The process of developing a product that will make it more attractive is called
The Need for New ProductsIn dynamic markets companies must constantly introduce new products and services to keep up with changing consumer wants and needs. Show
Learning Objectives Discuss the common challenges of developing successful new products Key TakeawaysKey Points
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The marketplace is never static: it is dynamic and fast changing, and demand for products is constantly shifting as needs, wants, and technology all change. As a result, companies must always evaluate their existing product line and look for ways to ensure that it is up to date and in line with consumer desires. Continuous decisions must be made about whether new products should be added (and whether old products should be
removed). Company Sales: Sales of individual products and total company sales for a fictitious company with multiple products. In the past, four of these products have been deleted as they near obsolescence (the products labeled as A, B, C, and F). As a result, the sales level in the most current period depends upon the
success of the remaining four products. If the firm has a goal to increase sales in the coming years, then it is imperative for that firm to introduce a new group of successful products. Innovation 'Innovation' is used here to describe an idea or product that is new to the company. A 'continuous innovation' introduces a new entrant into an existing category, and does not challenge established patterns of consumer behavior. An example of this is a new, technologically advanced cell phone. A 'discontinuous innovation' may alter existing consumption patterns,
and even create new ones. For example, portable audio equipment has evolved from the radio, to the cassette tape player, to the compact disk player, and to the digital audio player - and now, to Cloud-based systems. Discontinuous innovation has the potential to radically shift consumer habits and thus create new demand for a whole category of products and services, but understandably entails more risk for the organization. StrategyA good NPDS can help organize research, prioritize customer needs, and reduce cost overruns, to ensure a smooth development process. Learning Objectives Describe the three common approaches to strategically developing new products Key TakeawaysKey Points
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New Product Development Strategy A well thought out new product development strategy (NPDS) helps a company avoid wasting time and resources by helping to organize planning and research, understanding customer expectations, and accurately resourcing the project. By avoiding common errors such as
overestimating the target market, incorrectly setting the price, and accruing higher than predicted costs, a NPDS helps the product to be developed and launched as planned. Six Sigma: The symbol for Six Sigma, which is a contemporary management approach. Phase-Gate Model Idea GenerationThe success of product-driven companies is directly tied to new product development, which is generated through innovative ideas. Learning Objectives Identify the five primary sources of product innovation Key TakeawaysKey Points
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Idea GenerationIdeas for new products can be obtained from basic research using a SWOT analysis. Market and consumer trends, R&D departments, competitors, focus groups, etc. may also be used to get an insight into new product lines or product features. New product innovations are responsible for employment, economic growth, technological process, and high standards of living. Innovation is crucial for the development of successful new products. Described below are different sources of innovation that lead to the generation of ideas for new products. Sources of Innovation that Generate IdeasWhile innovation is crucially important to any forward-thinking organization, developing and evaluating innovations is a challenge. Where do innovative ideas come from? Discussed below are five crucial sources of innovation: technical breakthrough, non-technical idea development, environment, serendipity, and purposeful development. These are discussed in turn below (see ). Different Sources of Innovation: A summary of different sources of innovation, as described in this section. Being innovative is key to generating new ideas in product development. Technical Breakthroughs ScreeningDuring screening, the company evaluates whether to devote further resources to the development of a product at various stage gates. Learning Objectives Discuss the benefits and shortcomings of product screening Key TakeawaysKey Points
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ScreeningIt is important for businesses to continually devise new products, as products do not last forever. While there are millions of products available to consumers, many more products do not make it to market at all. As it is expensive to bring a product to market, products go through a product development process where they are evaluated at every stage before they are brought to commercialization. For example, of the 5,000 drug ideas that go through the screening process of the Federal Drug Administration, only 10 end up getting approved, and of these only 3 become profitable. With an average cost of $1 billion to bring a drug to market, it would take several billion in sales to recoup the cost. Screening: This figure illustrates the long process it takes for a drug to enter the market. Screening Objectives The objective of the screening stage is to eliminate unsound concepts prior to devoting resources to them. The screeners should ask several questions: Will the
customer in the target market benefit from the product? What is the size and growth forecast of the target market? What is the current or expected competitive pressure for the product idea? Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the customer at the target price? By answering these questions, the company can get a better idea of the likelihood of a product becoming a commercial success. Screening Techniques There are two
common techniques for screening new product ideas. Both involve the comparison of a potential product idea against the criteria for acceptable new products. The first technique is a simple checklist. For example, new product ideas can be rated on a scale ranging from very good to poor, in respect to factors such as value added, sales volume, patent protection, and effect on present products. Unfortunately, it is often very challenging for evaluators to define what is fair or poor in any given
category. Also, this system does not address the issue of the time and expense associated with each idea, nor does it provide instructions with regard to the scores. Concept TestingConcept testing is important for evaluating consumer responses to a product before market introduction. Learning Objectives Explain concept testing, its disadvantages, and alternative methods used to evaluate consumer behavior toward new concepts Key TakeawaysKey Points
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Concept testingConcept testing is the process of using quantitative and qualitative methods to evaluate consumer response to a product idea prior to the introduction of a product to the market. It is a vital part of the idea screening stage of new product development. It can also be used to generate communication designed to alter consumer attitudes toward existing products. These methods involve the evaluation by consumers of product concepts having certain rational benefits, such as "a detergent that removes stains but is gentle on fabrics," or non-rational benefits, such as "a shampoo that lets you be yourself." Concept testing is often performed using field surveys, personal interviews and focus groups, in combination with various quantitative methods. Focus Group: Using focus groups to generate user feedback is one method used to perform concept testing. The concept generation portions of concept testing are generally qualitative. Advertising professionals create concepts and communications of these concepts for evaluation by
consumers, on the basis of consumer surveys and other market research, or on the basis of their own experience as to which concepts they believe represent product ideas that are worthwhile in the consumer market. Shortcomings of Traditional Concept Testing Traditional systems of concept testing generally failed to provide a systematic, proven way of showing
consumer preference of one concept over another. The relative importance of the factors responsible for or governing why consumers, markets and market segments reacted differently to concepts presented to them in the concept tests were not demonstrated. Thus, communication of the concept was generally left to the creativity of the advertising agency, with no systematic quantitative method known or employed that could identify the criteria on which consumer choices were made (at least, not with
any real accuracy). Business AnalysisThe output of the business analysis stage is a prediction about whether the product is likely to be profitable or not if ultimately produced. Learning Objectives Demonstrate knowledge of the components included in the business analysis stage of product development Key TakeawaysKey Points
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Business AnalysisAfter the initial screening stage, the number of viable proposals available to progress to the next stage will have decreased significantly. However, before the company begins the development of prototypes, there is one more evaluation process that must take place, and this is the business analysis stage. In this stage, additional information is gathered on the remaining innovations in order to decide whether the significant costs that development will require are justified. Business Analysis: Financial ratio analysis allows an observer to put data provided by a company in context. The observer can gauge the strength of different aspects of the company's operations. The primary focus of the business analysis stage is to determine whether the product idea will ultimately be profitable or not. However, while this is the primary consideration, it is not the only consideration. Social and environmental issues are frequently considered as well, particularly if there are certain regulations that the company must adhere to in these realms.
Based on these costs, the business analysis stage will estimate the likely selling
price. This figure will also depend on the level of competition, as well as customer feedback. Sales volumes must also be estimated based on the size of the market (using, for instance, the Fourt-Woodlock equation). Ultimately, profitability and the estimated break-even point can be derived. Customers base buying decisions on a personal value equation where the value is calculated by weighing the cost versus the benefits. This relates to the viability and feasibility of products that companies
are considering to add to their line. DevelopmentDevelopment involves setting product specifications as well as testing the product with intended customer groups to gauge their reaction. Learning Objectives Describe the steps involved in the technical and marketing development stages of new product development Key TakeawaysKey Points
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DevelopmentOnce a potential product has passed the screening and business analysis stages, it goes onto the technical and marketing development stage. This stage includes identifying the target market and the decision maker in the purchasing process, determining what features must be incorporated into the product and the most cost-effective way to produce it, and establishing what the actual cost of production will be. Technical DevelopmentTechnical development involves two steps. The first is the applied laboratory research required to develop exact product specifications. The goal of this research is to construct a prototype model of the product that can be subjected to further study. Once the prototype has been created, manufacturing methods research can be undertaken to plan the best way of making the product in commercial quantities under normal manufacturing conditions. This is an extremely important step, because there is a significant distinction between what an engineer can assemble in a laboratory and what a worker can produce in a factory. Prototype: A company develops a prototype in order to conduct further testing on a potential product. Testing Process While the laboratory technicians are working on the prototype, the marketing department is responsible for testing the new product with its intended consumers and developing the other elements of the marketing mix. Test MarketingTest marketing is the final stage before commercialization, and is where all the elements of the marketing plan are tested. Learning Objectives Discuss the requirements that must be satisfied
to conduct successful test marketing of new products and distinguish test marketing from initial product testing Key TakeawaysKey Points
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Test Marketing This is the final step before commercialization. The objective of the this marketing phase is to test all the variables in the marketing plan, including different elements and characteristics of the product. This stage represents the launching of the total marketing program, albeit on a limited basis.
In the end, the test market should include an estimate of sales, market share, and financial performance over the life of the product. Initial product testing versus test marketing
Initial product testing and test marketing are not the same. Product testing is totally initiated by the producer: he or she selects the sample of people, provides the consumer with the test product, and offers the consumer some sort of incentive to participate. RisksTest marketing is not without inherent risks. First, there are substantial costs in buying the necessary productive capacity needed to manufacture the product or locating manufacturers willing to make limited runs. There are also promotional costs, particularly advertising and personal selling. Although not always easy to identify, there are indirect costs as well. For example, the money used to test market could be used for other activities. The risk of losing consumer goodwill through the testing of an inferior product is also very real. Finally, engaging in a test-market might allow competitors to become aware of the new product and quickly copy it. Test Marketing: Aggressive promotion in a limited geographical area is often a key element of the test marketing phase. Because of the special expertise needed to conduct test markets and the associated expenses, most manufacturers employ independent marketing research agencies with highly-trained project directors, statisticians, psychologists, and field supervisors. Such a firm would assist the product manager in making the remaining test market decisions. Variables
Even after all the test results are in, adjustments in the product are still made. Additional testing may be required, or the product may be deleted if it does
not perform well during this stage, or if it becomes apparent that the product is not likely to become a commercial success. CommercializationCommercialization the process of launching a new product; it may involve heavy promotion and filling the distribution networks with the product. Learning Objectives Describe the three steps that must be implemented during the commercialization of new products Key TakeawaysKey Points
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At last the product is ready to go. It has survived the development process and it is now on the way to commercial success (if all goes well, that is!). ' Commercialization ' is the process or cycle of introducing a new product or production method into the market. In this stage, the product is launched, advertisements and promotional activity begins and increases heavily, and the distribution pipeline is filled with the product. The actual launch of a new product is the final stage of new product development, and the one where the most money will have to be spent for advertising, sales promotion, and other marketing efforts. The commercialization processCommercialization of a product will only take place, if the following three issues are satisfied:
The company has to decide on an action plan for introducing the product by implementing the above decisions. It has to develop a viable marketing-mix and create a respective marketing budget. When a plan is in place for each of these three issues, then the commercialization process may begin. Launching a New Product: Whenever Apple launches a new product, there are crowds outside waiting to get their hands on the new product. Success and Failure: Strategies to Improve SuccessMarketers must learn from their own previous failures, and others' failures, to ensure that they are successful for the next product launch. Learning Objectives Describe how market structure and business model, culture and communication, political and regulatory, and product/service factors impact a company's market success and failure Key TakeawaysKey Points
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Success and FailureA product fails when it does not meet the objectives that were established before its release. The following case study describes Wal-Mart's failure to enter the German market, and highlights many of the problems faced by marketers in making a successful product. By learning from the failures of others (and their own prior failures), marketers may learn how to succeed in future. For a summary of the reasons why products fail as applied to the Wal-Mart case. Wal-Mart's Failure in Germany: Marketers face many challenges when making and introducing a successful product. Wal-Mart case study Wal-Mart is the world's biggest food retailer. In some nations, it is a great success. However, it has failed in some countries (e.g. Germany, South Korea). Here, we will describe Wal-Mart's failure in Germany, and use its experiences there to illustrate some key principles relating to product failure and deletion. Licenses and AttributionsWhat is a process of developing the product that will make it attractive to buyers?Marketing is the process of bringing an idea, product or service in front of a buying audience. Marketing focuses on a customer's wants and needs so companies can identify who might purchase their product to attract those customers to the business.
What is the process of developing a product?New product development is the process of bringing an original product idea to market. Although it differs by industry, it can essentially be broken down into six stages: ideation, research, planning, prototyping, sourcing, and costing.
What is the process of designing new products called?Product development -- also called new product management -- is a series of steps that includes the conceptualization, design, development and marketing of newly created or newly rebranded goods or services.
What are the 4 types of product development processes?The 4 stages of product development are as follows – R&D, Growth, Maturation, and Decline. These may be difficult to map out correctly, but over time when you scale a product you can get a better idea about the stage, it's in.
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