Concept of New Product Development

Concept of New Product Development

The firm undertakes the duty of new product development in order to release fresh items on the market. There will often be a need for fresh product development in the industry.

You may wish to cannibalise a current product, your old items may be technologically out of date, or you may want to target other market groups. In these situations, the company’s best option is to produce new products.

The process of introducing a new product to the market is known as new product development (NPD). Due to shifting customer tastes, escalating competition, technological advancements, or the desire to seize an opportunity, your company may need to participate in this process. Understanding what the market wants, making clever product modifications, and creating new goods that meet and surpass consumer expectations are the keys to the success of innovative firms.

‘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.

There are 7 stages of new product development and they are as follows:

1. Idea Generation

In this, you are basically looking for new product ideas in a planned way. A business needs to come up with a lot of ideas before it can find one that is worth pursuing. Customers, competitors, distributors, and suppliers are some of the main places where new product ideas come from.

One study found that almost 55% of all new product ideas come from inside the company. Companies like 3M and Toyota have set up special programmes to encourage their workers to come up with ideas that will work.
Almost 28% of new product ideas come from customers who are watched and listened to. Customers can even make their own products, and companies can make money by finding these products and selling them.

Almost 28% of new product ideas come from watching and listening to customers. Customers: even create new products on their own, and companies can benefit by finding these products and putting them on the market.

Example: Pillsbury gets promising new products from its annual Bake-off. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off winners’ recipes.

2. Idea Screening

Idea screening is the second step in the process of making a new product. The goal of coming up with ideas is to come up with a lot of them. At this stage, the goal is to narrow down these ideas to the ones that are really worth pursuing. There are many ways for companies to do this, such as through product review committees or formal market research.

At this point, it’s helpful to have a checklist that you can use to rate each idea based on the things that need to be in place for the product to do well on the market and how important they are.

Management can see how well the idea fits with the company’s marketing skills, experience, and other abilities. Lastly, the company’s management can get an overall rating of how well the company can launch the product.

3. Concept Development and Testing

The third step in making a new product is coming up with ideas and testing them. A Product concept needs to be made from an interesting idea. A product idea is just an idea for a product that the company thinks it could sell to customers. A product concept, on the other hand, is a detailed version of the idea written in terms that customers can understand.

This is also not the same as a product image, which is how a consumer sees a real or possible product. Once the ideas are made, they need to be tested either symbolically or physically with consumers. Some concept tests may only need a word or a picture, but a physical presentation will make the concept test more reliable.

After hearing about the idea, consumers are asked to answer a set of questions about it. These questions help the company figure out which idea has the most appeal. The company can then use these results to estimate how many sales it will make in the whole market.

This is the next step in new product development. The strategy statement consists of three parts: the first part describes the target market, the planned product positioning and the sales, market share and profit goals for the first few years.

The second part outlines the product’s planned price, distribution, and marketing budget for the first year. The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and the marketing mix strategy.

Business Analysis: Once the management has decided on the marketing strategy, it can evaluate the attractiveness of the business proposal.

Business analysis involves the review of projected sales, costs and profits to find out whether they satisfy a company’s objectives. If they do, the product can move to the product development stage.

5. Product Development

Here, R&D or engineering develops the product concept into a physical product. This step calls for a large investment. It will show whether the product idea can be developed into a full- fledged workable product.

First, R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. When the prototypes are ready, they must be tested. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively.

6. Test Marketing

If the product passes the functional tests, the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch.

The amount of test marketing varies with the type of product. Costs of test marketing can be enormous and it can also allow competitors to launch a “me-too” product or even sabotage the testing so that the marketer gets skewed results. Hence, at times, management may decide to do away with this stage and proceed straight to the next one:

7. Commercialization

The final step in new product development is Commercialization. Introducing the product to the market it will face high costs for manufacturing and advertising and promotion. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional, national or international). This depends a lot on the ability of the company to bear risk and the reach of its distribution network.

Today, in order to increase speed to market, many companies are dropping this sequential approach to development and are adopting the faster, more flexible, simultaneous development approach. Under this approach, many company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness.