Business organizations are facing gradual changes in the demands and tastes of customers. Actually which can be met through new products development. Although new product development process is not easy to complete. However the change in technology and competitor strategies, also stimulates organizations toward new product development process. Also the modifications in the existing products. It is obvious that progress in the world leads to awareness of new needs of people. So this in turn creates demand for new materials for the satisfaction of those new needs.
So it is one of the main functions of business organizations to keep in view the changing trends and demands of the customers in order to be successful in the long run. If a firm does not involve in new product development or modification of existing products, then it would become history in the market. Generally there are two methods to cover this issue which are as follows.
- Purchase (acquisition) of a new company with its products or obtaining a license to manufacture another firm’s product.
- New product development by using the organization’s own research and development.
More From Business Study Notes:- Research and Development
It is useful for business organizations to use their own research and development to manufacture either entirely a new product or modify existing one. There is a lot of cost associated with this method and therefore it is also much riskier. Studies have shown that in case of consumer products, almost 80% of new products fail in the market and 30% is a failure rate of industrial products. The reasons behind such failures may be more than one which are as follows.
- Overestimation of market potential
- Difference between the proposed design and the actual design of the product.
- High price or poor advertisement.
- False positioning of the product in the minds of customers etc..
In the light of the above problems, there is a strong need for businesses to do systematic planning for the development of new products. For this purpose there are eight steps in a systematic process that are successfully adopted by firms throughout the world.
Steps to New Product Development Process
These steps are as follows and complete the New Product Development Process nicely.
- Idea Generation
- Idea Screening
- Concept Development and Testing
- Marketing Strategy
- Business Analysis
- Product Development
- Test Marketing
The first step in the new product development process is idea generation in which a number of new ideas are searched. Following are some of important sources that are used to obtain new ideas about the product.
- Internal sources (executives, engineers, etc.)
In the internal environment, the engineers, executives, salespersons and scientists (etc.) are motivated to think of getting some new ideas. Communicating with customers regarding complaints and market surveys are also helpful in the accumulation of new ideas. In this step different ideas are searched only without examining their practicability and profitability.
In this step the accumulated ideas are analyzed in order to pick the best ideas while dropping the bad ones. It is obvious that for every new idea of a product, certain costs would definitely be incurred especially in the later steps. Also, it is not appreciable to search a lot of ideas, but the good thing is that the searched ideas are profitable one. So in this step the nominated committee evaluates all the searched ideas on the following criteria to check their relative feasibility.
- Is the new product beneficial for the customers and society?
- Is it fruitful for the business itself?
- Or is it in accordance with the objectives and mission of business?
- Does the business possess the required skill employees and technology for manufacturing it? etc..
Concept Development and Testing
When a business organization selects a potential idea, it converts it into a product concept to test the feasibility.
A product idea is simply an idea that seems practical to be converted into actual products.
The product concept is the version of that idea in some practical details.
The product image is the position of the product in the minds of customers.
So the business develops its concept of product and tests its profitability by conducting surveys in the market. Main concept or rough picture of the new product is shared with the customers to check its practicability. The detailed physical presentation of the new product can increase its reliability.
When the product concept of any product ideas is effectively tested, then a marketing strategy is prepared for it. This marketing strategy contains a statement divided into three parts.
The first part includes target market, sales, market share, market positioning, and profit goals for the coming few years. The second part includes strategy about planned price, budget for the first year and distribution of the new product.
The third part describes estimated sales in the long run along with the profit and the strategy of the marketing mix.
When the product concept is passed along with its marketing strategy, the business analysis is conducted in the overall attractiveness of the proposal. It analyzes the costs, sales and projected profits of the new product in order to check its feasibility with the organization’s objectives. When the new product is passed in this step, it enters into the stage of product development.
Before the product development step of a new product development process, the product is only in a crude form of concept, picture or words. But in this step the business takes a big jump of investment and its Research and Development team starts converting the words or picture into physical reality. For this purpose a sample prototype is prepared that contains the main features of the product to further check the practicability in its functions.
When the sample product passes the functional tests, its test marketing is started, in which it is marketed to the customers to check its further practical potential before manufacturing in large scale. For this purpose the business develops a proper marketing program that takes into account all the practical elements of marketing mix like pricing, advertising, distribution, budget, Branding and Packaging.
This is the last step of the new product development process in which the new product is manufactured and offered on a large scale for profit purpose. It is also important as the business has to incur the high cost and faces real challenges, like when to launch the new product and where it should be launched? etc.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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