product"
2.1 Not all new products are similar or comparable
2.2 How can we define success in this context?

3 Critical Factors for the success of New Product Development
3.1 Market orientation and customer integration
3.1.1 Integration of customers into New Product Development
3.1.2 Market orientation of New Product Development
3.2 The relevance of the New Product Development process within the company
3.2.1 Building cross functional teams
3.2.2 Involvement and support of senior management
3.2.3 Variation of the New Product Development Process
3.3 On Time and On Budget
3.4 Is the product really unique, different and better

4 The importance of New Product Development in the future


1 Why do we look at the success of new product launches?

In the last decades the way of doing business around the world has changed more than ever before. In our times it is not only important for companies to have a few products which sell good but to come up with successful new products from time to time. Especially in the consumer goods sector this applies very strongly. With shorter product-life-cycles companies are forced to change and invent new products or they will get pushed out of the market. The fact that customer preferences change very fast and the progress in technology is faster than ever along with the information being available better and more rapid is putting pressure on companies to come up with new products over and over again (Akgün, 2004, p. 1).

Coming up with ideas for new products alone does not guarantee company performance to be above average. It is only by successful launches of new products that companies are able to turnover and profits. This is were the main problem is based.

Many products are brought to market every year but only a small number of them is seen as being successful. The many failures that come up are very expensive for companies since they might involve a lot of costs for research and development, market research, employees involved in the development and other types of cost related to New Product Development. According to Kotler et al. (2002, p. 500) a study estimated that new consumer packaged goods fail at a rate of 80 per cent.

Companies that try to stay competitive ask themselves what they can do to create successful new products. The factors that divide failures from successes are vital to managers around the world in order to stay in business. It is not always easy to understand the determinants that are crucial to the success of a product.

2 Problems in defining "success" and "New Product"

2.1 Not all new products are similar or comparable

When analysing New Product Development it is essential to find out what the term "new product" actually means. It is important to be aware of the fact that a product can be new in a lot of different ways.

A product that is new for a company is not necessarily new for the customer or the market. It might have been gained through acquisition or by a merger. There is also a difference between original products, product improvements, product modifications and new brands developed in the research and development department.

The different types of products imply that strategies to bring products to success have to vary greatly depending on the type of product that is supposed to be launched.

Furthermore there is a difference between products that create a whole new market by themselves and products that are new to the company but already exist on the market in a fairly similar way. The question of how new the product is to the customer and whether the customer gains relevant advantages by buying the product is essential when deciding on how to bring to product on the market.

2.2 How can we define success in this context?

Success of new products cannot always be seen as financial success and therefore cannot always be operationalized and measured very easy. If we define success as the achievement of something desired, planned or attempted we have to have to have a much broader view than only financial success. For example if a company develops a new product based on a new technology and the product fails there can still be positives sides to the failure. The company might have gained valuable experience in a new market and chances for the next product launch to succeed are much bigger (Hart 1993).

The various different measures of success that studies tended to use can be classified into two groups: "financial" and "non-financial". Financial success can be measured fairly easy by picking out things like profit, sales growth, turnover, return on investment, return on capital employed, and inventory turnover (Hart 1993, p. 24). Non-financial success is not as easy to be accounted. Companies might be able to get data on the market share of a product but is a lot harder to measure ethical standing or social responsibility.

The question of long-term versus short-term success also arises. Even if it is tempting to go for short-term success because it is the immediate way to gain money it might not always be the best idea. Long-term success of a product guarantees a lasting and stable way of income.

Sometimes products are even considered successes even if the higher market share of a company is expensively "bought" through very high advertising expenses.

3 Critical Factors for the success of New Product Development

Since a universal theoretical framework to describe the correlation between variables of New Product Development and the success of new products does not exist (Ernst 2002, p. 1) it is the objective of this work to describe various different factors of New Product Development and their success measured by different empirical studies. The fact that there is not one single factor is known since the end of the 1980s (Balachandra R. and Friar J. 1999, p. 34).

When trying to find out about the most important factors that influence New Product Development and examining studies on the topic we can find out that there is no consistency in the results of the studies. Sometimes studies are even contradictory to each other (Balachandra R. and Friar J. 1999, p. 34). Nevertheless there are some factors that are mentioned in nearly all studies and therefore considered to be the most important for the success of New Product Development. When looking at these factors we have to keep in mind that not all of these factors necessarily have to be met at once and there might even be cases were one of these factors is not considered at all and the product is still a success (Connell J. et al. 2001, p. 35). In general the balance of the factors is vital to the success of New Product Development. Depending on the kind of product on its way to launch there might also be different approaches that have to be used (Kotler et al. 2002, p. 499).


Excerpt out of 23 pages


Success Factors of New Product Development
University of Cooperative Education Mannheim  (Institut für Wirtschaft)
"International Business Administration"
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
528 KB
Seminar paper researching and decribing the success factors for companies when trying to implement new products.
Success, Factors, Product, Development, International, Business, Administration
Quote paper
Anonymous, 2005, Success Factors of New Product Development, Munich, GRIN Verlag,


  • guest on 1/11/2007

    Sehr hilfreich.

    Hab zu nem ähnlichen Thema geschrieben und diese Arbeit zu lesen hat mich deutlich weiter gebracht. Allein die Literaturliste war einiges wert.
    zu empfehlen und auch nicht zu teuer

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