New Product Development and its Process

New Product Development (NPD)

Existing products are not sufficient to sustain growth or to retain profitability for the businesses due to the quick changes in taste, competition, and technology. For the company to maintain a diverse product offering, keep customers interested, and increase sales, new goods must be introduced often. One of the most important factors in ensuring that a business can continue to operate and survive in the market is new product development (NPD).

There are four categories of new product and they are given below:

Major Innovations

By developing new technology, it frequently offers clients completely new user benefits. Mobile phones, microwave ovens, home video recorders, and compact discs (CD) are a few examples of newly developed products. A significant issue with this class of products is that potential customers can have doubts regarding their utility and dependability. The business must be able to convince customers that they genuinely need the product, particularly if they have managed just fine without it. Despite the category's marketing issues and hazards, the company's innovative performance can increase its reputation with clients, potential investors, shareholders, and staff.

Product Improvements

Instead of creating a sizable new primary demand, these innovations within the current marketplaces try to steal market share from the rivals. This strategy is well-liked by detergent manufacturers, who commonly employ the catchphrase "new, enhanced recipe" to keep their current clients and entice new ones from rivals. It is also used in the market for crisps and snacks. For instance, Quaker Oats introduced corn snacks and Snack-a-Jacks rice that were "appropriate for coeliacs" and "had 10% less fat" (an allergic condition associated with wheat and related products).

Product Additions

It covers imitation products, which are typically built using the strategy and tools of the rival. New product features may be introduced to the market, but customers may not see as many new benefits. This strategy is common among smaller businesses that prefer to join the market with less expensive knockoffs after their bigger rivals have already expended the time and resources on the first launch. Sony learned this the hard way after spending a lot of money on the research, development, and launch of the Walkman only to find itself up against a lot of copycat devices. The problem of getting distribution in an established market that is dominated by competitors who will use marketing countermeasures to impede the successful entry of a new product must be overcome by newcomers who tend to enter the market with product enhancements or additions.

Repositioned Products

Instead of being considered new products, these are frequently looked of as product adaptations. Instead of providing substantially distinct characteristics, they create a new image for the product by shifting the focus of their advertising. This strategy was adopted by the Lucozade producer to transform the beverage's reputation as a recuperative beverage into an energizing sports beverage.

New Product Development (NPD) Process

• Idea Generation: In order to uncover a few good ideas, a corporation needs to be able to produce a variety of concepts. The flow of ideas can come from a variety of sources, including clients, coworkers, rival businesses, distributors, and suppliers. Employees are the primary source of most new concepts. Though ideas can come from anybody in the organization, individuals who are directly involved in creating and marketing the products, such as those in R&D, production, and marketing, are more useful since they are familiar with the latest developments in technology and consumer demands. Some significant businesses, including 3M, Toyota, and M&S, have successfully utilized this potential. For instance, Toyota claims to incorporate roughly 85% of the nearly 2 million suggestions it receives from various employees each year. Senior management needs to create an environment where staff members are encouraged to share ideas in order to make the most of this information source. Many businesses accomplish this by establishing goals for each area, such as seven ideas per employee, and rewarding those that implement their goals. To assist people and groups in coming up with creative ideas, psychologists and marketing specialists have devised a variety of creativity tools. The more well-liked techniques include forced relationships, morphological analysis, and brainstorming.

• Idea screening: Idea screening is simply the act of contrasting and evaluating ideas for new products to determine which are most promising for the business. The amount of concepts must eventually be decreased. Not all of the concepts are applicable to your business. All ideas must be examined in light of certain criteria, such as the strategic fit, technological challenges, and market prospects, in order to be able to separate the excellent from the poor. The second stage is scanning ideas to weed out those that aren't likely to work or are inappropriate. Potential success is dependent on three elements: the idea's alignment with the corporate strategy of the company, the likelihood that the product will be in demand, and the organization's capacity to seize the opportunity presented by the product. The relative importance of screening criteria is typically determined using a semi-formal weighting method, which is used by many companies.

• Concept Testing: The potential market must be tested on ideas that make it beyond the screening stage. This is only possible if prospective clients could understand the qualities and advantages of the product. The difference between a product idea and its positioning concept must be made. The new physical good or useful service that firms are considering is referred to as a product idea.

• Business Analysis: For the purpose of making production, marketing, and financial estimates, the product concept must be more precisely defined during the fourth stage of NPD. The process will begin with a marketing evaluation. This will consist of:

  • An explanation of the target markets.
  • Volume forecast for sales.
  • Product placement indication.
  • Assessment of potential rival responses.
  • Estimating probable sales losses from current items as customers shifted to the new product (known as cannibalization).
  • Detailing the features of the new product, including their quality levels.
  • Evaluation of pricing ranges that are feasible.
  • The method of dissemination.
  • Description of the conditions for promotions.

• Product Development: The engineering or Research and Development division transforms the product concept into a tangible product at this phase. The product has only been represented thus far by a written description, a picture, or an unfinished mock-up. A significant expenditure is necessary to establish whether the concept could be developed into a marketable product. The amount of innovation needed and the complexity of the product influence how long this stage takes. If the product uses the established technology, the process will be simpler. For instance, building the production process will not be as difficult for a company launching a new shape of potato crisp as developing a great brand image and keeping consistent quality. The many organizational functional areas must work closely together at this point. The product will be designed under the direction of development professionals, with manufacturing aiming for low-cost production, marketing and distribution focusing on the ideal marketing mix, sales, and logistics. Potential customers may participate in tests to gauge functional performance, safety, efficacy, and apparent benefit. Pack tests for consumer goods must evaluate the product's use, performance, and appearance. Research should be done to examine consumer perceptions of expected pricing levels as well as the efficacy of advertising.

• Test Marketing: This test marketing phase offers data on the likelihood that the product will be purchased by the target market, the reaction of the trade, and the performance of the product in comparison to the competitors. The company can change the product as needed thanks to this knowledge. Regarding the availability of media, the distribution system, the presence of competitors, and the characteristics of the target market, it must, as much as feasible, conform to a smaller version of the desired national market. There are certain drawbacks to test markets, though. They might take up to three years to finish, during which time the company could incur significant financial losses if they are unsuccessful. Before the new product is released, marketers and rivals have the opportunity to research it and possibly create a counterproduct in test markets. For instance, a coffee whitener called Carnation Coffee-Mate was test-marketed for six years before it was introduced in the UK. This provided adequate warning to the rival company, Cadbury, as well as the chance to create and market its own product. By lowering their pricing in test cities, stepping up their promotion, and purchasing the test product, rivals can further disrupt the market. They are likely to employ their strongest sales teams, which could skew sales figures and render them unreliable indicators of the expected total market sales.

• Commercialization: After the test-marketing results have been analyzed, assuming no significant changes are required for the product, it is ready to hit the market. There are two options available:

  • If the company has the resources, a rapid national launch can be implemented. This enables the marketing strategy to have the greatest impact possible and may stop rival companies from delaying the launch with competing goods or public relations efforts. A national campaign runs the danger of causing teething problems for some businesses if they don't spend enough time and money making sure their supply, manufacturing, and quality processes are operating as effectively as possible.
  • Another option to the nationwide launch is a rolling rollout. Few businesses have the assurance, resources, and ability to introduce new items on a full national or international basis. Small businesses that choose to pick a desirable city and launch a campaign to enter the market frequently use this strategy. Then, one by one, they could enter other cities.

• Monitoring and Evaluation: Evaluation of the launch procedure and post-launch performance of the product is important once the product has been introduced. The company must respond to inquiries like these when examining the process:

  • Was the correct person involved in the launch?
  • Was sufficient time and resources were allocated to the launch?
  • Was the marketing research information adequate for the launch?

The organization will be able to better its future NPD activities with the answers to these queries. The company will establish performance benchmarks prior to the product introduction, such as sales goals, market share goals in comparison to rivals, and promotion goals. By establishing such a benchmark, the business could gauge the performance of the actual product. Any discrepancy between the two needs should be examined to ascertain whether it was brought on by faulty judgment, a lack of knowledge, or unforeseen market circumstances.

Reference

http://www.business2community.com/product-management/eight-simple-steps-for-new-product-development-0560298

http://www.slideshare.net/arunalapati/newproductdevelopmentprocess