New Product Development Process

Reasons for New Product Development:

There are several reasons for developing and introducing new product in market. As consumer needs and wants change, so the company should develop new product for satisfying the customers need which would help them to create value for customers. After the product reaches the maturity stage of product life-cycle (PLC), there comes a stage of declining, after which the company needs to develop new product. There may be a need to develop new product when there are several changes in the environment. Like now a days, CDs are not being used by the music listeners instead they use internet for downloading the whole album, so now companies upload music albums on internet instead of selling CDs. New product is needed when there is a competition in any product category. Like in bakery products, Peek Freans Sooper was first launched, and then LU biscuits launched the same product in competition called LU Bakeri. New product is needed when there is a change in technology. For example, previously keypad phones were famous but now every company has launched touch system phone because technology has changed.

New Product Development Process:

New product development process includes the complete process of bringing the new product in market. To create new products, the company must understand the customers needs or competitors products and then develop the new product to satisfy their customers with greater value. The steps include in the new product development process are following: Idea generation Idea screening Concept development and testing
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Marketing strategy development Business analysis Product development Test marketing Commercialization

Idea Generation:
Idea generation is the systematic search for new- product ideas. A company creates many ideas in which some are wrong and some are right. Major sources of new product ideas include internal and external sources. Internal Sources: The company creates new ideas by formal research and development. Now the companies should encourage their employees for creating value for the customers by giving new ideas. Some companies have started entrepreneurial programs that support the employees to give new product ideas. External Sources: The company can also get benefits in generating new ideas through external sources. Like suppliers and distributors can give new ideas to the company because they are closer to the customer and knows what customers need, they can also tell company what to use to develop their product. Competitors are also the source of creating new ideas. The company can buy competitors product in order to observe what kind of material or technology they used and then create ideas for new product which would be better than the competitors product. The company can also get new ideas by customers through online blogs or feedbacks.

Idea Screening:
Idea screening is the second stage of product development process. In this process the top management like general manager, marketing managers or else used to analyze or consider all the ideas which were generated in the first stage, the idea generation stage. The management uses to drop the poor ideas and identify the good ideas. Like some ideas are suitable for the companies and some ideas are good for market, here the task of
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management is to consider those ideas which are good for the companies and also good for the market or consumers. Many companies requires from their executives to write up new product ideas in standard format that can be reviewed by new product committee. This write up or format of new product idea must describes the product or service, the proposed customer value proposition (benefit company promises to deliver) target market and competitions. It markets some rough estimates of market size product price, and development cost and time. R-W-W Screening Frame Work: The R-W-W screening frame work asks three basic but very important questions. First, is it real? Means is there a real need or desire for the product and will customer buy it? Is there a clear product concept or will product satisfy the market? Second question is, Can we win? Means does the product offers a sustainable competitive advantage? Does the company have the potential or have the resources to make the product successful? Finally, is it worth doing? Means does the product set the companys growth strategy? Does it offer sufficient profit potential? All companies should be able to answer yes to all the three questions of RW-W at this stage before going to the next stage of product development process.

Concept Development and Testing:

The idea that management consider as an attractive one must be further development into the product concept. There are 3 most important things to consider in concept development are: 1. Product idea: Is an idea for a possible product a company can think itself offering to market. 2. Product concept: It is conversion of idea into a detailed version that it must be stated in a meaningful consumer terms. 3. Product image: Is about how the consumer perceives an actual product will be.

Concept development:
New hybrid car concept:

An electric car which needs about 11 to 12 hour to charge the battery and can run about 3 to 4 hours continuously at 60Km/h. If someone wants to run it more than 60km/h, the car will automatically switch to petrol from battery means it start consuming petrol. While the car is running on petrol its battery will begins to charge. The product concepts for this car: Concept 1: An affordably priced midsize car design to use around the town or city for like, shopping, go to cinema, hoteling or visiting friends and family. Concept 2: Car of sporty shape which would like by youngster, singles and couples. Concept 3: Environmental friendly car for those people who are environmentally conscious and want to reduce pollution. Concept 4: A car for those who dont want to burn petrol or gas or who dont want to go to gas station to fuel their car.

Concept Testing:
Concept testing involves testing new product with some target consumers. The concept may be presented symbolically or practically. Mostly firms use to test its new product concept with consumers before making it to actual new product. Firms while testing its concept use to ask few questions to consumers like: Q#1: Do you understand the concept of our hybrid car? Q#2: What are the major benefits of the hybrid car compared with conventional car? Q#3: What improvements in car features would you suggest? Q#4: For what uses or reasons would you prefer a hybrid car? Q#5: What would be reasonable price to charge for the car? Q#6: Who would be involved in your decision to buy such a car?

The answers of consumers to such questions are very important and will help company to decide which concept is strong.

Marketing Strategy Development

After testing the new concept the next step is to make an effective marketing strategy to introduce the product in the market. This step is necessary for the development of the product as it analyses every single aspect of the market. Basically the marketing strategy includes three parts. The 1st part describes 1. Target market 2. Value proposition 3. Sales and market share 4. Profit goals

1. Target market: The companies do segmentation and choose a target market for their product. It decides which target market is suitable for our market. E.g. a hybrid car whose name is Prius is introduced in the market. Their target market was younger generation, middle and upper class people and people who are conscious about environment and seeking type of car that does bot pollute the environment much. 2. Value proposition: a very important factor in the marketing strategy development is to create a value about the product in customers mind. Customers will create a value about the car that it is affordable, fun to drive and it does not aim to affect the environment. 3. Sales and market share: company aims that how much sales it have to make in order to earn revenue. At first year the company will surely not earn profit but it has to make an effective strategy to have a loss of a certain amount but not more than that. E.g. the car company decides to sell 25,000 cars and have a loss of $10 million but not more than that. After the 1st year the company may aim to sell 50,000 cars and earn a profit of $million.

4. Profit goals: a product should make profit otherwise it is of no use. So a company focuses on profit goals and should set some profit goals that they should achieve in the future.

2nd Part describes

1. Planned price: Company examines the product and cost of producing it. Then it set some price according the features of products and accessories with it. E.g. what will be the price of car, at what rate it will sell the car to its dealers and offer them off-price? 2. Distribution: The distribution channel should be very effective of the product. Distributors play a very vital role in the sales of the product. Company may offer various offers to the distributors. E.g. the distributors will get 5% off on every car if he sells more than 10 cars in a month. Such type of offers motivates the dealers and they try to sell as many cars as possible.

3. Marketing Budget: Effective marketing is a necessary element of the sales of a product. To do an effective marketing of a product company should set a budget. E.g. a company has a marketing budget of $50 million. It will be divided between the media campaign and local event marketing which will introduce in the market. Advertising and website will be focusing on the features of the car. Some budget would also be needed to conduct a marketing research to find out the consumers perceptions about the car, mostly which people are buying the car and are they satisfied from the car.

3rd Part describes:

1. Planned long-run sales: Product long run sales are set that how many cars would be selling in the coming years by analyzing the response of people about the product. How much market share the product will occupy e.g. the hybrid car occupies a 3% of the auto market share. In order to do this the product quality should improve over the years to retain the market share.
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2. Profit Goals: After the product is introduced in the market the company should make profits. In order to have profit the product price may be increased after the 1 st year of launching of the product. 3. Marketing mix strategy: Marketing of the product will carry on making maximum people aware of the product. So the marketing budget would be increased every year. Budget on marketing research may be decreased every year.

Business Analysis
Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the companys objectives.

Product Development
Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments.

Test Marketing
Test marketing means to introduce a new product in the small market at a small scale. If the product gets successful, the company launches the product on a large scale, if product fails; the company finds out reason for the failure, develops the product with necessary changes and again tests it. If the new product fails again, the company rejects it. The company uses test marketing when introducing the new product costs high, risks are higher or management is not sure about the product that whether it would be successful or not. But if the product is copy of competitors product or the management is confident enough for launching the product, the company does no test market. For test marketing, the company chooses usually one of the three test markets. These are: Standard test markets Controlled test markets
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Simulated test markets

Standard test markets: In standard test markets, the company selects a small number of representative cities and conducts a full marketing campaign in these cities. To check whether the product is being purchased or liked by the customers, the company monitors the audits of stores to which they have supplied the product or conduct surveys. Standard test markets are very costly and they take a long time, due to which the competitors have an opportunity to launch the same product on a low price to attract customers. Controlled test markets: In controlled test markets, a research firm manages a panel of stores who agreed to carry the new products. The company selects the stores at their desired geographic locations and the research firm then delivers the products to the respective stores. To check the results, scanners are placed at the cashier counter. Controlled test markets usually costs less than standard test markets and it can be completed much more quickly than the standard test markets. Simulated test markets: In simulated test markets, the companies test the new product in simulated shopping environment. The consumers are selected, interviewed and then observed their buying behaviors. These consumers are then again interviewed or contacted by the phone after a week or two to ask them whether they are going to buy that new product again or not. Simulated test markets are fast and inexpensive and they can be run quickly to assess the new product and in this way, the company can keep the new product out of competitors view.

Commercialization:
The final step in product development process is commercialization, where the company launches its final product in the market on a large scale. This step involves more money for advertising, sales promotion. The company first decides when to launch the product for which they have to observe that if the new product launch will affect the sales of the other products. If so, the launch is delayed. Then it decides where to launch it, in single location, national market or international market.