New Product Development
What is meant by a Product?
A product can be an item OR a service offered for sale to satisfy the needs and wants, in the physical OR virtual OR cyber form which is made at a cost and sold at a price that can be charged depending on the market, the quality, the marketing and the segment that is targeted.
What is meant by a new product?
A new product is one product only which is perceived by the consumer as being new. New product can adopt or replace the existing product.
Six categories of the New Product
The term new product can mean different things. Six different categories of new products can be identified that are all quite different from each other. Still, they are all called new products. The six categories of new products range from new-to-the-world products (sometimes called really new products), as well as a range of existing products that you has modified and improved.
The six categories are:-
1. New — to — the — World products (really new)
The alternative expression for new-to-the-world products (really new products) already indicates that this is what most people would define as a new product. These products are inventions that create a whole new market. Examples: Polaroid camera, the iPod and iPad, the laser printer and so on.
2. New-to-the-firm Products (new to the Product Lines)
Products that take a firm into a category new to it. The products are not new to the world, but are new to the firm. The new product line raises the issue of the imitation product: a “me-too”. Examples: P&G’s first shampoo or coffee, Hallmark gift items, AT&T’s Universal credit card and so on.
3. Additions to existing Product Lines
These are simple line extensions, designed to flesh out the product line as offered to the firm’s current markets. Examples: P&G’s Tide Liquid detergent, Bud Light, Special K line extensions (drinks, snack bars, and cereals).
4. Improvements and Revisions to existing Products
Current products made better. Examples: P&G’s Ivory Soap and Tide power laundry detergent have been revised numerous times throughout their history, and there are countless other examples.
5. Repositioning
Repositioning are products that are retargeted for a new use or application. Examples: Arm & Hammer baking soda repositioned as a drain or refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks. Also includes products retargeted to new users or new target markets. Marlboro cigarettes were repositioned from a woman’s cigarette to a man’s cigarette years ago.
6. Cost Reductions
Finally, cost reductions complete the six categories of new products. Cost reductions refer to new products that simply replace existing products in the line, providing the customer similar performance but at a lower cost. May be more of a “new product” in terms of design or production than marketing.
What is New product development?
New product development (NPD) is the process of bringing a new product to the marketplace. It is described broadly as the transformation of a market opportunity into a product available for sale.
Process
The process of the new product development involves 8 steps or stages.
1. Idea generation
The new product development process starts with idea generation that refers to the systematic search for new-product ideas. Typically, a company generates a pool of hundreds of, may be even thousands of ideas. Two sources of new ideas can be identified:
1)Internal idea sources:
The company finds new ideas internally by doing R&D (research and development) and also from employees.
2)External idea sources:
The company finds new ideas externally. The most important external source is customers, because the new product development process should focus on creating customer value. This refers to all kinds of external sources, e.g. distributors and suppliers, competitors, etc.
2. Idea Screening
The next step in the product development is Idea Screening. It is the step of filtering the ideas from the pool of hundreds of ideas to pick out the good ones. All the ideas are screened OR analyzed to select the good ones and reject the poor ones. The purpose of this step is to reduce the large number of ideas generated in first step to the significant number. The reason is that product development costs rise greatly in later stages. Therefore, the company would like to go ahead only with those product ideas that will turn into profitable products. Dropping the poor ideas as soon as possible is, consequently, of crucial importance.
3. Concept Development and Testing
After the idea screening step, attractive ideas must be developed into a product concept. A product concept is the detailed version of the new-product idea stated in the meaningful consumer terms.
New product concepts need to be tested with groups of target consumers. The concepts can be presented to consumers either symbolically or physically. The question is always: does the particular concept have strong consumer appeal? For some concept tests, a word or picture description might be sufficient. However, to increase the reliability of the test, a more concrete and physical presentation of the product concept may be needed. After exposing the concept to the group of target consumers, they will be asked to answer questions in order to find out the consumer appeal and customer value of each concept.
4. Business Strategy Development
After the successful concept development and its testing, it is the time to design an initial marketing/business strategy for the new product based on the product concept for introducing this new product to the market.
The marketing strategy statement consists of three parts and should be formulated carefully:
1) A description of the target market, the planned value proposition, and the sales, market share and profit goals for the first few years.
2) An outline of the product’s planned price, distribution and marketing budget for the first year.
3) The planned long-term sales, profit goals and the marketing mix strategy.
5. Business Analysis
Once decided upon a product concept and marketing strategy, management can evaluate the business attractiveness of the proposed new product. The fifth step in the new product development process involves a review of the sales, costs and profit projections for the new product to find out whether these factors satisfy the company’s objectives. If they do, the product can be moved on to the product development stage.
In order to estimate sales, the company could look at the sales history of similar products and conduct market surveys. Then, it should be able to estimate minimum and maximum sales to assess the range of risk. When the sales forecast is prepared, the firm can estimate the expected costs and profits for a product, including marketing, R&D, operations etc. All the sales and costs figures together can eventually be used to analyze the new product’s financial attractiveness.
6. Product Development
The new product development process goes on with the actual product development. Up to this step, for many new product concepts, there may exist only a word description, a drawing or perhaps a rough prototype. But if the product concept passes the business test, it must be developed into a physical product to ensure that the product idea can be turned into a workable market offering. The R&D department will develop and test one or more physical versions of the product concept. Developing a successful prototype, however, can take days, weeks, months or even years, depending on the product and prototype methods.
Also, the products often undergo tests to make sure they perform safely and effectively. This can be done by the firm itself OR outsourced. In many cases, marketers involve actual customers in product testing. Consumers can evaluate prototypes and work with pre-release products. Their experiences may be very useful in the product development stage.
7. Market Testing
The last stage before commercialization in the new product development process is market testing. In this, the product and its proposed marketing program are tested in realistic market settings. So, test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. In fact, it allows the company to test the product and its entire marketing program, including targeting and positioning strategy, advertising, distributions, packaging etc. before the full investment is made.
8. Commercialization
The final stage in the new product development process is commercialization. Commercialization means nothing else than introducing a new product into the market. At this point, the highest costs are incurred i.e. the company may need to build or rent a manufacturing facility. Large amounts may be spent on advertising, sales promotion and other marketing efforts in the first year.
Conclusion:-
· In the process of the new product development, the most important focus should be on creating superior customer value. Only then, the product can become a success in the market.
· During the idea generation, R&D is the most essential source of idea. Because, every year millions of rupees are being spent on R&D for new products development. Such a huge investment is necessary as new products are the only means of the survival of a firm.
· However, it is not only a responsibility of research and development departments of businesses but also requires the cooperation of design, engineering, production and marketing departments.
· Inadequate coordination between these departments will result in failure of new product development, and failure of new product development will lead to a financial crisis.
Reference:-
https://economictimes.indiatimes.com/definition/product
https://marketing-insider.eu/categories-of-new-products/amp/
https://marketing-insider.eu/new-product-development-process/
https://www.intechopen.com/books/marketing/theory-of-new-product-development-and-its-applications
