Explain New Product Development Process

New Product Development Process –

New Product Development starts with idea generation

A company has to generate many ideas in order to find one that is worth pursuing. The Major sources of new product ideas include internal sources, customers, competitors, distributors and suppliers. Almost 55% of all new product ideas come from internal sources according to one study. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas.

Almost  28%  of  new  product  ideas  come  from  watching  and  listening  to  customers. Customers: even create new products on their own, and companies can benefit by finding these  products  and  putting  them  on  the  market  like  Pillsbury  gets  promising  new products from  its annual Bake-off.  One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off winners’ recipes.

About  30%  of  new  product  ideas  come  from  analysis  of  competitors’  products.  The company can watch competitors’ ads, press releases and write-ups in the press about their activities. Companies also buy competitors information and pay for industrial espionage.

Resellers and others who are close to the market, can often pass on information about new developments. Other sources are trade magazines, shows and seminars, market research firms, government reports, advertising agencies and new product consultants.

Idea Screening: –The purpose of idea generation is to create a large pool of ideas. The purpose  of  this stage is to pare these down to those that are genuinely worth pursuing. Companies have  different  methods  for  doing  this  from  product  review  committees  to formal market research. It, is helpful at this stage to have a checklist that can be used to rate each idea based on the factors required for successfully launching the product in the marketplace and their relative importance.  Against these, management can assess how well  the  idea  fits  with  the  company’s  marketing   skills  and  experience  and  other capabilities. Finally, the management can obtain an overall rating of the company’s ability to launch the product successfully.

Concept Development and  Testing –  An attractive idea has to be developed into a Product  concept. As opposed to a product  idea that is an idea for a product  that the company can see itself marketing to customers, a product concept is a detailed version of the idea stated in  meaningful consumer terms. This is different again from a product image, which is the consumers’ perception of an actual or potential product.  Once the concepts are developed, these need to be tested with con- sumers either symbolically or physically. For some concept tests, a word or a  picture may be suffi- cient, however, a physical presentation will increase the reliability of the concept test. After being exposed to the concept, consumers are asked to respond to it by answering a set of questions de- signed to help the company decide which concept has the strongest appeal. The company can then project these findings to the full market to estimate sales volume.

Marketing Strategy Development – This is the next step in new product development. The strategy statement consists of three parts: the first part describes the target market, the planned product positioning and the sales, market share and profit goals for the first few  years.  The  second   part  outlines  the  product’s  planned  price,  distribution,  and marketing budget for the first year.  The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and the marketing mix strategy.

Business Analysis – Once the management has decided on the marketing strategy, it can evaluate the attractiveness of the business proposal. Business analysis involves the review of projected sales, costs and profits to find out whether they satisfy a company’s objectives. If they do,  the  product  can move   to  the  product development stage.

Product Development – Here, R&D or engineering develops the product concept into a physical product. This step calls for a large investment. It will show whether the product idea can  be  developed into a full- fledged workable  product.  First, R&D  will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. When the prototypes are ready, they must be tested. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively.

Test  Marketing  –  If  the  product  passes  the  functional  tests,  the  next  step  is  test marketing: the stage at which the product and the marketing program are introduced to a  more  realistic  market settings.  Test marketing gives  the marketer an opportunity  to tweak the  marketing  mix before  the going into the expense of a product launch. The amount of test  marketing varies with the type of product. Costs of test marketing can be enormous and it can also allow competitors to launch a “me- too” product or even sabotage the testing so that the marketer  gets skewed results. Hence, at times, management may decide to do away with this stage and proceed straight to the next one:

If the company goes ahead with commercialization – introducing the product to the market-it will face high costs for manufacturing and advertising and promotion. The company will have to decide on the  timing of the launch (seasonality) and the location (whether regional, national or international). This depends a lot on the ability of the company to bear risk and the reach of its distribution network.