New product development

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In business and engineering, new product development (NPD) is the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new product within the overall strategic process of product life cycle management used to maintain or grow their market share.

Contents
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1 Marketing considerations o 1.1 The eight stages o 1.2 Fuzzy Front End o 1.3 Other approaches 2 NPD organizations 3 NPD strategies 4 Related fields 5 See also 6 Notes and references

Marketing considerations[edit]

There have been a number of approaches proposed for analyzing and responding to the marketing challenges of new product development. Two of these are the eight stages process of Koen[clarification needed] and a process known as the fuzzy front end.

The eight stages[edit]

1. Idea Generation is often called the "NPD" of the NPD process.[1] o Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats). Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features. o Lots of ideas are generated about the new product. Out of these ideas many are implemented. The ideas are generated in many forms. Many reasons are responsible for generation of an idea. o Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step). 2. Idea Screening[citation needed] o The object is to eliminate unsound concepts prior to devoting resources to them. o The screeners should ask several questions: Will the customer in the target market benefit from the product? What is the size and growth forecasts of the market segment / target market? What is the current or expected competitive pressure for the product idea? What are the industry sales and market trends the product idea is based on? Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the customer at the target price? 3. Concept Development and Testing[citation needed] o Develop the marketing and engineering details Investigate intellectual property issues and search patent databases Who is the target market and who is the decision maker in the purchasing process? What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering and rapid prototyping What will it cost to produce it? o Testing the Concept may involve asking a number of prospective customers to evaluate the idea

4. Business Analysis[citation needed] o Estimate likely selling price based upon competition and customer feedback o Estimate sales volume based upon size of market and such tools as the FourtWoodlock equation o Estimate profitability and break-even point 5. Beta Testing and Market Testing[citation needed] o Produce a physical prototype or mock-up o Test the product (and its packaging) in typical usage situations o Conduct focus group customer interviews or introduce at trade show o Make adjustments where necessary o Produce an initial run of the product and sell it in a test market area to determine customer acceptance 6. Technical Implementation[citation needed] o New program initiation o Finalize Quality management system o Resource estimation o Requirement publication o Publish technical communications such as data sheets o Engineering operations planning o Department scheduling o Supplier collaboration o Logistics plan o Resource plan publication o Program review and monitoring o Contingencies - what-if planning 7. Commercialization (often considered post-NPD)[citation needed] o Launch the product o Produce and place advertisements and other promotions o Fill the distribution pipeline with product o Critical path analysis is most useful at this stage 8. New Product Pricing[citation needed] o Impact of new product on the entire product portfolio o Value Analysis (internal & external) o Competition and alternative competitive technologies o Differing value segments (price, value and need) o Product Costs (fixed & variable) o Forecast of unit volumes, revenue, and profit These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that the NPD process takes, many companies are completing several steps at the same time (referred to as concurrent engineering or time to market). Most industry leaders see new product development as a proactive process where resources are allocated to identify market changes and seize upon new product opportunities before they occur (in contrast to a reactive strategy in which nothing is done until problems occur or the competitor introduces an innovation). Many industry leaders see new product development as an ongoing process (referred to as continuous development) in which the entire organization is always looking for opportunities.[citation needed]

For the more innovative products indicated on the diagram above,[clarification needed] great amounts of uncertainty and change may exist which makes it difficult or impossible to plan the complete project before starting it. In this case, a more flexible approach may be advisable.[citation needed] Because the NPD process typically requires both engineering and marketing expertise, crossfunctional teams are a common way of organizing projects. The team is responsible for all aspects of the project, from initial idea generation to final commercialization, and they usually report to senior management (often to a vice president or Program Manager). In those industries where products are technically complex, development research is typically expensive and product life cycles are relatively short, strategic alliances among several organizations helps to spread the costs, provide access to a wider skill set and speeds up the overall process.[citation needed] Because both engineering and marketing expertise are usually critical to the process, choosing an appropriate blend of the two is important. Observe (for example, by looking at the See also or References sections below) that this article is slanted more toward the marketing side. For more of an engineering slant, see the Ulrich and Eppinger, Ullman references below.[2][3] A new product pricing process is important to reduce risk and increase confidence in the pricing and marketing decisions to be made. Processes have been proposed to break down the complex task of new product pricing into more manageable elements.[4] The Path to Developing Successful New Products[5] points out three key processes that can play critical role in product development: Talk to the customer; Nurture a project culture; Keep it focused.
Stages Process Steps of New Product Development

The stages or process or steps involved in a new-product development are depicted in the image given below. Click on it to get a zoomed preview.

Image credits Moon Rodriguez. The eight stages or process or steps involved in the development of a new product are listed and also hyper-linked as follows: 1. 2. 3. 4. 5. 6. 7. 8. Idea generation. Idea screening. Concept testing. Business analysis. Product development. Test marketing. Commercialization. Review of market performance.

Now let's discuss each stage in the process of a new-product development.

1. Idea generation

The first step in new-product development is idea generation. New ideas can be generated by:

o o o o o o o

Conducting marketing research to find out the consumers' needs and wants. Inviting suggestions from consumers. Inviting suggestions from employees. Brainstorming suggestions for new-product ideas. Searching in different markets viz., national and international markets for new-product ideas. Getting feedback from agents or dealers about services offered by competitors. Studying the new products of the competitors.

2. Idea screening

Most companies have a "Idea Committee." This committee studies all the ideas very carefully. They select the good ideas and reject the bad ideas. Before selecting or rejecting an idea, the following questions are considered or asked: 1. 2. 3. 4. Is it necessary to introduce a new product? Can the existing plant and machinery produce the new product? Can the existing marketing network sell the new product? When can the new product break even?

If the answers to these questions are positive, then the idea of a new-product development is selected else it is rejected. This step is necessary to avoid product failure.

3. Concept testing

Concept testing is done after idea screening. It is different from test marketing.

In this stage of concept testing, the company finds out:

o o o

Whether the consumers understand the product idea or not? Whether the consumers need the new product or not? Whether the consumers will accept the product or not? Here, a small group of consumers is selected. They are given full information about the new product. Then they are asked what they feel about the new product. They are asked whether they like the new product or not. So, concept testing is done to find out the consumers' reactions towards the new product. If most of the consumers like the product, then business analysis is done.

4. Business analysis

Business analysis is a very important step in new-product development. Here, a detailed business analysis is done. The company finds out whether the new product is commercially profitable or not. Under business analysis, the company finds out... 1. 2. 3. 4. 5. 6. 7. 8. Whether the new product is commercially profitable or not? What will be the cost of the new product? Is there any demand for the new product? Whether this demand is regular or seasonal? Are there any competitors of the new product? How the total sales of the new product be? What will be the expenses on advertising, sales promotion, etc.? How much profit the new product will earn?

So, the company studies the new product from the business point of view. If the new product is profitable, it will be accepted else it will be rejected.

5. Product development

At this stage, the company has decided to introduce the new product in the market. It will take all necessary steps to produce and distribute the new product. The production department will make plans to produce the product. The marketing department will make plans to distribute the product. The finance department will provide the finance for

introducing the new product. The advertising department will plan the advertisements for the new product. However, all this is done as a small scale for Test Marketing.

6. Test marketing

Test marketing means to introduce the new product on a very small scale in a very small market. If the new product is successful in this market, then it is introduced on a large scale. However, if the product fails in the test market, then the company finds out the reasons for its failure. It makes necessary changes in the new product and introduces it again in a small market. If the new product fails again the company will reject it. Test marketing reduces the risk of large-scale marketing. It is a safety device. It is very time-consuming. It must be done especially for costly products.

7. Commercialization

If the test marketing is successful, then the company introduces the new product on a large scale, say all over the country. The company makes a large investment in the new product. It produces and distributes the new product on a huge scale. It advertises the new product on the mass media like TV, Radio, Newspapers and Magazines, etc.

8. Review of market performance

The company must review the marketing performance of the new product. It must answer the following questions: 1. 2. 3. 4. 5. 6. 7. Is the new product accepted by the consumers? Are the demand, sales and profits high? Are the consumers satisfied with the after-sales-service? Are the middlemen happy with their commission? Are the marketing staffs happy with their income from the new product? Is the Marketing manager changing the marketing mix according to the changes in the environment? Are the competitors introducing a similar new product in the market?

The company must continuously monitor the performance of the new product. They must make necessary changes in their marketing plans and strategies else the product will fail.

Review of literature8 Step Process Perfects New Product Development

Posted on May 27, 2013 by Robert F Brands http://cdn.innovationexcellence.com/components/com_wordpress/wp/wp-

content/uploads/2013/05/images2.jpg http://cdn.innovationexcellence.com/components/com_wordpress/wp/wpcontent/uploads/2013/05/images2.jpgEvery entrepreneur knows that productivity is one of the key ingredients for successful product development. One of the two key processes in Roberts Rules of Innovation is the NEW PRODUCT DEVELOPMENT PROCESS. A formalized, NPD process also referred to and best practice: the Stage Gate Process is a must, from simple to sophisticated. The New Product Development process is often referred to as The Stage-Gate innovation process, developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons why products succeed and why they fail. When teams collaborate in developing new innovations, having the following eight ingredients mixed into your teams new product developmental repertoire will ensure that its overall marketability will happen relatively quick, and accurately making everyone productive across the board. Step 1: Generating Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one can distance themselves from the competition by generating ideologies which take affordability, ROI, and widespread distribution costs into account. Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep the system nimble and use flexible discretion over which activities are executed. You may want to develop multiple versions of your road map scaled to suit different types and risk levels of projects. Step 2: Screening The Idea

Wichita, possessing more aviation industry than most other states, is seeing many new innovations stop with Step 2 screening. Do you go/no go? Set specific criteria for ideas that should be continued or dropped. Stick to the agreed upon criteria so poor projects can be sent back to the idea-hopper early on. Because product development costs are being cut in areas like Wichita, prescreening product ideas, means taking your Top 3 competitors new innovations into account, how much market share theyre chomping up, what benefits end consumers could expect etc. An interesting industry fact: Aviation industrialists will often compare growth with metals markets; therefore, when Boeing is idle, never assume that all airplanes are grounded, per se. Step 3: Testing The Concept As Gaurav Akrani has said, Concept testing is done after idea screening. And it is important to note, it is different from test marketing. Aside from patent research, design due diligence, and other legalities involved with new product development; knowing where the marketing messages will work best is often the biggest part of testing the concept. Does the consumer understand, need, or want the product or service? Step 4: Business Analytics During the New Product Development process, build a system of metrics to monitor progress. Include input metrics, such as average time in each stage, as well as output metrics that measure the value of launched products, percentage of new product sales and other figures that provide valuable feedback. It is important for an organization to be in agreement for these criteria and metrics. Even if an idea doesnt turn into product, keep it in the hopper because it can prove to be a valuable asset for future products and a basis for learning and growth. Step 5: Beta / Marketability Tests Arranging private tests groups, launching beta versions, and then forming test panels after the product or products have been tested will provide you with valuable information allowing last minute improvements and tweaks. Not to mention helping to generate a small amount of buzz. WordPress is becoming synonymous with beta testing, and its effective; Thousands of programmers contribute code, millions test it, and finally even more download the completed end-product. Step 6: Technicalities + Product Development Provided the technical aspects can be perfected without alterations to post-beta products, heading towards a smooth step 7 is imminent. According to Akrani, in this step, The production department will make plans to produce the product. The marketing department will make plans to distribute the product. The finance department will provide the finance for introducing the new product.

As an example; In manufacturing, the process before sending technical specs to machinery involves printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the organizational structure, procedures, processes and resources needed to implement quality management.) In internet jargon, honing the technicalities after beta testing involves final database preparations, estimation of server resources, and planning automated logistics. Be sure to have your technicalities in line when moving forward. Step 7: Commercialize At this stage, your new product developments have gone mainstream, consumers are purchasing your good or service, and technical support is consistently monitoring progress. Keeping your distribution pipelines loaded with products is an integral part of this process too, as one prefers not to give physical (or perpetual) shelf space to competition. Refreshing advertisements during this stage will keep your products name firmly supplanted into the minds of those in the contemplation stages of purchase. Step 8: Post Launch Review and Perfect Pricing Review the NPD process efficiency and look for continues improvements. Most new products are introduced with introductory pricing, in which final prices are nailed down after consumers have gotten in. In this final stage, youll gauge overall value relevant to COGS (cost of goods sold), making sure internal costs arent overshadowing new product profits. You continuously differentiate consumer needs as your products age, forecast profits and improve delivery process whether physical, or digital, products are being perpetuated. Remember: The Process Is Loose The entire new product development process is an ever evolving testing platform where errors will be made, designs will get trashed, and loss could be recorded. Having your entire team working in tight synchronicity will ensure the successful launch of goods or services, even if reinventing your own wheel. Productivity during product development can be achieved if, and only if, goals are clearly defined along the way and each process has contingencies clearly outlined on paper.

Profile of the company