I.     Idea Generation:

New product development process starts with idea generation. It is systematic search for new product ideas. Companies generate hundreds, even thousands of ideas, to find the most suitable and best one. These ideas come from internal sources and external sources, which are, customers, suppliers, distributors and competitors and others.

 

Internal Idea Source:

Using internal sources companies can find new ideas through formal R&D. for example, Ford has set-up an innovation and mobility center in Silicon Valley, it includes engineers, scientists and app developers. They work on everything from driverless cars to working with nest apps that enable consumers to control home heating, lighting and appliances from their vehicles.

 

Another internal source is, a company can use the brain of their own employees, they may be salesperson, to scientists, to engineers etc. Many companies have developed internal social networks and intrapreneurial programs to encourage employees to come-up with new product ideas. For example, AT&T has internal online innovation community, since its establishment in 2009, AT&T employees has have submitted more than 28,000 new ideas, and company has funded more than 75 projects.

 

External Idea Sources:

Companies can also get new product ideas from external sources, which are;

 

·         Distributors: Distributors are there in the market and near to customers, they know about the needs and problems of customers, they can pass this information back to companies to develop a new product which can better serve consumer needs.

 

·         Suppliers: Suppliers can tell companies about the new ways of manufacturing products, about new materials and techniques etc.

 

·         Customers: Companies can use customer reviews, questions and complaints about the product to develop a better product to solve their problems in coming future. Or companies can gather them at some place to get some new idea.

 

·         Competitors: Companies can carefully watch TV ads of their competitors to get an idea and develop their own a new product.

 

Other idea sources include, business magazines, seminars, webinars, websites, marketing research firms, advertising agencies, Universities, etc.

 

Crowdsourcing:

It is a broader approach of getting a new product idea, Crowdsourcing is to invite broad communities of people, employees, customer, independent researchers and scientists and even public at large, into a new product innovation process. It can produce unexpected and powerful new ideas.

 

 

 

                          II.      Idea Screening:

The purpose of idea generation is to get maximum number of ideas, the later steps will reduce the number. The first idea-reducing stage is Idea screening. It helps spot good ideas and skip the bad one as soon as possible, as product development is a costly step.

 

In many companies, executives list down the ideas in a given standard format, that can be reviewed by new product committee. It touches the important points, estimated market size, product price, manufacturing cost, development time and rate of return.

 

One marketing expert presented three questions to ask before the developing the new product idea further, and the answer should be in “yes”. Questions are R-W-W (Real, Win & worth doing)

 

·         Real: Do the need is real, will customers will buy it, do the new product will solve the customer’s problem.

·         Win: Do the product will provide competitive advantage, do the company have enough resources to make the product.

·         Worth doing: Do the product will help the company to grow. Does it have sufficient profit potential.

 

 

 

                       III.     Concept Development and Testing:

An attractive idea should be developed into a product concept there are three different things;

·         Product Idea: The idea for a possible product, that a company will offer into market.

·         Product Concept: It is the detailed version of idea, described in meaningful consumer terms.

·         Product Image: It is how consumers perceive an actual or potential product.

 

Concept Development:

It is to evaluate the customer’ reactions about your product or service before its launch. See, whether customers like your concept or not, how many customers (customer market) will buy it.

 

Concept Testing:

It is to test new products with group of consumers. The concept may be presented physically or symbolically to consumers. Customers asks question, concerned personals answer those questions. In the end it is observed, out of total, how many customers show 100% interest in the concept or how many have shown 50% interest and how many of them has rejected the concept.

 

 

 

                      IV.       Marketing Strategy Development:

It is to develop initial marketing strategy for introducing a product into market. Marketing strategy statement consists of three parts, which are;

 

·         First part describes, the target market, sales, market share and profit goals for the first few years.

·         Second part describes, products planned price, distribution and marketing budget for the first year.

·         Third and final part or marketing strategy statement highlights the planned long-run sales, profit goals and marketing mix strategy.

 

 

 

                         V.       Business Analysis:

In this step, concerns review the sales, costs and profit projections for a new product to find out, whether they satisfy company’ objectives.

 

·         To estimate sales, company may review the sales history of similar products and conduct market surveys. Company can also estimate minimum and maximum sales to assess the involved risk.

·         While estimating costs, includes marketing and R&D cost, operations, accounting and financial costs.

After estimating sales and costs, company can analyze the new product’ financial attractiveness.

 

 

 

                      VI.      Product Development:

In this stage, R&D and engineers develop the product concept into a physical product, to ensure that the product idea can be turned into a workable market offering. It is a call for huge jump in investment.

 

R&D department will develop one or more physical versions of product concept. It may develop a prototype first, which will satisfy and excite consumers and this can be produced quickly and at budgeted cost. Developing a complete and successful prototype may take days or weeks or even years.

 

Often product pass through rigorous tests to ensure safety and its efficiency. Companies can do this testing on their own or outsourcing this testing to companies specialized in testing.

 

 

 

                   VII.      Test Marketing:

At this stage, product and proposed marketing program are tested in realistic market settings. Test marketing lets the company to test the product and its whole marketing program.

 

Test marketing costs can be higher and there are chances that competitors will take advantage. Which level of test marketing is required; it varies with each new product.

 

If big investment and great risk is involved or when managers are not sure about the product or its marketing program, then companies do a lot of test marketing. For example, Starbucks took 20 Years in developing Starbucks VIA instant coffee and spent several months in testing this new product in its shops in Chicago and Seattle before launching it nationally. The testing paid back, and now Starbucks VIA generating more than $300 million annually.

 

A company may do little test marketing, when managers are confident about the product or its marketing program, when product is less costly or in line extensions or while coping competitor’s successful products.

 

Companies may also shorten or even skip the test marketing after analyzing the market situation or a quick opportunity available in the market. For example, Starbucks very quickly introduced a mobile payment app in the market and with time remove the bugs found in the app.

 

Companies can also use controlled test markets or simulated test markets to reduce the cost and speed-up the process.

 

·         Controlled Test Markets: it is to test new products or its tactics among controlled panels of shopkeepers and stores.

 

·         Simulated Test Markets: in this, managers observe consumer response toward new products and marketing program in laboratory stores or simulated online shopping environment.

 

 

 

                VIII.      Commercialization:

After the successful test marketing, company finally decides to launch the new product in the market. Company starts with commercialization, to introduce the new product in the market, it involves high costs.

 

For Example, while introducing Apple Watch, Apple spent around $38 million on TV advertising campaign in its first year.

 

While launching a new product company must decide about its timing and where;

 

Timing:

·         If the new product will eat the sales of company’ other product, then the launch can be delayed.

·         If improvements are required in the product, launch can be delayed.

·         If economy is down, launch of new product can be delayed.

·         When competitors are ready to introduce a competing product then company may push to introduce the product sooner.

 

Where:

It is up to the company strategy or its expansion policy, company can introduce the new product in a specific region, the national market of international market. Example: Apple launch its products in 115 countries within the three months of its launch.

 

 

 

Managing New Product Development:

The new product development involves more than just going through above-mentioned steps. Successful new product development requires a customer-centered, team-based and systematic effort.

 

 

Customer-Centered New Product Development:

To make the new product successful, companies need to fully understand the customer needs and what he values. A customer centered new product development puts its all focus on finding new ways to solve the problems of customers and create more customer satisfying experiences.

 

One study found that, a successful new product are the ones which are differentiated, solve major problems of customers and offering them a compelling value proposition.

 

Another study found that, companies who involve customers in their new product development process have shown three times growth in income to those companies who don’t. customer involvement has very positive effect on new product development process and product success.

 

 

Team-Based New Product Development:

A successful new product development requires a total-company, cross-functional effort. Some companies use Sequential product Development, it is a process that we discussed earlier, a product is passed from each department, and product or idea moves on step by step, there is no bypass or overlaps. In todays fast changing environment, through this process companies keep control on complex and risky projects, but it can be dangerously slow, it can result in product failure, lost sales and profits.

 

To counter this problem, companies are using Team Based New Product Development, in this approach, cross-functional teams (people from marketing, finance, design, manufacturing or legal department etc.) work together, overlapping steps. It saves time and increase effectiveness.

 

Companies should use both customer-centered and team-based approach to gain a big competitive advantage to get the right new product into market faster.

 

 

Systematic New Product Development:

A new product development process should be holistic and systematic, it should use Innovation Management System, to gather, evaluate, review and manage new ideas.

 

Companies can appoint a senior employee as its innovation manager, this can be a web-based idea management software. It will encourage all stakeholders, employees, distributors, suppliers to participate in finding and developing new products. A recognition program can also be introduced to reward those, who contribute the best idea.

 

This will yield two favorable outcomes, first, it helps companies to create an innovation-oriented company culture. Second, it will help to get larger number of new ideas and to choose the best among them.