VARIOUS STAGES OF NEW

PRODUCT DEVELOPMENT

KETAN KISHOR BANGAD

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 INDEX

Sr. No. Topic Name Page No.

1 Introduction – NPD 2
2 Idea Generation 6
3 Idea Screening 8
4 Concept Development 13
5 Business Strategy Development 19
6 Product Development 25
7 Test Marketing 28
8 Commercialisation 41
9 Introduction 43
10 Conclusion 49
11 Bibliography 50

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INTRODUCTION:
Why is New Product?

It helps organizations to achieve business success, contributes in the growth of the company,
influences profit & performance. Firms that have multiple successful products in their
portfolios can command greater attention and priority treatment, such as preferred shelf space
and payment terms, from wholesalers and retailers. Furthermore, the image and reputation of
the firm and its brands is heavily influenced by the number and calibre of successful products
in its portfolio.

Also new products create differential advantages, capitalises on technological breakthrough

and response to the changing demographic.

'New products' can be:

 Products that your business has never made or sold before but have been taken to
market by others
 Product innovations created and brought to the market for the first time. They may be
completely original products, or existing products that you have modified and
improved.
From a broader marketing perspective, firms that develop the necessary organizational
structures and processes to continuously and efficiently generate new products are more
likely to be in tune with their customers’ needs and wants.

New products are responsible for employment, economic growth, technological progress, and
high standards of living.

The financial payoff from successful new product introductions can help many firms
overcome the slowing growth and profitability of existing products and services that are
approaching the maturity stages of their life cycles. A 1990 study sponsored by the Marketing
Science Institute found that 25% of successful firms’ current sales were derived, on average,
from new products introduced in the last three years. New product development can also be a
potential source of significant economies of scale for the firm.

So what is New Product Development (NPD)?

New product development is described broadly as the transformation of a market

opportunity into a product available for sale. The product can be tangible (something physical
which one can touch) or intangible (like a service, experience, or belief), though sometimes
services and other processes are distinguished from "products."

New product development (NPD) is the process of bringing a new product or service to the
marketplace. This type of development is considered the preliminary step in product or
service development and involves a number of steps that must be completed before
the product can be introduced to the market.

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In the last few decades, the number of new product introductions increased dramatically as
the industry became more aware of the importance of new products to business.
Correspondingly, managing the NPD process has become a challenge for firms as it requires
extensive financial and human resources and is time sensitive. The harsh realities are that the
majority of new products never make it to market and those that do face a failure rate
somewhere in order of 25 to 45%. For every seven new product ideas, about four enter
development, one and a half are launched, and only one succeeds. Despite the extensive
research on how to achieve success in NPD, firms continue to deliver products that fail and
therefore NPD ranks among the riskiest and most confusing tasks for most companies. As the
number of dollars invested in NPD goes up, the pressure to maximize the return on those
investments also goes up. It becomes worse as an estimated 46% of resources allocated to
NPD are spent on products that are cancelled or fail to yield an adequate financial return.

Many new products fail, and the new product development landscape is littered with
expensive examples. Although Henry Ford led the way in developing the automobile market,
the Ford Motor Company in the 1950s introduced the Edsel and lost more than $100 million.
DuPont’s Corfam substitute for leather resulted in hundreds of millions of dollars in losses.
General Mills lost millions of dollars on the introduction of a line of snacks called Bugles,
Daisies, and Butterflies. Gillette lost millions on a facial cleansing cream called Happy Face.
Xerox invented the personal computer in 1973 (three years before Jobs and Wozniak got
started), but failed to commercialize the “Alto” in spite of it being a brilliant technical
success. Exxon lost hundreds of millions on its ill-fated forays into office information
systems and high-tech electric motors.

The NPD process consists of the activities carried out by firms when developing and
launching new products. A new product that is introduced on the market evolves over a
sequence of stages, beginning with an initial product concept or idea that is evaluated,
developed, tested and launched on the market. This sequence of activities can also be viewed
as a series of information gathering and evaluation stages. In effect, as the new product
evolves, management becomes increasingly more knowledgeable (or less uncertain) about the
product and can assess and reassess its initial decision to undertake development or launch.
Following this process of information gathering and evaluation can lead to improved new
product decisions on the part of firms by limiting the level of risk and minimizing the
resources committed to products that eventually fail. The NPD process differs from industry
to industry and from firm to firm. Indeed it should be adapted to each firm in order to meet
specific company resources and needs.

Many researchers have tried to develop a model that captures the relevant stages of the NPD
process. Many different models with a varying number of stages have been proposed.
Basically NPD process is divided in 8 stages,

1. Idea generation
2. Idea Screening
3. Concept development
4. Business strategy development

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 5. Product development
6. Test marketing
7. Commercialising
8. Introduction / Review of market performance

Researchers found that companies that have successfully launched new products are more
likely to have some kind of formal NPD process and that they generally pass through all of
the above stages.

Now we will go through each step one by one,

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IDEA GENERATION:
The first stage of the New Product Development is the idea generation. Ideas come from
everywhere, can be of any form, and can be numerous. Typically, a company generates hundreds
of ideas, maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas
can be identified:

 Internal idea sources: the company finds new ideas internally. That means R&D, but
also contributions from employees.

 External idea sources: the company finds new ideas externally. This refers to all kinds
of external sources, e.g. distributors and suppliers, but also competitors. The most
important external source is customers, because the new product development process
should focus on creating customer value.

This stage involves creating a large pool of ideas from various sources, which include

External (Customer):

New product development cannot be managed successfully without a clear understanding of

customers and their changing needs. The customer is influenced by the economic, social,
legal, and political environment. Firms must become adept at not only identifying customer
needs, but also at anticipating needs that customer themselves find difficult articulate. NPD
teams should undertake both ethnographic studies and experiential interviews to identify
unmet and difficult-to-articulate customer needs.

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For example, in the mid-1960s Ford identified the trend of teenagers and young adults to
customize inexpensive vintage Fords with V8 engines. To meet this opportunity they
launched the 1964½ Mustang, which captured the hearts of a new generation of baby
boomers just reaching driving age.

This small, inexpensive sports car with a powerful V8 engine sold 420,000 units in the first
year ($10 billion at today’s prices) and went on to launch the lucrative “pony” segment.

Internal (Management):
Tata Nano was the dream of Mr. Ratan Tata. He observed that family of four riding on 2
wheelers which is dangerous in rough weather conditions and something has to be done for
this.
“I observed families riding two wheelers – the father driving the scooter, his young kid
standing in front of him, his wife sits behind him holding little baby. This could be very
dangerous in night driving and stormy weathers.
It led me to wonder whether one could conceive of a safe, affordable, all weather form of
transport for such families.”
This is how the idea got generated for the people’s car. Then after four years of R&D the goal
of people’s car realised.

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IDEA SCREENING:

It is important for businesses to continually devise new products, as products do not last forever.
While there are millions of products available to consumers, many more products do not make it to
market at all. As it is expensive to bring a product to market, products go through a product
development process where they are evaluated at every stage before they are brought to
commercialization. For example, of the 5,000 drug ideas that go through the screening process of the
Federal Drug Administration, only 10 end up getting approved, and of these only 3 become profitable.
With an average cost of $1 billion to bring a drug to market, it would take several billion in sales to
recoup the cost.

Screening Objectives:

The objective of the screening stage is to eliminate unsound concepts prior to devoting resources to
them.
The strong screening factors, with which the product idea must agree, arise from the project aim and
the project constraints.

The overall aims of the company always take precedence over other factors. No matter how brilliant a
product idea is in isolation, it is rejected if it does not fit with the company's business strategy, in
particular the product strategy. There may be an outstanding product idea which may change the
direction of the company's business strategy, but it has to be taken from the project ideas and directed
back into the top management area. This product idea has to be viewed in its scale and suitability for
the company, and decisions within the company must be taken at top management level.

The constraints identified at the beginning of the project are also important screening factors. A
product may be dropped for many reasons: it does not meet the food regulations; there is not sufficient
money to develop or to produce it; the managing director does not like it! The factors used in
screening should be as objective as possible, but sometimes subjective decisions are made.

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The screeners should ask several questions:

Marketing factors:

Potential market size

Compatibility of market image with company's product lines
Relationship to competing products
Compatibility with existing or specified market channels
Access to suitable physical distribution systems
Fits into an acceptable pricing structure
Relationship to promotional methods and resources
Marketing resources needed to produce success

Production factors:

Compatibility with existing product lines

Availability of processing equipment
Availability of raw materials and ingredients
Availability of technical skills to produce the product
Availability of production time
Agreement with any legal requirements
Cost and availability of new resources required

Development factors:

Knowledge needed for development

Available knowledge and skills
Available time and human resources
Development funds needed and available
Compatibility with existing strengths
Development difficulties and risks of failure

Financial factors:

Compatibility of development costs with financial resources

Capital investment resources needed and available
Finance needed and available for market launch and on-going product support
Profits or returns on investment required

By answering these questions, the company can get a better idea of the likelihood of a product
becoming a commercial success.

Significant factors are many and these are just a few that often occur. The choice of screening factors
depends on the type of ideas, the company and its resources, the company's environment and the level
of innovation. There could be many factors but it is not humanly possible to use them all, so that the
factors are ranked in importance and only the most critical chosen in the first screening, although
others may be checked later. Factors can be rated as crucial, most important, important and minor.

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The screening step is a critical part of the new product development process. Product ideas that do not
meet the organization’s objectives should be rejected.

Two problems that may arise during the screening stage are
 The acceptance of a poor product idea, and
 The rejection of a viable product idea.

In the former case, money and effort are wasted in subsequent stages until the product idea is
abandoned. In the latter case, a potential winner never sees the market.

Screening Techniques:

There are two common techniques for screening new product ideas. Both involve the comparison of a
potential product idea against the criteria for acceptable new products.

The first technique is a simple checklist. For example, new product ideas can be rated on a scale
ranging from very good to poor, in respect to factors such as value added, sales volume, patent
protection, and effect on present products. Unfortunately, it is often very challenging for evaluators to
define what is fair or poor in any given category. Also, this system does not address the issue of the
time and expense associated with each idea, nor does it provide instructions with regard to the scores.

The second technique goes beyond the first in that the criteria are assigned weights based on their
importance. These scores are then multiplied by their respective weights and added to yield a total
score for the new product idea.

Screening is usually done in stages. Simple methods may be used in the early stages with more
detailed screening undertaken as the number of products is reduced and more technical, marketing and
financial information becomes available. As screening proceeds, the number of product ideas
decrease, the amount of information increases, the number of screening factors increase and the
accuracy improves.

A possible screening sequence could be:

(25 ideas)
Pass/fail screening using aim and constraints

(10 ideas)
Checklist screening using market suitability and technical possibility

(2 ideas)

Economic evaluation using predicted market size, prices and production costs
(1 idea)
First the ideas are studied to see if they are compatible with the aim, constraints and any other crucial
factors in a sequential, pass/fail screening in which the product idea is considered against each crucial
factor in sequence, and a simple pass/fail decision is made. If they fail, they are dropped from further
consideration. The remaining ideas are scored against each other on the important factors in a
checklist screening, the scores added to give a total score and the lowest scoring ideas are dropped.

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The scales used can be 0 - 5 or 0 - 10 depending on the accuracy of the knowledge used.

Probability screening is also used; instead of giving a single score on a factor for the product idea, the
probabilities of achieving the different scores on the scale are predicted.

At this point, detailed information on prices, production and distribution costs, market potentials and
investment costs are collected and an economic evaluation made to select the product which has the
predicted highest sales revenue, profit, rate of return on investment or some other financial criterion.
This economic evaluation is repeated at different stages of the project, together with a check on all the
factors used in earlier screenings. Minor factors are included on a checklist at the end of the product
idea screening to see that they are being met in the final product concept. The packaging and the
promotion can be screened on these factors as well as the products.

The advantages of a systematic screening approach are that it provides:

uniform method of product idea evaluation;
point of reference throughout the project;
systematic approach;
focus on business strategy and top management decisions

Example:
Screening of bakery products in Malaysia

A bakery company was investigating the Malaysian market for Western style baked products.

From pass/fail screening, seven product ideas remained which fell into four categories - cakes, buns,
pies, pizza. There are two main ethnic groups in Malaysia, Malay and Chinese, so it was decided to
find out which product categories and which individual products were preferred by each ethnic group.
The consumers ranked the product categories from 1, the most preferred, to 4, the least preferred, and
they also selected the product in each product category which they preferred. Seven Malay women
and thirteen Chinese women were in the panel.

Rank mean score

Malay Chinese Total
Cakes 2.1 3.0 5.1
Buns 2.6 3.2 5.8
Pies 2.9 1.3 4.2
Pizza 2.4 2.5 4.9

Number preferring product

Malay Chinese Total
Cakes Carrot cake 2 4 6
Spice cake 5 9 14

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Buns Hot cross bun 2 3 5
Cheese bun 5 10 15
Pies Macaroni and meat 4 6 10
Vegetable,
3 5 8
mushroom
Vegetarian - 2 2

There was a clear-cut preference by the Chinese for pies, but not for the Malays. There were no strong
preferences by the Malays between the different varieties of baked goods and only one more woman
preferred macaroni and meat pies over the other pies. The preference of the Chinese for macaroni and
meat pie plus the high scores for this product in the technical screening were the reasons why the
macaroni and meat pie went forward for further evaluation.

People Involved in Idea Screening:

Variety of people are involved in screening products.

The initial screening is carried out by company staff with a simple pass/fail on the aim, constraints
and other crucial factors. This may be done by one person but it is preferable to have representatives
from different areas of the company.

Once product descriptions are written it is important to involve the consumer, or in industrial and food
service marketing the customer. This usually involves focus groups initially, but as the number of
products is reduced, consumer or market surveys on three to five products are carried out to give
quantitative data on the acceptance and the predicted market potential.

Company personnel are also involved - again in groups or by a survey. It is often useful to have
individual people from different areas of the company to score the product ideas on several factors,
and then bring them together. This highlights any problems which could occur in further
development. Checklist or probability techniques can be used.

The final screening is of course done by top management at the end of the first stage based on
feasibility studies of the final product concept.

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CONCEPT DEVELOPMENT:

The development from the simple product idea to the product design specifications and
finally the product specifications is a continually evolving process through the initial stage of
the product development process to the end of the product design stage. It is a creative but
focussed process. There is creativity in developing the ideas for the type of product and then
for the detail of the product, but this is tempered by the aim and constraints of the project. It
is important that the creativity does not lead to a product that is outside the business strategy.

The product concept develops from the first description of the product idea to the final
product specifications controlling production and to the product proposition that the
marketers present to either the retailers or the industrial customers. Sometimes there is a
confusing use of the term product concept, but this is reduced if different names are given to
the various stages of the product concept development: product idea concept, product
concept, product design specifications, product specifications, product proposition as shown
in Figure.

Figure: Evolution of the product description in the PD Process

DESCRIPTION MOST IMPORTANT COMPANY PARTICIPANTS

Product idea name Company PD group, consumer research group

Product idea description Company PD group

Product idea concept Consumer research group

Consumer research group, marketing, technical, company

Product concept
PD group

Product design Technical, marketing, consumer research group, company

specifications PD group

Product specifications Technical, company PD group

Product proposition Marketing, consumer research group

The activities and product outcomes in the development of the product concept and product
design specifications are shown in Figure.

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Figure: Activities in developing the product concept and product design specifications

MARKETING CONSUMER TECHNICAL

PRODUCT IDEAS
Product ideas descriptions development
Consumer product ideas Product characteristics
screening identification

PRODUCT IDEAS DESCRIPTIONS

Product idea concept development
Desk market search Consumer concept development Internal technical search

PRODUCT IDEA CONCEPTS

Product concept building and evaluation
Market survey Consumer screening Literature searching
Competitive products Consumer survey 'Mock-up' prototypes

PRODUCT CONCEPT
Product concept engineering
Pricing, distribution, Consumer groups: Processing information
promotion, information product profile Product qualities

PRODUCT DESIGN SPECIFICATIONS

The 'product concept' is not one definition made at the beginning of the product development
project but it changes and develops as the project progresses.

It starts as a consumer-based product concept, which gradually develops into a working brief
for the project, and then develops further as detailed consumer descriptions of product
characteristics based on examination of the prototype products, to the final product concept
related to the consumer and the marketplace which is used for the design.

The product concept at any stage acts as a guide to the product development. The basis for
the operational activities in the product launch is set at this stage; if this stage is vague and
non-technical it causes trouble in the product commercialisation. The product concept along
with the aims, objectives and constraints of the project ensures that the project does not go off
on a tangent.

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Product Idea Concept Development:

The product idea concept is first developed from market and consumer research but with
consideration of the technical aspects of the product. Usually, it is a combination of internal
company information searching combined with consumer or, in industrial marketing,
customer discussion groups. In industrial product development, it has been shown that
selecting the most innovative customers for product concept development reduces the time
and improves the product concepts. The product idea concept research leads to a more
detailed description of the product ideas and also includes screening of the ideas.

The consumer discussion panel, or as it is usually called the consumer focus group, is
invaluable for building up the product concept. About 30-60 consumers can take part in small
discussion groups of 6-8 people. They are given simple descriptions of the product ideas and
are allowed free rein in their discussions. The consumers discuss their own attitudes and
behaviour towards the products and identify their needs and wants in the product.
The product idea concept developed after the discussions details the 'benefits' that the
consumers want from the product. These 'benefits' can be divided into four types - basic
product benefits, package benefits, use benefits, psychological benefits:

Basic product benefits include physical characteristics such as size, shape, colour and
safety features.

Package benefits include price, value for money, and ease of storage, use and disposal.

Use benefits include convenience in buying and carrying, information on use.

Psychological benefits include prestige, fun and friendliness, aesthetics, healthiness.

When writing product idea concepts for use in further consumer panels or consumer
surveys to build up the product concept, there are five things to remember

Be brief. Present a picture of the product, with no technical details.

Use simple, everyday language. Use attractive, interesting and lively descriptions to
keep the consumer interested

Start with the product category. Pinpoint the kind of product with the first few words
of the description.

Give a true picture of the product. State and do not exaggerate the product qualities.
The idea product concept should be both believable and realistic.

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 Describe the product's reason. Describe the uses and values of the product. Answer
the consumer's question 'What is in it for me?' Show it has a useful and needed
advantage over existing products.

Product Concept Evaluation:

In product concept evaluation, several product concepts are evaluated and screened to find
the most suitable product concept.

The product concepts can be evaluated by consumers to see which they identify as winners
and losers, and also by the company personnel to see which can be processed and marketed,
and which has the highest predicted sales potential and profit or/and market share.

Initial predictions of costs, prices and sales have a wide range at this stage but do give some
indication of possible profits. Market share for a new product in an established market can be
predicted from the market shares of the competing products in the present market, but
obviously an innovative product in a new market is hard to predict. As predictions are
inaccurate; pessimistic, most likely and optimistic predictions are made.

Product Concept Engineering:

In most industries, design specifications are usually set before the design process starts.
Product design is not an easy task if the information that the designer is given are a set of
constraints and a few ideas (often vague and definitely not quantitative) from consumers or
the marketers.

Before embarking on the design of a new product or the modification of a product, it is

important that clear concise product design specifications are set so that a specific product
can be developed.

Product concept engineering is the interpretation of consumer needs and wants into technical
terms.

Product design specifications in industries call the quantitative descriptions metrics, and
product target values are set for each metric. It is often useful to define the marginally
acceptable target values for consumer satisfaction, so that the design parameters are not too
tight but are set within a defined range. Metrics also aid comparison with competing
products.

The product quality standards (metrics) are written out clearly, showing the optimum level
for each product characteristic and the limits of divergence from this that the consumers will
tolerate. Sometimes the consumer will accept quite wide variations in the product quality and
still rate the product as acceptable. The product quality standards must of course agree with
any legal regulations that apply and with defined company policy.

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Product Concept Testing:

Concept testing (to be distinguished from pre-test markets and test markets which may be
used at a later stage of product development research) is the process of using surveys (and
sometimes qualitative methods) to evaluate consumer acceptance of a new product idea prior
to the introduction of a product to the market. It is important not to confuse concept testing
with advertising testing, brand testing and packaging testing; as is sometimes done. Concept
testing focuses on the basic product idea, without the embellishments and puffery inherent in
advertising.
It is important that the instruments (questionnaires) to test the product have a high quality
themselves. Otherwise, results from data gathered surveys may be biased by measurement
error. That makes the design of the testing procedure more complex. Empirical tests provide
insight into the quality of the questionnaire. This can be done by:
 Conducting cognitive interviewing. By asking a faction of potential-respondents about
their interpretation of the questions and use of the questionnaire, a researcher can
verify the viability of the cognitive interviewing.
 Carrying out a small pre-test of the questionnaire, using a small subset of target
respondents. Results can inform a researcher of errors such as missing questions, or
logical and procedural errors.
 Estimating the measurement quality of the questions. This can be done for instance
using test-retest, quasi-simplex, or mutlitrait-multimethod models.
 Predicting the measurement quality of the question. This can be done using the
software Survey Quality Predictor (SQP).

Concept testing in the new product development (NPD) process is the concept generation
stage. The concept generation stage of concept testing can take on many forms. Sometimes
concepts are generated incidentally, as the result of technological advances. At other times
concept generation is deliberate: examples include brain-storming sessions, problem
detection surveys and qualitative research. While qualitative research can provide insights
into the range of reactions consumers may have, it cannot provide an indication of the likely
success of the new concept; this is better left to quantitative concept-test surveys.

In the early stages of concept testing, a large field of alternative concepts might exist,
requiring concept-screening surveys. Concept-screening surveys provide a quick means to
narrow the field of options; however they provide little depth of insight and cannot be
compared to a normative database due to interactions between concepts. For greater insight
and to reach decisions on whether or not pursue further product development, monadic
concept-testing surveys must be conducted.

Frequently concept testing surveys are described as either monadic, sequential monadic or
comparative. The terms mainly refer to how the concepts are displayed:
1. Monadic. The concept is evaluated in isolation.
2. Sequential monadic. Multiple concepts are evaluated in sequence (often
randomized order).

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 3. Comparative. Concepts are shown next to each other.
4. Proto-monadic. Concepts are first shown in sequence, and then next to each other.

"Monadic testing is the recommended method for most concept testing. Interaction effects
and biases are avoided. Results from one test can be compared to results from previous
monadic tests. A normative database can be constructed." However, each has its specific uses
and it depends on the research objectives. The decision as to which method to use is best left
to experience research professionals to decide, as there are numerous implications in terms of
how the results are interpreted.

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BUSSINESS STRATEGY DEVELOPMENT:

The testing results help the business in coming up with the final concept to be developed into
a product.
Now that the business has a finalized concept, it’s time for it to analyse and decide
the marketing, branding, and other business strategies that will be used. Estimated product
profitability, marketing mix, and other product strategies are decided for the product.

Other important analytics includes

 Competition of the product
 Costs involved
 Pricing strategies
 Breakeven point, etc.

Business Analysis:

After the initial screening stage, the number of viable proposals available to progress to the
next stage will have decreased significantly. However, before the company begins the
development of prototypes, there is one more evaluation process that must take place, and
this is the business analysis stage. In this stage, additional information is gathered on the
remaining innovations in order to decide whether the significant costs that development will
require are justified.

The business analysis is the detailed investigation stage that clearly defines the product and
verifies the attractiveness of the project prior to heavy spending. According to Cooper’s New
Prod studies of new product, it was shown that weakness in the upfront activities seriously
compromises the project performance. Inadequate market analysis and a lack of market
research, moving directly from an idea into a full-fledged development effort, and failure to
spend time and money on the up-front steps, are familiar themes in product failures. The
quality of execution of the predevelopment steps is closely tied to the product’s financial
performance (Cooper, 1980).
In every successive stage of the NPD process, as estimates become more refined and
accurate, companies should continue conducting financial evaluation throughout the NPD
process, but at this stage it is critical. A review of a costs, potential sales and profit
projections of the new product are undertaken in order to determine whether these factors
satisfy the company’s objectives or not. If a result
from this stage shows that the product meets the objectives, then the new product concept can
move to the development stage. According to Griffin (1997) among the firms taking part in
study, 75.6% developed formal financial objectives against which performance was
measured. The final component of the business analysis stage is the action plan. A detailed
plan of action is created for the next stage and tentative plans are developed for all
subsequent stages. This critical stage opens the door to a significant commitment of resources
and to a full-fledged development program based on financial analysis

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The primary focus of the business analysis stage is to determine whether the product idea will
ultimately be profitable or not. However, while this is the primary consideration, it is not
the only consideration. Social and environmental issues are frequently considered as well,
particularly if there are certain regulations that the company must adhere to in these realms.
The first step in the business analysis process is to examine the projected demand for the
product. While the major source of revenue would be product sales, another possible
significant source of revenue is the licensing of the technology generated as a byproduct of
the given product. Clearly this is not applicable to all products, but for certain classes of
products, this can be a very significant source of income.
A complete cost appraisal is also necessary as part of the business analysis. As you can
expect, it is difficult to anticipate all the costs that will be involved in product development.
However, the following cost items are typical:
 Expected development cost, including both technical and marketing R&D
 Expected set-up costs (production, equipment, distribution)
 Operating costs that account for possible economies of scale and learning curves
 Marketing costs, especially promotion and distribution
 Management cost
Based on these costs, the business analysis stage will estimate the likely selling price. This
figure will also depend on the level of competition, as well as customer feedback. Sales
volumes must also be estimated based on the size of the market (using, for instance, the
Fourt-Woodlock equation). Ultimately, profitability and the estimated break-even point can
be derived. Customers base buying decisions on a personal value equation where the value is
calculated by weighing the cost versus the benefits. This relates to the viability and feasibility
of products that companies are considering adding to their line.

Marketing Strategy:

Effective marketing starts with a considered, well-informed marketing strategy. A good

marketing strategy helps in defining vision, mission and business goals, and outlines the steps
which are needed to take to achieve these goals.
Marketing strategy affects the way entire business runs, so it should be planned and
developed in consultation with working team. It is a wide-reaching and comprehensive
strategic planning tool that:
 Describes the products and services
 Explains the position and role of the products and services in the market
 Profile of the customers and product’s competition
 Identifies the marketing tactics will be used
 Allows building a marketing plan and measuring its effectiveness.
A marketing strategy sets the overall direction and goals for marketing, and is therefore
different from a marketing plan, which outlines the specific actions you will take to
implement marketing strategy. Marketing strategy could be developed for the next few years,
while marketing plan usually describes tactics to be achieved in the current year.

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Write a successful marketing strategy:

Well-developed marketing strategy will help in realising business's goals and build a strong
reputation for the products. A good marketing strategy helps in targeting products and
services to the people most likely to buy them. It usually involves creating one or two
powerful ideas to raise awareness and sell the products.
Developing a marketing strategy that includes the components listed below will help make
the most of the marketing investment, keep marketing focused, and measure and improve
sales results.

Identify Business Goals:

To develop marketing strategy, identify overarching business goals, so that set of marketing
goals can be defined to support them. Business goals might include:
 Increasing awareness of the products and services
 Selling more products from a certain supplier
 Reaching a new customer segment.

When setting goals it's critical to be as targeted as possible so that outcomes can be
effectively measure against what the targets are set out to achieve. A simple criterion for
goal-setting is the SMART method:
 Specific - state clearly what you want to achieve
 Measurable - set tangible measures so you can measure your results
 Achievable - set objectives that are within your capacity and budget
 Relevant - set objectives that will help you improve particular aspects of your
business
 Time-bound - set objectives you can achieve within the time you need them.

State Marketing Goals:

Define a set of specific marketing goals based on the business goals listed above. These goals
will motivate and help in benchmarking success.
Examples of marketing goals include increased market penetration (selling more existing
products to existing customers) or market development (selling existing products to new
target markets). These marketing goals could be long-term and might take a few years to
successfully achieve. However, they should be clear and measurable and have time frames
for achievement.
Make sure that overall strategies are also practical and measurable. A good marketing
strategy will not be changed every year, but revised when strategies have been achieved or
marketing goals have been met. Also, you may need to amend your strategy if your external
market changes due to a new competitor or new technology, or if your products substantially
change.

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Research Market:

Research is an essential part of marketing strategy. One needs to gather information about
market, such as its size, growth, social trends and demographics (population statistics such as
age, gender and family type). It is important to keep an eye on the market so you are aware of
any changes over time, so your strategy remains relevant and targeted.

Profile Potential Customers:

Use market research to develop a profile of the customers you are targeting and identify their
needs.
The profile will reveal their buying patterns, including how they buy, where they buy and
what they buy. Again, regularly review trends so you don't miss out on new opportunities or
become irrelevant with marketing message.
While you try to find new customers, make sure your marketing strategy also allows you to
maintain relationships with your existing customers.

Profile Competitors:

Similarly, as part of your marketing strategy you should develop a profile of your
competitors by identifying their products, supply chains, pricing and marketing tactics.
Use this to identify your competitive advantage - what sets your business apart from your
competitors. You may also want to identify the strengths and weaknesses of your own
internal processes to help improve your performance compared with your competition.

Develop Strategies To Support Marketing Goals:

List your target markets and devise a set of strategies to attract and retain them. An example
goal could be to increase young people's awareness of your products. Your corresponding
strategies could be to increase your online social media presence by posting regular updates
about your product on Twitter and Facebook; advertising in local magazines targeted to
young people; and offering discounts for students.
Use the '7 Ps of marketing'

Identify your tactical marketing mix using the 7 Ps of marketing. If you can choose the right
combination of marketing across product, price, promotion, place, people, process and
physical evidence, your marketing strategy is more likely to be a success.
7P’s of Marketing:

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 Product - The Product should fit the task consumers want it for, it should work and it
should be what the consumers are expecting to get.

 Place – The product should be available from where your target consumer finds it
easiest to shop. This may be High Street, Mail Order or the more current option via e-
commerce or an online shop.

 Price – The Product should always be seen as representing good value for money.
This does not necessarily mean it should be the cheapest available; one of the main
tenets of the marketing concept is that customers are usually happy to pay a little
more for something that works really well for them.

 Promotion – Advertising, PR, Sales Promotion, Personal Selling and, in more recent
times, Social Media are all key communication tools for an organisation. These tools
should be used to put across the organisation’s message to the correct audiences in
the manner they would most like to hear, whether it be informative or appealing to
their emotions.

 People – All companies are reliant on the people who run them from front line Sales
staff to the Managing Director. Having the right people is essential because they are
as much a part of your business offering as the products/services you are offering.

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  Processes –The delivery of your service is usually done with the customer present so
how the service is delivered is once again part of what the consumer is paying for.

 Physical Evidence – Almost all services include some physical elements even if the
bulk of what the consumer is paying for is intangible. For example a hair salon would
provide their client with a completed hairdo and an insurance company would give
their customers some form of printed material. Even if the material is not physically
printed (in the case of PDFs) they are still receiving a “physical product” by this
definition.

Test Ideas:

In deciding your tactics, do some online research, test some ideas and approaches on your
customers and your staff, and review what works. You will need to choose a number of
tactics in order to meet your customers' needs, reach the customers within your target market
and improve your sales results.

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PRODUCT DEVELOPMENT:

Development involves setting product specifications as well as testing the product with
intended customer groups to gauge their reaction. Once a potential product has passed the
screening and business analysis stages, it goes onto the technical and marketing development
stage. This stage includes identifying the target market and the decision maker in the
purchasing process, determining what features must be incorporated into the product and the
most cost-effective way to produce it, and establishing what the actual cost of production will
be.

In this stage the goal is to evaluate the designed and engineered concepts so that any launch is
likely to succeed. Having taken considerable input from potential customers in terms of
desirable features via techniques such as conjoint analysis, and having conducted required
analyses to determine engineering specs with techniques such as House of Quality and
Design for Manufacturing and Assembly, in this last phase several prototypes (perhaps
virtual) are developed and tested. Recently, Rapid Prototyping Methods have been developed.
In essence, these techniques automatically generate multiple technical solutions on a product
concept theme.

Prototype:

A prototype is an early sample, model, or release of a product built to test a concept or

process or to act as a thing to be replicated or learned from. It is a term used in a variety of
contexts, including semantics, design, electronics, and software programming. A prototype is
generally used to evaluate a new design to enhance precision by system analysts and
users. Prototyping serves to provide specifications for a real, working system rather than a
theoretical one. In some design workflow models, creating a prototype (a process sometimes
called materialization) is the step between the formalization and the evaluation of an idea.

Basic prototype categories:

Prototypes explore different aspects of an intended design:

 A Proof-of-Principle Prototype serves to verify some key functional aspects of the
intended design, but usually does not have all the functionality of the final product.

 A Working Prototype represents all or nearly all of the functionality of the final
product.

 A Visual Prototype represents the size and appearance, but not the functionality, of
the intended design. A Form Study Prototype is a preliminary type of visual
prototype in which the geometric features of a design are emphasized, with less
concern for color, texture, or other aspects of the final appearance.

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  A User Experience Prototype represents enough of the appearance and function of
the product that it can be used for user research.

 A Functional Prototype captures both function and appearance of the intended

design, though it may be created with different techniques and even different scale
from final design.

 A Paper Prototype is a printed or hand-drawn representation of the user interface of

a software product. Such prototypes are commonly used for early testing of a software
design, and can be part of a software walkthrough to confirm design decisions before
more costly levels of design effort are expended.

Differences in creating a prototype vs. a final product

In general, the creation of prototypes will differ from creation of the final product in some
fundamental ways:
 Material: The materials that will be used in a final product may be expensive or
difficult to fabricate, so prototypes may be made from different materials than the
final product. In some cases, the final production materials may still be undergoing
development themselves and not yet available for use in a prototype.

 Process: Mass-production processes are often unsuitable for making a small number
of parts, so prototypes may be made using different fabrication processes than the
final product. For example, a final product that will be made by plastic injection
molding will require expensive custom tooling, so a prototype for this product may be
fabricated by machining or stereolithography instead. Differences in fabrication
process may lead to differences in the appearance of the prototype as compared to the
final product.

 Verification: The final product may be subject to a number of quality assurance tests
to verify conformance with drawings or specifications. These tests may involve
custom inspection fixtures, statistical sampling methods, and other techniques
appropriate for ongoing production of a large quantity of the final product. Prototypes
are generally made with much closer individual inspection and the assumption that
some adjustment or rework will be part of the fabrication process. Prototypes may
also be exempted from some requirements that will apply to the final product.

Engineers and prototype specialists attempt to minimize the impact of these differences on
the intended role for the prototype. For example, if a visual prototype is not able to use the
same materials as the final product, they will attempt to substitute materials with properties
that closely simulate the intended final materials.

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Characteristics And Limitations of Prototypes:

Engineers and prototyping specialists seek to understand the limitations of prototypes to

exactly simulate the characteristics of their intended design.
It is important to realize that by their very definition, prototypes will represent some
compromise from the final production design. Due to differences in materials, processes and
design fidelity, it is possible that a prototype may fail to perform acceptably whereas the
production design may have been sound. A counter-intuitive idea is that prototypes may
actually perform acceptably whereas the production design may be flawed since prototyping
materials and processes may occasionally outperform their production counterparts.
In general, it can be expected that individual prototype costs will be substantially greater than
the final production costs due to inefficiencies in materials and processes. Prototypes are also
used to revise the design for the purposes of reducing costs through optimization and
refinement.
It is possible to use prototype testing to reduce the risk that a design may not perform as
intended, however prototypes generally cannot eliminate all risk. There are pragmatic and
practical limitations to the ability of a prototype to match the intended final performance of
the product and some allowances and engineering judgement are often required before
moving forward with a production design.
Building the full design is often expensive and can be time-consuming, especially when
repeated several times—building the full design, figuring out what the problems are and how
to solve them, then building another full design. As an alternative, rapid prototyping or rapid
application development techniques are used for the initial prototypes, which implement part,
but not all, of the complete design. This allows designers and manufacturers to rapidly and
inexpensively test the parts of the design that are most likely to have problems, solve those
problems, and then build the full design.

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TEST MARKETING:

It is a product development stage where the product and its marketing plan are exposed to a
carefully chosen sample of the population for deciding if to reject it before its full scale
launch. Test marketing is an experiment conducted in a field laboratory (the test market)
comprising of actual stores and real-life buying situations, without the buyers knowing they
are participating in an evaluation exercise. It simulates the eventual market-mix to ascertain
consumer reaction. Depending on the quality and quantity of sales data required for the final
decision, test marketing may last from few weeks to several months.
Due to its high cost, however, test marketing is more suitable for fast moving packaged goods
than for consumer durables.

Marketing’s role in this phase is to simultaneously test multiple designs with customers. After
such parallel concept testing is conducted the “freezing” of the design can be considered.
However, at this stage very “realistic” testing is required. The NPD team needs to simulate
product acceptance in a marketplace where sales are affected by marketing variables such as
advertising, word-of-mouth, and sales force presentations. Furthermore, really new products
often stretch technology and customer comprehension of its benefits. For example, prior to
the development of the personal computer, word processing was done by professionals rather
than by virtually everyone, spread sheet analysis was limited to a few financial professionals,
and personal finance was done with the cheque book rather than programs like Quicken.
There was little demand for web browsers before the Internet became widely available and
little demand for home networking before broadband capabilities were ubiquitous. Thus, in
testing really new products and concepts it is often necessary to place potential customers in
new information states with new perspectives on the world.

Market testing depends on different factors:

The investment cost and risk, time pressure and research cost
High risk and high cost product where the chance of failure is high
High risk products those who creates new product categories or have novel feature
The amount of market testing is reduced if the company is having great time pressure
because the season is just starting

Test marketing can be divided in two groups based on the type of goods,
1. Consumer goods market testing
2. Industrial goods market testing

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Consumer Goods Market Testing:

Consumer goods are goods which are used by end customer or the general public. These
goods can be bought from the shops, online etc.
This test is conducted to know the consumer behaviour in terms of:
 Trial: Whether a consumer will try a product, at least once.
 Repeat: Whether the consumer will repurchase it after the trial.
 Adoption: Whether the consumer accepts the product and will purchase it again.
 Purchase Frequency: How often the consumer will buy the product.

The market testing for these goods can be done in four ways,
Sales wave research
Simulated test marketing
Controlled test marketing
Test markets

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Sales Wave Research:

One of the methods used in consumer goods market testing. In this type of research
consumers who initially try the product at no cost are re-offered the product, or a
competitor’s product, at slightly reduced prices. They may be re-offered the product as many
as three to five times (sales waves), with the company noting how many customers selected
that product again and their reported level of satisfaction. Sales-wave research can be
implemented quickly, conducted with a fair amount of security, and carried out without final
packaging and advertising.

Sales Waves are respondent contacts that take place immediately upon the conclusion of a
Marketing Research interview or in successive waves thereafter. A Sales Wave offers to the
respondent the product or service that was the subject of the initial interview. The product or
service is made directly available to the respondent at the regular or expected retail price and
then is delivered to the respondent after money is exchanged via cash or the setting up of an
account in the respondent's name. Almost always, at the conclusion of the Sales Wave
portion of a study, all monies are returned to the respondent or the account is never collected
upon. The purpose of Sales Waves is to gauge actual purchase intent and, ultimately, likely
sales volume. Data gathered from Sales Waves are considered more reliable than data
gathered from hypothetical purchase intent questions because the respondent is making an
actual commitment with his or her own dollars. It is a discrete choice test where respondents
can receive the product of service of their choice or, perhaps, no product or service at all. In
this scenario it is essential that respondents have the mind-set that they are paying real dollars
for whatever they order. Sales Waves are considered by some manufacturers and service
providers to be required in Marketing Research projects that involve new food products,
breakthrough products or services, or line extensions. Because the intent is to generate
information and not sales, Sales Waves are considered legitimate Market Research. The
controversy arises over respondent perceptions of sales vs. research: can respondents make
this subtle but important distinction? There seem to be contradictions in the standard
Marketing Research practice of utilizing Sales Waves. We make promises to respondents that
we will not sell them anything and then we offer a product or service for sale at the end of the
interview (or some time thereafter). Marketing Researchers have worked diligently to
differentiate between selling and researching; "sugging", or Selling under the Guise of
Research, is considered a violation of research ethics. However, there is a clear distinction in
the motivation or underlying reason for sales vs. Sales Waves: sales are employed to generate
profits; Sales Waves are employed to generate data and information. Measuring expected
sales or sales volume is a legitimate Marketing Research outcome. With recent concerns over
respondent cooperation and privacy, Sales Waves are not used as often as they once were.
However, they continue to be used in our industry by many large manufacturers and service
providers. Ultimately, the decision as to whether to accept studies that incorporate Sales
Waves is a business decision that must be made on a case-by-case basis.

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Simulated Test Marketing:

Simulated test marketing is a form of market testing where customers are exposed to a
simulated market situation to gauge the consumer’s reactions to a product, service or
marketing mix variations. It is used to forecast demand and do market analysis.

It is a type of laboratory experiment that aims to imitate real life, where respondents are
selected, interviewed, and then observed making or discussing their purchases. Simulated test
markets can lead to mathematical models used to forecast factors such as awareness, trial,
sales volumes, impact on other products etc.

The testing of a product’s success done through statistics and data analysis from survey
results. This method is less expensive than a market simulation.

The area of pre-test marketing, more commonly known today as simulated test marketing
(STM) was pioneered in the 1970's by Glen Urban and Alvin Silk. Over the following
decade, the methods would be refined and commercialized into several products. The
methods were considerably cheaper and faster than traditional test markets. They have
retained their reputation for being highly accurate for making a go/no-go decision for new
consumer product launches, with several suppliers of STM techniques claiming an average
accuracy within +/-10% of the actual forecast up to 90% of the time.

Over the past 20 years, the practice, major players, and methods have evolved. Today, the
industry is highly consolidated. Most of the STM techniques are similar with validation rates
that are highly effective. The major vendors are able to differentiate their services through
customized models, the experience of senior researchers, and experimentation with the latest
in research trends. Since the late 1980s, there has been sparse published academic research on
the subject. This paper attempts to provide an update on the state of-the-art for STM.

The significant vendors in the global STM market are briefly discussed as to what services
they offer and the industries that they support. The STM models fall into two different
categories: purchase intent, generally gauged on a five-point scale, and preference share,
where trial is measured for a new product given a competitive set. Three of the major players
in the STM market use models that were originally based on purchase intent: VNU BASES,
TNS FYI, and Research International. Ipsos and M/A/R/C use models that were originally
based on share of preference. It is important to note that over the years, all of the STM
vendors have incorporated aspects of both categories in order to hone their forecasting.

Application:

Simulated test marketing's usages go well beyond pre-launch planning and forecasting
demand. Marketers can also use this approach to improve the marketing plan post-launch.
Marketers can observe the current trajectory of a new product or service based on the data for
a month across the world. If they observe a big difference between the product forecasts

31
before the launch and post-launch forecasts of awareness, sales, and profits, they still have
the time to change the strategy and the marketing plan. This will also help in maintaining the
return on investment.
Although the number of marketers regularly using this technology to test different and
numerous versions of new products and services are increasing, we are hard pressed to find
so many that use it to formulate the marketing plan.

Advantages:

1. A month on month forecast of relevant performance measures like purchase and share can
be obtained through this tool.
2. This method provides an opportunity to work with different marketing plans and evaluate
every measure in terms of its effects on sales, profits, or both.
3. The ability to experiment with different measures from traditional and digital medium is
very useful for budget allocation.

Controlled Test Marketing:

One of the methods of consumer goods market testing in which a research firm on behalf of
the test marketing company manages a panel of stores that will carry new products for a fee.
The company with the new product specifies the number of stores and geographic locations it
wants to test. The research firm delivers the new product to the participating stores and
control shelf positions, and point-of-purchase promotions, and pricing. Sales results can be
measured through electronic scanners at the checkout points. The company can also evaluate
the impact of local advertising and promotions during the test.

Test Markets:

It is a product development stage where the product and its marketing plan are exposed to a
carefully chosen sample of the population for deciding if to reject it before its full scale
launch. Test marketing is an experiment conducted in a field laboratory (the test market)
comprising of actual stores and real-life buying situations, without the buyers knowing they
are participating in an evaluation exercise. It simulates the eventual market-mix to ascertain
consumer reaction. Depending on the quality and quantity of sales data required for the final
decision, test marketing may last from few weeks to several months.

The relevance of test marketing to an industry depends essentially on the type of

manufacturing process involved. The confectionery industry, for example, can frequently
produce sufficient quantities of the new product for test market purposes by minor
modifications to existing plants and layouts whereas, in the event of a national launch, an
entirely new plant may have to be built, which would necessitate a much heavier investment.

Test markets will obviously be inappropriate in industries where the technology requires the
same sort of investment for the production of one unit as for a thousand, as in the case of

32
airplanes and cars. No doubt, the British and French governments, for example, and certainly
the British and French taxpayers, would have been more enthusiastic about the national
commitment to Concorde had they been in a position to test market the prototype in advance.
Consequently, in deciding whether test marketing is a relevant aspect of marketing strategy,
the scale of risk and investment implied by the marketing decision must be evaluated. The
most visible side of the risk tends to be the cost of plant and machinery that are needed for
the new product’s manufacture.

But new products also involve other substantial costs: the advertising expenditure; the
amount of sales force time occupied by selling the new product; the goodwill and reputation
of the company at the wholesale and retail level; the store shelf space required by the new
product; and the production and rework problems that always accompany any new line start-
up. If test markets enable large parts of these important costs to be deferred until a reliable
estimate of national sales can be made, based on actual experience of the product in the
marketplace, then test marketing is desirable.

To Test or Not to Test?

Test marketing offers the marketing company two important benefits. First, it provides an
opportunity to test a product under typical market conditions in order to obtain a measure of
its sales performance. As well as enabling top management to make an accurate prediction of
its potential national turnover, this information often forms the basis of the decision whether
to extend the product nationally. So the importance of its accuracy is self-evident.

Second, it provides an opportunity, while the product is on limited sale, for management to
identify and correct any weaknesses in either the product or its marketing plan before making
the commitment to a national sales launch, by which time it will normally be too late—and
certainly very expensive—to incorporate product modifications and improvements.

Decision factors:

Despite these benefits, however, the decision to test market should never be routine. It is a
costly, laborious method of collecting information about reactions to new products, and
therefore a test market should be used only as a last resort. The more profitable route to
follow with a new product—provided the risk is acceptable and the research sufficiently
reassuring—is to launch nationally and avoid the costs and delays of a test market. Test
marketing enables the company to minimize losses but not to maximize profits.

There are four major factors that should be considered in determining the efficacy of test
marketing:

1. It is necessary to weigh the cost and risk of product failure against the profit and
probability of success. For example, at Cadbury Typhoo Limited, though we have test
marketed 24 products during the past three years, during this period we have also

33
successfully launched 4 products nationally, but without utilization of a test market phase. In
each case of launching nationally, I should stress that the costs and risks of product failure
were low.

2. The difference in the scale of investment involved in the test versus national launch route
has an important bearing on deciding whether to test. Of the products we have launched
directly into national market, very little difference in manufacturing investment was called
for whether we opted for a test or national launch. On the one hand, where plant investment
for a national launch is considerable, but only slight for a test market, the investment risk
favours the test launch approach.
On the other hand, by restricting a product to the test market area during the considerable
period required for performance to be predicted accurately, there may be a high opportunity
cost. This opportunity cost may amount to the foregone turnover and profit of one year’s
national sales, depending on how long the product is kept in test.

3. Another factor to be considered is the likelihood and speed with which the competition will
be able to copy your product and preempt part of your national market or overseas markets,
should the test be successful. Competitors will be monitoring your test market, and where
they have the technology, they will be developing their own versions of your product—and
marketing it if you leave the opportunity open for them to do so. Within two years of the start
of Cadbury’s successful test market of a children’s chocolate line (Curly Wurly) in the United
Kingdom, we have seen identical competitive versions of the product appear on Canadian,
Japanese, West German, and U.S. markets.

4. Apart from the investment in plant and machinery that may be involved, every new
product launch is accompanied by a substantial marketing investment that varies with the
scale of the launch. New product launches call for heavy advertising and promotional
expenditure; they require sales force time, attention, and effort; and they need shelf space in
wholesale and retail outlets, which is sometimes obtained only at the expense of the space
already given to the company’s existing products.

Moreover, if a new product fails, the costs of rebating and reclaiming unwanted stocks from
customers have to be faced, along with those costs of writing off unwanted and unusable
materials and packaging. Top management should also take into account the possible damage
that a new product’s failure can inflict on the company: its reputation in the eyes of
consumers and customers may be blemished, which is a real if not quantifiable danger.

The foregoing marketing costs—or risks—are reduced by limiting the new product launch to
a test market. The cost of concentrating sales force priorities on an unsuccessful new product,
and of allowing profitable existing products to lose some share of market as a result, can be
greater than the more visible cost of a piece of unwanted machinery.

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Industrial Goods:

Industrial goods are made up of machinery, manufacturing plants and materials, and any
other good or component used by other industries or firms. Industrial goods are the one used
in the production of other goods.

These are based on the demand for the consumer goods they help to produce. Industrial goods
are classified as either production goods or support goods. Production goods are used in the
production of a final consumer good or product, while support goods help in the production
process of consumer goods, such as machinery and equipment.

Alpha Testing:

This is a form of internal acceptance testing performed mainly by the in-house QA and testing teams.
Alpha testing is the last testing done by the test teams at the development site after the acceptance
testing and before releasing the product for beta test.

Alpha testing can also be done by the potential users or customers of the application. But still, this is a
form of in-house acceptance testing.

Alpha Testing is a Pre-release activity and one of the types of Acceptance Testing. Here,
testing activity is carried out in a much-controlled manner and it is not accessible by the end-
users/market.

A newly developed product or updated product undergoes Alpha testing in the Testing
environment (which is formally called Developer’s site). Testing is carried out to simulate
real-time behaviour to match the usage of the product by the end-users in the market.

Alpha Testing is actually a methodology to assess the quality and stability of a product under
test in the testing environment.

This phase mainly focuses on:

 Uncover major issues
 Usability Issues
 Feature gaps
 Compatibility/Inter-operability Issues

Feedback from the team which involved in Alpha Test is gathered to evaluate the Product’s
quality and stability, and any suggestions to improve the product are considered.
And the main question that arises in Alpha Testing is “Does the Product Work?”
This testing is always necessary for the products that are planned to undergo Beta Testing
(most of the times, the Alpha test is omitted and directly the phase skips to Beta Testing,
which is not mostly recommended).

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The reasons behind conducting this test are:

 Bugs directly coming from the later phases (Beta Testing phase/after Production
launch) leave a bad remark on the product and the reputation is lost on the
organization that developed the product. Also, these bugs cause delays in Production
launch, more effort (both time and resource) is required in fixing them.

 Encourage different sectors within the organization (sales, management, etc) to use
the product and experience it. They are also encouraged to provide feedback,
suggestions to improve the product which actually helps to increase the quality of the
product.

 As this phase will capture the upcoming concerns that end-users have, we can build a
strong Support system for the product right after the Production Launch.

 Feature Gaps can be covered or planned for the subsequent releases.

Stakeholders and Participants:

Stakeholders of Alpha Testing phase will usually be the Engineers (in-house developers),
Quality Assurance Team, and the Product Management Team.

Participants in this testing will be testers (usually):

 Subject Matter Expertise in the area of domain.
 One who knows the Product well.
 From different related technical environments (Technical experts)

Sometimes, customers or identified end-users may participate in testing the Alpha version of
the product.

Beta Testing:

Beta Testing is the test of a product by actual users in real life situations. The testing can last
for an extended period and participating users may include customers, partners or other
stakeholders who will have feedback but no direct link with the company. At this point, the
product will have all the specifications of the actual launch model, and will closely resemble
it in all other aspects, ideally including packaging. Beta testing is usually conducted for three
basic reasons.

1. It is the most accurate way to understand how interested users are in the actual
product and its features. Not all features may be desirable to the consumer. In
addition, it is vital to use this information to understand whether the user will actually
be willing to purchase the product.

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 2. Once the first reason is met, the next step is to observe how the product is used and
how durable it is under normal situations of use. There may be some situations or
conditions where the product may not perform at its optimal.

3. And most importantly, the information received in this test will need to be recorded
and reviewed to identify all major or minor changes that are necessary or desirable to
further increase the worth of the product. The features that cause the most excitement
in users may also be used to design and direct the marketing and sales campaigns and
strategies.

Objectives of Beta Testing:

Product Management:

 Deliver promised user experience: Through a beta test, it is possible to ensure that all
product components such as quality, features, installation, support and delivery
perform as they should in order to provide the promised user experience.

 Achieve User Acceptance: In new products or products with new functionalities, the
beta tests helps achieve true user acceptance and ensures that the product meets the
user requirements.

 Assess Competition: By including a competing product into the beta test, the team can
often determine customer reactions to the quality, features and functionality of their
closest competition.

Quality:

 Identify Possible Issues: Beta testing allows a real world usage situation within a
wider variety of environments and situations that is not possible for an internal quality
assurance team to simulate. This means that often undetected issues can be addressed
in a timely manner.

 Evaluate Real World Performance: A product may perform excellently in a controlled

environment but fail in the real world. Through beta testing, a predictive benchmark
of actual performance can be gained.

 Retesting Solved Issues: Often, beta tests may be conducted to ensure that any issues
that were fixed remain functioning properly and that they have been fixed to the
users’ specifications and requirements.

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Usability:

 Enhance User Experience: Beta tests can be used to gather insight into actual usage
patterns for the product. Detailed feedback is gathered from users and any usability
issues encountered are noted. These can then either be redesigned or customer service
staff prepared to help users manage these issues.

 Ease New User Experience: Beta tests can help create a more seamless introduction to
a new product for a new user.

Support:

 Streamline Support Process: Once user issues are identified and addressed, these can
then feed into a strong product support system.

 Create Support Documentation: Issues that users face during the beta testing process
can be used to develop and edit customer support documentation.

Marketing:

 Mock reviews: Another part of the beta test process can be the collection of mock
reviews. By asking testers to articulate their experience in words, the team can get a
realistic picture of how the product will fare in real life online reviews.

 Testimonials and References: Since beta users are the first real customers of a
product, their testimonials can be used as references for future marketing and PR
campaigns. In some cases, they can also be used as references for new clients.

 Gain Loyal Early Adopters: If early access is provided to the right group of
enthusiastic users, they can prove invaluable to the strength of the product. Early
adopters often act as positive public relations channels for a product and encourage
others to purchase.

 Pre-Launch Awareness: In certain types of products, a beta test can help create a
positive buzz and a viral awareness among the target audience. This buzz can be
translated into high initial sales.

Benefits of Beta Testing:

By applying to achieve its objectives, beta testing can help a company achieve an accurate
measure of customer validation and a resulting higher quality product. These then lead to:
 A reduction in production costs
 An increase in sales
 A decrease in returns

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  An increased level of customer satisfaction
 An improvement in the product planning process

Steps in Beta Testing:

Beta tests can be managed through a number of processes or stages. One common factor to
any process should be attention to detail. The higher the degree of attentiveness that goes into
each step, the more likely the possibility of meeting any expectations one has from the
process. One basic 6 step process to run a beta test is:

1. Plan:

Before setting out to run a beta test, it is pertinent that the team define what they aim to
achieve at the end. A proper set of expectations and objectives can help ensure a successful
test process. Clearly defined objectives can help ensure that the test audience is relevant and
the right numbers of people are selected. It can also help determine the amount of time
needed for a thorough test phases and that everyone understands what the end goal is. It may
also be relevant to decide on deadlines or a timeline, a complete record of the products
current features and situation, and a definition of the target market selected.

2. Engage Participants:

Once a plan of action is decided and set into place, it is now time to select the right test
group. The selected candidates should be a good mix of the intended target market. They
should also not have any previous positive or negative bias towards the company or its
products. The size of the group will depend on the nature and complexity of the product, the
available time, the goals to be achieved, and the nature of the industry.

3. Distribute Product:

With the audience identified and prepared, the product to be tested is now made available to
them. The most effective user experience can be recorded when almost all details of the
product are as close to the original intended one. This means the packing and any supporting
materials should also be provided.

4. Collect Feedback:

Feedback starts coming in once the beta testers start using the product. This may be in the
form of comments, quotes, surveys, testimonials or interviews. There should be a system in
place to accurately record this information as this is the basis of re-designs, new designs, and
marketing and PR communications and may need to be revisited repeatedly.

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5. Evaluate Feedback:

The data collected till now is extremely valuable for the product and the company’s future
plans. The system in place mentioned in the last step should allow the data to be accessed and
organized. This data then needs to be reviewed critically and relevant results incorporated
into the product design and support.

6. Conclude:

With the relevant feedback recorded, analysed and utilized, it is now time to conclude the
project. The participants should be given feedback about the project and the product they
should be thanked or rewarded for their time and effort. A good reward plan may help cement
their place as product champions going forward.

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COMMERCIALIZATION:

It is the process of introducing a new product or production method into commerce—making

it available on the market. The term often connotes especially entry into the mass market (as
opposed to entry into earlier niche markets), but it also includes a move from
the laboratory into (even limited) commerce. Many technologies begin in a research and
development laboratory or in an inventor's workshop and may not be practical for
commercial use in their infancy (as prototypes). The "development" segment of the "research
and development" spectrum requires time and money as systems are engineered with a view
to making the product or method a paying commercial proposition.

In this stage, the product is launched, advertisements and promotional activity begins and
increases heavily, and the distribution pipeline is filled with the product. The actual launch of
a new product is the final stage of new product development, and the one where the most
money will have to be spent for advertising, sales promotion, and other marketing efforts.

Commercialization is often confused with sales, marketing, or business development. The

commercialization process has three key aspects:

1. The funnel. It is essential to look at many ideas to get one or two products or
businesses that can be sustained long-term.
2. Commercialization is a stage-wise process, and each stage has its own key goals and
milestones.
3. It is vital to involve key stakeholders early, including customers.

Commercialization of a product will only take place, if the following four issues are satisfied:

 Timing of launch: When facing the danger of cannibalizing the sales of the
company’s other products, if the product can be improved further, or if the economy
is down, the launch should be delayed.

 Launch location: It can be in a single location, one or several regions, a national or the
international market. This decision will be strongly influenced by the company’s
resources, in terms of capital, managerial confidence and operational capacities.
Smaller companies usually launch in attractive cities or regions, while larger
companies enter a national market at once. Global roll outs are generally only
undertaken by multinational conglomerates, since they have the necessary size and
make use of international distribution systems (e.g., Unilever, Procter & Gamble).
Other multinationals use the “lead-country” strategy: introducing the new product in
one country/region at a time.

 Target consumers: The primary target consumer group will have been identified
earlier by research and test marketing. This primary consumer group should consist of

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 innovators, early adopters, heavy users and/or opinion leaders. This will ensure
adoption by other buyers in the market place during the product growth period.

 How to launch: Prospective vendors should decide on an action plan for introducing a
proposed product - a plan shaped by addressing the questions above. The vendor has
to develop a viable marketing-mix and to structure a corresponding marketing-budget.

When a plan is in place for each of these four issues, then the commercialization process may
begin.

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INTRODUCTION / LAUNCH:

It is a process by which a new product is introduced into the market for initial sale.

Generally Product launch or introduction is mistaken as it is the end of product development

phase but in reality Product launch is not the end of the development process it’s the
beginning of the sales process.

So one can say that Product Launch is the process of introducing a product to a market in
such a way that it generates momentum.

The primary purpose of a product launch is business growth. Businesses must master the
concept and process of a product launch to enable growth through successfully introducing
new products into the market. Product launches build sales and revenue through expansion of
customer base. By introducing new products, a business can target previously untapped
customer markets. The resulting growth allows businesses to hire additional sales and support
staff.

A comprehensive new product launch strategy provides a plan for maintaining the
momentum gained during the pre-launch activities and launch event. This plan may consist of
post-launch promotional campaigns and customer incentives, as well as informational
vignettes about the history of the product’s development, challenges overcome along the way
and lessons learned. People often enjoy reading about the details of new product development
and the anecdotes can gain consumer trust and loyalty.

Consider if adding the product to the current line-up will augment brand equity or detract
from it. Brand equity is an intangible asset governed by consumer perception of the overall
company brand. Introducing products that do not align with business objectives and vision
may detract from brand equity, causing customers to back off from the brand entirely. Make
certain new products offer value in conjunction with current products or keep with the
product theme.

A poorly planned product launch may not have sales force support or adequate customer
awareness to succeed. Avoid building false excitement in consumers about a poor quality
product. This causes customers to lose trust and confidence in the business as a whole. A
failure to maintain initial momentum can result in an unrecoverable decrease in product sales
and positive brand influence.

Because the introduction stage is the first stage in the product life cycle where a company
tries to build awareness about the product or service in a market where there is less or no
competition. Once the company makes adequate publicity about the product either by
promotion or through branding, it can look at other aspects such as pricing, as well as
distribution. Pricing a product in the introduction stage is very important to gain market

43
share. A popular pricing strategy followed by most of the companies is the skimming price
strategy. In this pricing strategy, a company usually charges a very high price to customers,
who are willing to purchase a product.

Launching a new product can be an exciting time for any company. Whether it is the first
product the company has offered, or an addition to an already existing line, the enthusiasm
and buzz in the air is contagious as dreams of instant success abound. Before presenting the
product to the masses, however, there are a few things that every company needs to do to
prepare for the big reveal.

1) Evaluations must be done before the launch,

2) The proper way to plan a launch,
3) Successful execution of a product launch, and
4) Things to keep in mind post-launch.

Evaluate Before The Launch:

It is impossible to gauge exactly how the new product is going to be received – even the most
experienced and large companies have had both wild success and epic failures with new
product launches.
Hence some questions need to be asked and be sure of,
1. Whether the organization is ready for the launch?
2. Can company support the fast overnight growth?
3. If launch is successful, can company fulfil the high demand of the market?
4. Do the company have adequate staff, production lines and processes and materials to
fulfil immediate market demands?
5. Are the adequate arrangements in place to handle customer inquiries and customer
support?
If any of the above questions has an answer as no, it is better to postpone the launch.
As it can make a bad impact on the company’s image in the market which can result in the
drop in sale not only for the new product which is launched but also for the existing products
already available in the market.

So it is better to make plan and acquire enough resources to fulfil all the above requirements
and then launch the product.

Evaluate The Product Itself:

At the start of new product development generally a time plan is decided. So to complete the
task on a given deadline one should not ignore the importance of testing and its results.
The testing has to be completed thoroughly and the results must be good.
If testing is not done or the results are not as expected then it’s better to delay the launch and
relook into the product to make sure that it will pass the tests.

44
As every new product plays a very important role in making the company’s image better or
worse. If the product fails after the launch it directly affects the image of the company. And it
makes very difficult for the organization to regain the trust of the customer. In fact the further
new products of the organization then require even more marketing and advertisements which
incurs a lot of expenditure. And if the first new product is successful then company can get
the benefit in future of the mouth publicity and also it retains the existing customer.

Evaluate The Market:

This is the most important aspect to be considered before introducing the new product into
the market. One must consider following two questions
1. Whether the market supports this kind of product?
2. Does the available market have a place for the new product?

For eg. In cell phone and automobile sector huge numbers of products are available in every
segment. So one has to be sure while launching the product that it must have some USP
which can attract the customer.

Recent launch of Marrazo by Mahindra signifies the same. In MPV segment there are many
vehicles available in the market still it can accommodate the new entry for sure but only if it
has something different. This Vehicle Marrazo has space and low in price than the rival
Innova. To keep the price in check the engine was developed which is much smaller than the
Innova. But it generates good amount of power and mileage which is a demand of the
customer.

Plan For Launch:

Once the evaluation is done and everything is in favour of launch. Then the planning for the
actual launch must be started.
While doing the planning one must research on three things,
 Competition
 Target market
 Marketing strategy

Competition:

While launching the product one must look for the available products in the market and must
define what is there in our product which sets it better place than the competitor’s product.

Also the existing product helps to understand the exact requirement of the customer and how
the product should be marketed.
It also gives the insight about what services and product customer choose and why?

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This study helps to shape the launch and identifies the USP in better way the new product
offers and what all can be done to make the product launch more successful.
Basically the competitors and their products are important source of information for the new
product launch.

Target Market:

Apart from the competition one must identify the target customer. It helps better to plan
marketing strategy. As specific customer have specific habits and the ways to be reached.
Customers can be classified in many different ways and they do have different requirements.
Let’s say one can classified them age wise, according to their financial status or say
geographically. Each one has different need and a different way to reach.

A person from middle class family will not be looking for Mercedes and a person who is rich
won’t be looking for a Nano or a small car.

Develop Marketing Strategy:

For a successful product launch, a well-developed marketing strategy is essential. Using

multi-faceted marketing channels helps in successful launch and reaches to the target
customer.

One must evaluate the channels which are to be used to the target customer,
 Is the product best highlighted in TV commercials?
 Does the print medium portray the product best?
 Does the target customer use social media platforms more and whether that can
highlight the product best?

Target the people who not only use the product, but who use the tools that one is marketing
with.

Executing The Launch:

Once everything is in its place start creating the environment in the market with the help of
pre-launch if the launch date is weeks away.

Start Promoting Early:

It is not needed to wait till the launch date. Teasers can be made available to public to
generate the curiosity. In today’s world which is driven by social media a good teaser can
really help to make a buzz in the market.

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Pre-launch Trials:

Product can be given for trials to the people who understand the product and have big
followers. If these people writes or say well about the product it can generate interest in the
minds of potential customers. Having actual users give testimonials about the exciting new
product about to be released will increase customer willingness to be on the lookout for the
launch.
Even the expert reviews of the product helps potential customer to understand what exactly to
expect from the product and how it is different from the existing product. A review from
expert in favour of product can always help in sales after launch. And even in a successful
launch.

Be Creative:

The marketing or the launch campaign must be creative. The more creative, the better.
During the lead time to launch release the video or commercial which is unique in nature.
Take a poll of the target customer and present it in graphical form.
Consider an industry related release campaign to capitalize on the days leading up to the
launch.

Use People With Vested Interest:

Product can be distributed to the people who invested into it before the launch. So they can
use the product and can tell about it to others. Being the part of development and the first user
they can motivate and influence others about the product.

Social Media:

This is the biggest channel of today’s world. Effective and smart use of this channel can pays
high dividends in the product launch. Today’s young and the one who has an impact on every
decision taken in the house hold or the organization uses this media in one way or the other.
Through this one can interact with masses very easily. It can be the easiest and a very
effective way to reach to maximum people in very short span of time.

As the social circle widens and expands, more and more people will begin to talk about the
product, who will then in turn tell others, and so forth – starting a grass-roots movement to
help launch the campaign.

After The Launch:

Once the launch has been done then care should be taken that the buzz in the market must not
die down. To keep the media busy following things should be done,
 Maintain steady flow of topics / reports to reporters and journalists
 Testimonials of early users of the product

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  Changes that the product brought to market
 Press releases about the just released product
 If sales in the initial is good then the sales figure in volumes sold etc.

But company should take care that media can write negative also. So plus points of the
product must be fed on continuous basis to media.
General customer should have the access to product as well as the information of the product.
Free trials, product demos and videos must be made available. In the post launch phase
marketing team has to be vigilant about the efforts or strategies which are losing the
effectiveness. Appropriate changes should be done in those. Not only this but marketing team
must keep the track of the tools which are very effective in promoting the product. So those
can be used further or can be intensified to make further impact.

Preparing for a product launch can be both exhilarating and horrifying. The list of things to
be done is endless. Important things is one should not try to do everything on one’s own.
Engage the help of professional writers, marketing strategists and other personnel who can
help initiate a successful launch. As the launch is the most important phase of the new
product development. Launch and pre-launch are basically the channels where company is
directly communicating with the target and potential customers about their product. It directly
impacts the sale. Many a times it is seen that even a good product doesn’t hit the market in
correct way or it doesn’t generate the sale as required. For example Tata Motor’s Hexa is a
great vehicle if reviews and expert opinions are taken into consideration. But still it wasn’t
able to make impact in the market. Many such examples are available.

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CONCLUSION:

New product development is very essential for the growth of any organization. It requires
huge amount money to be spend on each and every stage whether it is Idea generation,
Prototype making, Testing or Introduction to market.

The main aim of developing a new product is to generate more sales, capture the market
share, capitalise on technological breakthroughs, create brand image also the companies
which have better product portfolio gets priority treatment in market from wholesalers,
distributors and retailers.

As the new product development requires huge amount of money to develop a product a
method or a defined path has to be in a place. Many researchers have defined various stages
of new product development. But the best way is 8 stages viz., Idea generation, idea
screening, concept development, business strategy development, product development,
testing, commercialisation and introduction or launch cover all the aspects of development.

Every single stage has unique importance. The company which follows this in a correct way
definitely will be successful in development of new product.

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BIBILOGRAPHY:

1. A framework for successful new product development – Nadiya Bhuiyan - Journal of

Industrial and Engineering Management

2. New Product Development – Murthy, D. N. P., Rausand M., Osteras T. - Springer

3. New Product Development Processes and New Product Profitability: Exploring the
Mediating Role of Speed to Market and Product Quality – Regina C. MacNally, M.
Billur Akdeniz and Roger J. Calantone - J PROD INNOV MANAG 2011;28(S1):63–
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4. New Product Development – John M Hauser, MIT & Ely Dahan – Hauser and Dahan

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6. New Product Development – Jan Carel Diehl

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