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Resources and environmental considerations
The shortages of various raw materials in the world have caused a lot of
problems for the companies that have now realized that the supply of many
natural resources is listed and irreplaceable. Careful product planning and
development has become essential of new products that make less use of scarce
resources.
Two aspects are essential for successful new product development and
its profitable marketing.
i)
proper organisational arrangements for it, and
ii)
skillful handling of each step involved in the process of new product
development.
Organisational arrangements for new product development
A company can establish the organisational structure for new product
development in various ways. New product development work may be
entrusted to the product manager or new product managers. Alternatively, the
company may set up a high level management committee for reviewing new
product proposals and approving new product plans. Large companies may
have a new product development department headed by a manager having
adequate authority and direct access to the top management. A company can
also form a new product venture team by bringing together a group of managers
from different operating departments. The members of the group may be
charged with the duty of bringing a specific product or business into being.
Each of these organisational arrangements can be more effective under some
circumstances and less effective under others.
In order to be successful a company must make a consistent commitment
of its resources to new product development, design a new product strategy
linked to its strategic planning process and establish a formal mechanism for
managing the new product development process.
Stages in new product development process
1) Idea generation :
The actual process for developing a new product starts with the
search for ideas for that product which can be derived from a number of
sources such as customers, scientists and technologists, competitors,
company’s sales force and dealers, top management of the company,
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inventors, patentees, universities, commercial and research laboratories
(like the Regional Research Laboratories), industrial consultants,
advertising agencies, marketing research firms and industrial journals
and publications. A company should tap these sources to the maximum
possible extent for obtaining useful ideas for new products.
2) Idea Screening:
The ideas generated or screened and their number is reduced by
dropping the poor ideas early to avoid high product development costs
on them at the later stages. The concerned managers of a company
should be careful at this stage, and should not commit the “go-error” by
permitting a poor idea to move into development and
commercializations, and “drop-error” by dismissing or dropping out an
otherwise good idea.
3) Concept development and testing :
In this stage, the ideas that pass through the screening stage are
developed into product concepts.
For example, a food processing company gets the idea of
producing a power to add to milk to increase its nutritional value and
taste. In such case, the company has to put questions on the powder may
be meant for infants, children, teenagers, young or middle aged adults or
old people, may have the taste nutrition, refreshment and energy benefits
and may be taken at the time of breakfast, lunch or dinner. The company
can by asking these questions, form many product concepts, such as an
instant breakfast drink for adults looking for a quick nutritional
breakfast, a tasty snack drink as a mid-day refreshment, or health
supplement for old people in the night before going to bed.
A product concept has got to be properly positioned against other
product concepts competiting with it as well as against existing brands of
product in its own category. The company, therefore has to take decision
in this regard. Further, the concept has go to be tested with an
appropriate group of target consumers whose reactions to it have to be
found out by asking them appropriate questions. The answers to such
questions will help the company determine which concept is the most
appealing one.
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4) Marketing strategy development :
In this stage, a preliminary marketing strategy for the new
product, stating the size, structure and behaviour of the target markets,
the planned product positioning and sales, market share and initial profit
goals, the products planned price, distribution strategy, marketing
budget, planned long run sales and profit goals and marketing mix
strategy over time has got to be developed.
5) Business Analysis :
Under this stage, the management of the company has to review
their sales, costs, and profits estimates, in order to evaluate the business
attractiveness of the proposed products and determine whether they
satisfy the company’s objectives. If the business analysis reveals that a
product concept is attractive enough, it can move to the product
development stage.
6) Product development:
Under this stage, that involves increased investment and
determines whether the product idea can be translated into a technically
feasible and commercially viable product. The R & D department of the
company develops one or more physical versions of the product concept
with a view to find a prototype that is perceived by the consumers as
embodying the key attributes mentioned in the product concept
statement.
7) Market Testing :
Market testing enables the management of a company to know as
to how consumers and dealers react to handling, using and purchasing
the actual product and what is the size of the marketing for the new
product that the company is developing under this stage, it is fit for being
dressed up with name, packaging, and a preliminary marketing
programme to test it in more authentic consumer sittings and real market
situation.
8) Commercialization :
If the information gathered by the management of company after
market testing is encouraging and indicative of better prospects and
satisfactory sales and profit potentials of the new products, the company
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may proceed to the new product development process i.e.
commercialization.
Under this stage, four important decisions are required to be taken.
i)
decision regarding the timing of the launching of the product.
ii)
decision regarding the geographical area where the product is to be
launched - single locality, a region, several regions, the national market
or the international market.
iii) decision regarding the prime prospectus to whom to target the
distribution and promotion, and
iv)
decision regarding the introductory market strategy involving the
development of an action plan for introducing the new product into the
target markets and allocation of the marketing budget among the
different components of the marketing mix and sequencing of the various
activities.
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