New Product Planning and development New products are a vital part of a firm’s competitive growth strategy. Leaders of successful firms know that it is not enough to develop new products on sporadic basis. What counts is a climate of a products development that leads to one triumph after another. It is commonplace fro major companies to have 50percent or more of their current sales in products introduced within the last 10 years. Some Additional facts about new products are: • • • • • Many new products are failures.
Estimates of new product failures range from 33%90%, depending on industry. New product sales grow far more rapidly than sales of current products, potentially providing a surprisingly large boost to a company’s growth rate; Companies vary widely in the effectiveness of their new products programs; A major obstacle to effectively predicting new product demand is limited vision; Common elements appear in the management practices that generally distinguish the relative degree of efficiency and success between companies.
In one recent year, almost 22 000 products were introduced in supermarkets, drugstores, mass merchandisers and health food stores. Idea Generation Every product starts as an idea. But all new product aides do not equal merit or potential for economic or commercial success. Some estimates indicate that as many as 60-70 ideas are necessary to yield one successful product. To develop a new product the following step must be realized: 1. 2. 3. 4. 5. 6. Idea generation; Idea screening; Project planning; Product development; Test marketing; Commercialization.
Idea screening The primary function of the idea screening process is two fold: first, to eliminate ideas for new products that could not be profitably marketed by the firm, and second, to expand viable ideas into full product concepts. New product ideas may be eliminated either because they are outside the fields of the firm’s interest or because the firm does not have the necessary resources or technology to produce the product at a profit. The organization has to consider three categories of risk in the idea screening phase prior to reaching a decision.
These three risk categories are: 1. Strategic risk – strategic risk involves the risk of not matching the role or purpose of a new product with a specific strategic need or issue of the organization; 2. Market risk – market risk is the risk that a new product won’t meet a market need; As products are being developed, customer requirements change and new technologies evolve; 3. Internal risk – internal risk is the risk that a new product won’t be developed within the desired time and budget; Project planning This stage of the process involves several steps.
It is here that the new product proposal is evaluated further and responsibility for the project is assigned to a project team. The proposal is analyzed in terms of production, marketing, financial and competitive factors. A development budget is established and some preliminary marketing and technical research is undertaken. Alternative product features and component specifications are outlined. Finally, a project plan is written up, which includes estimates of future development, production and marketing costs along with capital requirements and manpower needs. Project proposal is given to top management for a go or no-go decision.
Various alternatives exist for creating and managing the project team. A key component contributing to the success of many companies’ product development efforts relates to the emphasis placed on creating cross-functional teams early in the development process. Frequently, marketing and sales personnel are called in to lead the teams. Product development At this juncture, the product idea has been evaluated from the standpoint of engineering, manufacturing, finance and marketing. If it has met all expectation, it is considered a candidate for further research and testing.
A development report to management is prepared that spells out in fine detail: 1. results of the studies; 2. required plan design; 3. production facilities design; 4. tooling requirements; 5. marketing test plan; 6. financial program survey and 7. estimated release data. Test Marketing Up until mow the product has been a company secret. Now management goes outside the company and submits the product candidate for customers approval. Test marketing is a controlled experiment in a limited geographic area to test the new product or in some cases certain aspects of the marketing strategy, such as packaging or advertising.
The main goal of a test market is to evaluate and adjust the general marketing strategy to be used and the appropriate marketing mix. Throughout the test market process, findings are being analyzed and forecasts of volume developed. Upon completion of a successful test market phase, the marketing plan can be finalized and the product prepared for launch. Commercialization This is the launching step in which the firm commits to introducing the product into the marketplace. During this stage, heavy emphasis is placed on the organization structure and management talent needed to implement the marketing strategy.
Emphasis is also given to following up on such things as bugs in the design, production costs, quality control, and inventory requirements. Importance of time Over the course of the last five years, companies have placed an increasing emphasis on shortening their products’ time to market. Time to market can be defined as the elapsed time between product definition and product availability. It has been well documented that companies that are first in bringing their products to market enjoy a competitive advantage both in terms of profits and market share.
Quality level Consumers consider that the level of product quality when making purchase decisions are both new and existing products. At minimum, buyers want product that will perform the functions they are supposed to and do so reasonably well. Some customers are willing to accept lower quality if product use is not demanding and the price is lower. In designing new products, marketers must consider what criteria potential customer use to determine their perceptions of quality. Eight general criteria are given below: 1. Performance – How well does the product do what it is supposed to do? . Features – Does the product have any unique feature that are desirable? 3. Reliability – Is the product likely to function well and not break down over a reasonable time period? 4. Conformance – Does the product conform to established standards for such things as safety? 5. Durability – How long will the product last before it will be worn out and have to be replaced? 6. Serviceability – How quickly and easily can any problems be corrected? 7. Aesthetics – How appealing is the product to the appropriate senses of sight, taste, smell, feel and/or sound? 8.
Overall evaluation – Considering everything about the product, including its physical characteristics, manufacturer, brand image, packaging and price, how good is this product? Product design Many well-designed products are easy to use as intended and pleasing to the senses. Designing new products with both ease of use and aesthetic appeal can be difficult, but it can clearly differentiate a new product from competitors. Good design can add great value to a new product. Product safety Clearly, new products must have a reasonable level of safety. Safety is both an ethical and practical issue.
Ethically, customers should not be harmed by using a product as intended. The practical issue is that when users get harmed by a product, they may stop buying, tell others about their experience, or sue the company. Cause of New Product Failure Many new products with satisfactory potential have failed to make the grade. Here is a brief list of some of the more important causes of new product failures after the products have been carefully screened, developed and marketed: 1. No competitive point of difference, unexpected reactions from competitors; 2.
Poor positioning; 3. Poor quality of product; 4. Non-delivery of promised benefits of product; 5. Too little marketing support; 6. Poor perceived price/quality value; 7. Faulty estimates of market potential and other marketing research mistake; 8. faulty estimates of production and marketing costs; 9. Improper channels of distribution and marketing costs; 10. Rapid change in the market after the product was introduced. Need for research The keystone activity of any new product planning system is research – nut just marketing research, but technical research as well.
This need will be more clearly understood if some of the specific questions commonly raised in evaluating product ideas are examined: 1. What is the anticipated market demand over time? Are the potential applications for the product restricted? 2. Can the item be patented? Are there any antitrust problems? 3. Can the product be sold through present channels and sales force? 4. At different volume levels, what will be the unit of manufacturing costs? 5. What is the most appropriate package to use in terms of color, material, design and so forth? 6. What is the estimated return on investment? 7. What is the appropriate pricing strategy?