Developing New Products

NEW PRODUCT DEVELOPMENT STRATEGY

Introduction

A company can either acquire a new product from some external agency (a research organisation or from another company who has developed) or get internal resources to develop own products. New products development is a risky and costly proposition since 90% of the new products fail within 2 years of introduction The reasons for failure could be; Market size may be overestimated Product design was not good enough Product was not properly positioned in the market The product was not priced right (high or low) Poorly advertised or promoted A wrong decision imposed by some senior ( a promoter or CEO or senior person) without considering the market research findings Product development costs were too high Competitors could fight back well

Developing New Products

NEW PRODUCT DEVELOPMENT PROCESS 1. Idea generation- Internal

Introduction

The internal could be an executive, engineer, scientist, or any employee in the organisation

2.

Idea generation External sources could be;

i. A customer or consumer-continuous feedback which the company receives must be analysed and as and when some idea is received the company personnel must contact and talk to them in details. It is only a consumer who can give a real feedback on the new wants and needs

ii.
3. 4.

External source A scientist, a research organisation, a company of another country

Idea Screening Concept development and testing

i.
ii.

A product idea is an idea for a possible product while a concept development is detailed version of the idea in meaningful consumer terms
Concept testing calls for testing new product concepts with target group consumers

Developing New Products

5. Developing Market Strategy

Introduction

The next step is to plan a market strategy. It would start with deciding target markets, planned product positioning and market mix. This will also leads to planning sales, market share and profit goals.

6.

Business analysis
Analysis of forecasting of volumes, costing, projections of profits, investments involved and return on investments (ROI) is done and final decision taken.

7.

Product Development

After the above step, the company moves into product development stage. The R&D, Engineering department, Production department, Procurement departments are involved for actual product development.

8.

Test Marketing Finally before launching the product on commercial scale, it is necessary to test market the product using 1) Standard Test Markets, 2) Controlled Test Markets or 3) Simulated Test Markets

9.

Commercialisation Test marketing indicates if the company should go into commercialisation of the product and decide which markets to choose for launching first