New Product Development Process (Unit 2)

 

New Product Development

 

New Product Development Process consists of the following eight major steps.

1.       Idea Generation

2.       Screening

3.       Concept Development & Testing

4.       Marketing strategy

5.       Business Analysis

6.       Product Development

7.       Test marketing

8.       Commercialization

 

1  Idea Generation

Major sources of Idea generation are – Internal sources, Customers, Competitors, Distributors, Suppliers. Other sources can be trade magazines, shows, seminars, consultants, Ad agencies, universities and brain storming.

 

2  Idea Screening

It is screening new product ideas in order to spot good ideas and drop poor ones.

Have a rough idea about market size, market growth, market positioning

 

3  Concept Development & Testing

A Product Idea is an idea for a possible product that the company can envision offering to the market.

A Product Concept is a detailed version of the new product idea stated in meaningful consumer terms.

A Product Image is the way consumers. perceive an actual or potential product.

Concept Development

Customers do not buy a product idea, they buy a product concept.

Concept Testing

Concept testing is testing new product concepts with a group of target consumers to find out if the concepts have strong Consumer appeal.

 

 

4  Marketing. Strategy Development

•Marketing Strategy Development is designing an initial marketing strategy for a new product based on product concept.

• Marketing Strategy statement is a statement of the planned strategy for a new product that outlines the intent target market, the planned product positioning, plus the sales, market share and profit goals for the first few years.

* Marketing Strategy Statement consists of three parts

1. The first part describes the target market, the planned product positioning and the sales, market share and profit goals for the first few years.

2. The second part outlines the products planned price, distribution and marketing budget for the first year.

3. The third part of the marketing strategy statement describes the planned long run. sales, profit goals and marketing-mix strategy.

 

 

5  Business Analysis

• Business Analysis is a review of the sales, costs and profit projections for a new product to find out whether these factors satisfy the company objective

• If they do the product can move to the product development stage.

• This is done by looking at the sales & history of similar products, survey of market opinion etc.

 

 

6  Product Development

• Product development is developing the product concept into a physical product in order to assure that the product idea can turned intobe workable product.

It calls for lage jump in investment.

Developing it may take days, weeks, month or even years

• The prototypes must have required functional features and also convey intended psychological characteristics. 

 Previously the goal was to produce customer satisfying products and without much concern about how the designs will be produced, which was left to manufacturing department. Recently companies have adopted a new approach called called design for manufacturing and assembly (DFMA). Using this approach companies work to fashion products that are both satisfying to consumers and easy to manufacture.

 

 

7  Test Marketing

 

•Text Marketing is the stage of new-product development in which the product and marketing programe are tested in more realistic market setting.

Test marketing allows the company to test its entire marketing program for the product - its portioning strategy, advertising distribution, pricing, branding & packaging.

• Test marketing is used to find potential problems of consumers and dealers while handling, using and repurchasing the product.

• When cost of developing and introducing the product are low and the company is confident that the product will succeed or the product is a minor modification of current product the company may do little or no test marketing.

 Test marketing takes time during which competitor may gain advantage.

 

•Consumer product companies usually choose one of the three approaches to test Marketing 

 1 Standard test market 

2 Controlled test market 

3 Simulated test market 

 

Standard Test Market

• Standard test markets test the new consumer product in situations like those it would a face in a full scale launch. A few test cities are found where Salesforce tries to persuade resellers to give shelf space and promotional support. The product is backed by full advertising and promotion campaign and the product performance is measured. The results are used to forecast national sales and profits.

• Standard test Markets take a long time to complete, it is costly, competitors know it even before it launch, and get time to develop defensive strategies.

 

Controlled Test Market

Several research firms keep controlled panel of stores which carry new products for free. The research firms delivers the product to the participating store and controls shelf location, space, displays and point of purchase promotions and pricing.

 

Simulated Test Markets

The consumers are given some a small amount of money and invited to a real or laboratory store where they buy items. 

 • The process is a test of commercial effectiveness.

Some weeks later the consumers are interviewed by phone to determine product attitudes, usage satifaction de repurchase intentions

 

 

8  Commercialization 

Commercialization is introducing a new product into the market.

The company takes decisions on when, where, to whom and how to inter the market.