Financing and Marketing Management

Unit 16 - New Product Development Process

16.1. New Product Development Process

• Idea Generation- is the idea worth considering? Ideas might come from Internal sources: R & D, top mgt’ employees; External sources: Customers, competitors, distributors, suppliers, research institutes
• Idea Screening- Is the product idea compatible with company objectives, strategies? Strength and weaknesses, Fit with objectives, Market trends, Rough ROI (Return on Investment) estimate Ideas are evaluated against criteria; most are eliminated. Errors: A GO-Error A DROP-Error
• Concept development and testing-Can we find a good concept for the product that consumers say they would try? Concept: who will use the product? What primary benefit should the product provide? When will people consume? Concept testing is the way of testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. It can be presented symbolically or physically. Nowadays are designed and developed in a computer Obtain: Reactions from customers, Rough estimates of cost, sales and profits
• Marketing strategy development-can we find a cost-effective, affordable marketing strategy? Preliminary market strategy plan describe: • The target market, product positioning, and sales, share, and profit goals for the first few years. • Product price, distribution, and marketing budget for the first year. • Long-run sales and profit goals and the marketing mix strategy.
• Business Analysis Evaluating proposal’s business attractiveness - Will this product meet our profit goal? Management prepares sales, cost, and profit projections. As new information comes in, the analysis will undergo revision and expansion
• Product development R&D or reengineering – developing physical product Prototype development and testing
• Market testing Not all companies undertake market testing. New-to the market products, high risk, high investment cost influence market testing. Questions: have product sales met expectations? Or should we send the idea back for product development (stage 6)? how much market testing should be done, and what kind(s)? How many test cities? Which cities? Length of test? What information? What action to take?
• Commercialization-Are product sales meeting expectations? Contracting for manufacture or build or rent a full-scale manufacturing facility. The company launching a new product must first decide on introduction timing, geographic strategy, target market prospects and introductory market strategy. When? (introduction timing) – First entry – Parallel entry – Late entry ( due to the many problem) - Where? (geographic strategy) – single location, – a region, – the national market or – the international market. To Whom? (target market prospects) – Determining initial distribution and promotion – Early adopters, heavy users and opinion leaders How? (introductory market strategy) – Developing action plan for introducing the product – Critical path scheduling (CPS) can be used.