An Integrated New Product Development Model with an Overlapping Sales Period for Existing and New Products

Decision making for new product development (NPD) has become more crucial today for firms' survival and growth in the competitive market. This research examines the situation in which the performance quality level of a new product is incrementally improved from that of an existing product and both products are sold for a period between entry time of a new product and exit time of an existing product. This problem of an overlapping sales period between existing and new products which was not explored in previous studies is particularly important in practice for developing or promoting a new product faced with either short product life-cycle or fast clockspeed, because cannibalization problem occasionally appears between the two products. Therefore, we develop an integrated analytical model to simultaneously determine important factors in NPD decision-making, including the price, performance quality level, and development resource input and time of a new product, along with the exit time of an existing product, in order to maximize profit during the development and sales period. Then we solve optimally the model which involves complex trade-offs among the decision variables, using MAPLE and LINGO. Through sensitivity analyses, we provide important theoretical and managerial implications on NPD.