New product development process plays a crucial role in deciding the future of the organisation. Every product has a life of its own and it becomes obsolete after a certain period of time.
Table of Contents
- 1 Steps of New Product Development Process
- 1.1 Concept Generation and Market Structure Identification
- 1.2 Idea Generation
- 1.3 Advertising Development
- 1.4 Product Formulation and Testing
- 1.5 Testing the Product
- 1.6 From Development to Commercialisation
- 2 Reasons for adding a New Product
It is essential to develop new products or alter or improve the existing ones to meet the oft-changing customer needs. Introducing new products is rather a difficult strategic alternative as it involves long-range planning.
The role of new product development can be stated in the following terms:
- Ensuring that the product-mix matches the changing environmental conditions and that product obsolescence is avoided.
- Enabling the marketer to compete in new and developing segments of the market.
- Reducing the marketer’s dependence on particular elements of the product range or vulnerable market segments.
- Filling excess capacity.
- Achieving greater long-term growth and profit.
Steps of New Product Development Process
Many companies follow different types of new product development system.
Concept Generation and Market Structure Identification
The first step in the new product development process centres on concept generation and market identification. In this part of the new product development process, there are four key activities namely idea generation, structure identification, sales potential and concept screening.
The first stage of the New Product Development evolution begins with an idea for the product. Hence this stage is also termed as ‘Idea Generation’.
New product ideas can be generated both directly and indirectly.
Direct methods rely heavily upon the creativity of individuals as well as groups and consumer survey data for techniques e.g. forced the relationship, transfer analysis, brainstorming, motivation research, multi-dimensional scaling etc.
Indirect methods refer to the ‘synthetic’ methods; methods that are used for other purposes but with little ingenuity, they can be employed just as well in exploration, e.g. quadrant analysis and magnitude estimation have been used in product testing.
The result of the idea generation step is the consumer’s view of the market in qualitative terms; an understanding of the technical development potential and a possible list of new product ideas in untested and raw idea form.
Market Structure Analysis
The next step in the process of the new product development process is to implement a market structure. This process describes the consumer’s perception of the market by building a map outlining critical consumer dimensions, positioning existing brands on the perceptual map and indicating favourable new product opportunities.
In this step, the potential of a new product entry into the market structure is estimated. Executive judgment and Delphi techniques are used to develop a simulated market model, as most of the input data are available with the new product team.
At this stage, the ideas collected are scrutinised to eliminate those inconsistent with the product policies and objectives of the firm. Patents may already protect some ideas and some others may not be fit for consideration because of the non-availability of raw materials for production.
This stage of new product development involves the development of advertising and formulation of the product. All the advertising and technical developments of the product concept have a greater focus due to the results from the earlier stages. This stage typically involves two activities, viz. development of advertising strategy and product formulation.
Product Formulation and Testing
While advertising formulation happens in the advertising agency, the product formulation happens in the laboratory. During this stage, the ‘idea-on-the-paper’ is turned into a ‘product-on-hand’. In other words, the idea is converted into a product that can be produced and demonstrated. This stage is also termed as ‘Technical Development’. It is during this period that all developments of the product, from idea to final physical form, take place.
Testing the Product
It is at this stage of product testing that the new product manager can check the feasibility and accuracy of product performance. The objective of this stage is to assess whether the product meets the technical and commercial specifications developed at various levels of concept development for ascertaining product acceptability.
There are three types of tests conducted at this stage as mentioned below:
This step is concerned with measuring customer reactions to the idea or concept of a product.
Product Prototype Testing
Putting the real product into a few selected markets.
Test marketing is a simulation of full-scale production and distribution and provides very useful information for better planning of the full-scale effort. It also permits initial pricing mistakes to be made on a small rather than large scale.
For example, Liril Soap, introduced by Hindustan Lever Limited, was originally tested in Hyderabad and Lucknow. These towns were selected because of their different characteristics, which make them representative of a large spectrum of towns in India.
From Development to Commercialisation
In this stage, the product is submitted to the market, and thus commences its life cycle. Commercialisation is also the phase where marketing is most active in connection with the new product. This stage is considered to be a critical one for any new product and should, therefore, be handled carefully.
Reasons for adding a New Product
Excess Capacity as a Reason for Expanding Product-line
The most important single factor leading to product-line diversification is the presence of excess production capacity is, perhaps. Excess capacity is said to exist when it would cost the product less to make and sell the new product than it would cost a new company set up to produce only that product.
Profit as a Criterion of Optimum Product-line
In the long term, profit maximization may be the objective of optimum product-line. But income stability may be the more important goal in the shorter term. Even these objectives, however, may merge with the long-run objective of profit maximization. Thus, profitability is crucial for adding to the product line.
Diversification as Response to Change
Many companies find it profitable to diversify and add to their product line in response to change. Changes may occur in the demand for their products, in the scope for further expansion or in the overall economic, political or social environment in which the company operates.
Diversification as Response to Restrictive Government Regulations
To avoid the rigours of the various restrictive regulations, many multinational companies and those belonging to big houses have decided to diversify.