Product development

Product development is a broad field of endeavor dealing with the design,

creation, and marketing of new products. Sometimes referred to as new product
development (NPD), the discipline is focused on developing systematic methods
for guiding all the processes involved in getting a new product to market.

There are a number of organizations dedicated to supporting product development

professionals, such as the Product Development and Management Association
(PDMA) and the Product Development Institute (PDI). According to the PDMA,
the organization's mission is "to improve the effectiveness of people engaged in
developing and managing new products - both new manufactured goods and new
services. This mission includes facilitating the generation of new information,
helping convert this information into knowledge which is in a usable format, and
making this new knowledge broadly available to those who might benefit from it."

A company has to be good at developing and managing new product. Each

product seems to go through a life cycle it is born, goes through several phases,
and eventually dies as newer product comes along that better serve consumer
needs.

The product life cycle faces two major challenges-

(1) All products eventually decline; the firm must find new products to replace
aging ones (the problem of new product development).

(2) The firm must understand how its products age and adapt its marketing
strategies as products pass through life cycle stage. The company must manage
their new products in the face of changing tastes, technologies and competition.

Factors responsible for product development

A properly co ordinate and well panned product development activity stabilizes

the developmental advantages of an enterprise. The successful
implementation of product development plan leads to rise in living standards
of the society as a whole and provides several other benefits to producers and
consumers. He utility and effectiveness of product development strategy
effort can be judged by getting the answer to a series of question. Product
development effort is an expensive phenomenon and organization should
satisfy about the feasibility of development effort by asking question about
the related factors and there solution/answer.
The factors can be:

Are the consumers satisfied with the size, colors, shape and other characteristics of
the product?
Can the organization achiever economy in production costs so that the price of the
product may be suitable to the consumer.
Chances an scope for product protection
Effect of product development programmer on other products in line.
Capability of the product to make purchasing easy, Swift and satisfactory.
Can the organization ensure stable supply of the product?
Purchasing power of the consumer and the price of the product.
Durability of the products and chances of its spoilage till it reaches to a consumer.
Is the demand of the product is likely to increase due to improvement in quality?
It the product easy to handle during transportation or when in use?
Scope of using waste or other raw material left during the production process to
same other by-product of utility.
Are the manufacturing and distribution facilities available with the organization
easily adjustable to the product?
Is the product convention to stock and can be effectively displayed?

The answers of these quarries should be assessed relatively in terms of

utility and effectiveness before starting the product development process.

New Product Development Process

Because introducing new products on a consistent basis is important to the future
success of many organizations, marketers in charge of product decisions often
follow set procedures for bringing products to market. In the scientific area that
may mean the establishment of ongoing laboratory research programs for
discovering new products (e.g., medicines) while less scientific companies may
pull together resources for product development on a less structured timetable.

In this section we present a 7-step process comprising the key elements of new
product development. While some companies may not follow a deliberate step-by-
step approach, the steps are useful in showing the information input and decision
making that must be done in order to successfully develop new products. The
process also shows the importance market research plays in developing products.
 We should note that while the 7-step process works for most industries, it is less
effective in developing radically new products. The main reason lies in the
inability of the target market to provide sufficient feedback on advanced product
concepts since they often find it difficult to understand radically different ideas. So
while many of these steps are used to research breakthrough ideas, the marketer
should exercise caution when interpreting the results

New product Development Strategy:

Given the rapid change in consumer tastes, technology and competition must
develop a steady stream of new product and service. A firm can obtain new
products in two ways:

(1) One way is by acquisition where the firms buy a whole company, a patent, or
license to product someone else’s product.

(2) The other way is through new product development which is the development
of original products, product improvements, product modifications, and new
brands through the firms own R&D effort

Innovation can be very risky.

(1)One study estimated that as many as 80% of new product failed.
(2)Only about 40% of new products are around after five years.

Among the reasons that so many new product fail are:

(1)Market size may have been overestimated.

(2)The actual product may have not been designed as well as it should have been.

(3)The product may have been incorrectly positioned in the market, priced too
high or advertised poorly.

(4)A new product may have been pushed though in spite of poor marketing
research finding.

(5)The cost of producing the product may have been higher than expected.

(6)Sometimes competitors fight back harder than expected.

 One way to overcome these difficulties and pitfalls is to identify successful new
products and fine out why and how they succeeded. Success factors are thought
tube:

(1) Unique superior product

(2) A well defined product concept

3) Others factors include-

a. Senior management commitment
b. Relentless innovation
c. A smoothly functioning new product development process.

(4)In all to create successful new product a company must understand its consumer,
market, competitors and develop products that deliver superior customer.

Why New Products Fail

• Lack of differentiating advantage
• Poor marketing plan
• Poor timing
• Target market too small
• Poor product quality
• No access to market

New Product Development Process

Because introducing new products on a consistent basis is important to the future
success of many organizations, marketers in charge of product decisions often
follow set procedures for bringing products to market. In the scientific area that
may mean the establishment of ongoing laboratory research programs for
discovering new products (e.g., medicines) while less scientific companies may
pull together resources for product development on a less structured timetable.

In this section we present a 7-step process comprising the key elements of new
product development. While some companies may not follow a deliberate step-by-
step approach, the steps are useful in showing the information input and decision
making that must be done in order to successfully develop new products. The
process also shows the importance market research plays in developing products.
We should note that while the 7-step process works for most industries, it is less
effective in developing radically new products. The main reason lies in the
inability of the target market to provide sufficient feedback on advanced product
concepts since they often find it difficult to understand radically different ideas. So
while many of these steps are used to research breakthrough ideas, the marketer
should exercise caution when interpreting the results

Step1. IDEA GENERATION

The first step of new product development requires gathering ideas to be evaluated
as potential product options. For many companies idea generation is an ongoing
process with contributions from inside and outside the organization. Many market
research techniques are used to encourage ideas including: running focus groups
with consumers, channel members, and the company’s sales force; encouraging
customer comments and suggestions via toll-free telephone numbers and website
forms; and gaining insight on competitive product developments through
secondary data sources. One important research technique used to generate ideas is
brainstorming where open-minded, creative thinkers from inside and outside the
company gather and share ideas. The dynamic nature of group members floating
ideas, where one idea often sparks another idea, can yield a wide range of possible
products that can be further pursued.

o Ideas for new products can be obtained from basic research using a
SWOT analysis (Strengths, Weaknesses, Opportunities & Threats),
Market and consumer trends, company's R&D department,
competitors, focus groups, employees, salespeople, corporate spies,
trade shows, or Ethnographic discovery methods (searching for user
patterns and habits) may also be used to get an insight into new
product lines or product features.
o Idea Generation or Brainstorming of new product, service, or store
concepts - idea generation techniques can begin when you have done
your OPPORTUNITY ANALYSIS to support your ideas in the Idea
Screening Phase (shown in the next development step).
Step2. SCREENING

In Step 2 the ideas generated in Step 1 are critically evaluated by company

personnel to isolate the most attractive options. Depending on the number of ideas,
screening may be done in rounds with the first round involving company
executives judging the feasibility of ideas while successive rounds may utilize
more advanced research techniques. As the ideas are whittled down to a few
attractive options, rough estimates are made of an idea’s potential in terms of
sales, production costs, profit potential, and competitors’ response if the product is
introduced. Acceptable ideas move on to the next step.

o The object is to eliminate unsound concepts prior to devoting

resources to them.
o The screeners should ask several questions:
 Will the customer in the target market benefit from the
product?
 What is the size and growth forecasts of the market
segment/target market?
 What is the current or expected competitive pressure for the
product idea?
 What are the industry sales and market trends the product
idea is based on?
 Is it technically feasible to manufacture the product?

Step3. CONCEPT DEVELOPMENT AND TESTING

With a few ideas in hand the marketer now attempts to obtain initial feedback
from customers, distributors and its own employees. Generally, focus groups are
convened where the ideas are presented to a group, often in the form of concept
board presentations (i.e., storyboards) and not in actual working form. For
instance, customers may be shown a concept board displaying drawings of a
product idea or even an advertisement featuring the product. In some cases focus
groups are exposed to a mock-up of the ideas, which is a physical but generally
non-functional version of product idea. During focus groups with customers the
marketer seeks information that may include: likes and dislike of the concept;
level of interest in purchasing the product; frequency of purchase (used to help
forecast demand); and price points to determine how much customers are willing
to spend to acquire the product.
 o Develop the marketing and engineering details
 Investigate intellectual property issues and search patent data
bases
 Who is the target market and who is the decision maker in the
purchasing process?
 What product features must the product incorporate?
 What benefits will the product provide?
 How will consumers react to the product?
 How will the product be produced most cost effectively?
 Prove feasibility through virtual computer aided rendering,
and rapid prototyping
 What will it cost to produce it?

Testing the Concept by asking a sample of prospective customers what they think
of the idea. Usually via Choice Modeling

Step4. BUSINESS ANALYSIS

At this point in the new product development process the marketer has reduced a
potentially large number of ideas down to one or two options. Now in Step 4 the
process becomes very dependent on market research as efforts are made to analyze
the viability of the product ideas. (Note, in many cases the product has not been
produced and still remains only an idea.) The key objective at this stage is to
obtain useful forecasts of market size (e.g., overall demand), operational costs
(e.g., production costs) and financial projections (e.g., sales and profits).
Additionally, the organization must determine if the product will fit within the
company’s overall mission and strategy. Much effort is directed at both internal
research, such as discussions with production and purchasing personnel, and
external marketing research, such as customer and distributor surveys, secondary
research, and competitor analysis.

o Estimate likely selling price based upon competition and customer

feedback
o Estimate sales volume based upon size of market and such tools as the
Fourt-Woodlock equation
o Estimate profitability and breakeven point
Step5. PRODUCT AND MARKETING MIX DEVELOPMENT

Ideas passing through business analysis are given serious consideration for
development. Companies direct their research and development teams to construct
an initial design or prototype of the idea. Marketers also begin to construct a
marketing plan for the product. Once the prototype is ready the marketer seeks
customer input. However, unlike the concept testing stage where customers were
only exposed to the idea, in this step the customer gets to experience the real
product as well as other aspects of the marketing mix, such as advertising, pricing,
and distribution options (e.g., retail store, direct from company, etc.). Favorable
customer reaction helps solidify the marketer’s decision to introduce the product
and also provides other valuable information such as estimated purchase rates and
understanding how the product will be used by the customer. Reaction that is less
favorable may suggest the need for adjustments to elements of the marketing mix.
Once these are made the marketer may again have the customer test the product. In
addition to gaining customer feedback, this step is used to gauge the feasibility of
large-scale, cost effective production for manufactured products.

o Produce a physical prototype or mock-up

o Test the product (and its packaging) in typical usage situations
o Conduct focus group customer interviews or introduce at trade show
o Make adjustments where necessary

Produce an initial run of the product and sell it in a test market area to determine
customer acceptance

Step6. MARKET TESTING

Products surviving to Step 6 are ready to be tested as real products. In some cases
the marketer accepts what was learned from concept testing and skips over market
testing to launch the idea as a fully marketed product. But other companies may
seek more input from a larger group before moving to commercialization. The
most common type of market testing makes the product available to a selective
small segment of the target market (e.g., one city), which is exposed to the full
marketing effort as they would be to any product they could purchase. In some
cases, especially with consumer products sold at retail stores, the marketer must
work hard to get the product into the test market by convincing distributors to
agree to purchase and place the product on their store shelves. In more controlled
test markets distributors may be paid a fee if they agree to place the product on
their shelves to allow for testing. Another form of market testing found with
consumer products is even more controlled with customers recruited to a
“laboratory” store where they are given shopping instructions. Product interest can
then be measured based on customer’s shopping response. Finally, there are
several high-tech approaches to market testing including virtual reality and
computer simulations. With virtual reality testing customers are exposed to a
computer-projected environment, such as a store, and are asked to locate and
select products. With computer simulations customers may not be directly
involved at all. Instead certain variables are entered into a sophisticated computer
program and estimates of a target market’s response are calculated.

o New program initiation

o Finalize Quality management system
o Resource estimation
o Requirement publication
o Publish technical communications such as data sheets
o Engineering operations planning
o Department scheduling
o Supplier collaboration
o Logistics plan
o Resource plan publication
o Program review and monitoring
o Contingencies - what-if planning

Step7. COMMERCIALIZATION

If market testing displays promising results the product is ready to be introduced

to a wider market. Some firms introduce or roll-out the product in waves with
parts of the market receiving the product on different schedules. This allows the
company to ramp up production in a more controlled way and to fine tune the
marketing mix as the product is distributed to new areas.

o Launch the product

o Produce and place advertisements and other promotions
o Fill the distribution pipeline with product
o Critical path analysis is most useful at this stage