New Product Development Meaning, Stages, Importance

Table of contents:-

  • Meaning of Product Development
  • Relationship between Research, Design and New Product Development
  • Stages of New Product Development
  • Importance of New Product Development
  • Factors Responsible for New Product Development

Meaning of Product Development

New product development is developing a new product or service for the market. This type of development is considered the preliminary step in service or product development. It involves several steps that must be completed before the product can be introduced to the market. New product development may be done to develop an item to compete with a particular product or service, or it may be done to improve an already established product. New product development is essential for every business that must keep up with market trends and differences.

Relationship between Research, Design and New Product Development

There is a definite relationship between research, development and design for the development of any product. As any process first starts with research, then various procedures are followed for its development and at last a design is given to the product which leads to the launching of the product in the market.

These three concepts are inter-related with each other, which are as follows:

1) Research

It depicts the process of gathering, analysing, interpreting and developing information about a market and product.

Successful new products are essential for any company’s growth and survival. New products are assumed to be one of the most important applications of marketing research. Market research provides relevant data to help solve marketing challenges that a business will most likely face in the product development process.

2) Development

It is the process of creating a new product to be sold by a business or enterprise to its customers. After detailed research, the production manager starts developing a product based on information that is gathered during the research process. Then designing is done which leads to involvement of the activities, ie., creating, styling, look and feel of the product and deciding the proper execution of the product.

Development refers collectively to the entire process of identifying market opportunity, creating a product appeal to the identified market and finally testing, modifying and refining the design of the product until it is ready for production.

3) Design

After completion of the research and development process, the turn comes to designing of product. Design is usually a creative act of adventurous and skilled professionals. Product design comprises product ‘research’ and ‘development’ as research is done on new products and development is done to improve the existing product.

Thus, it can be said that there is an intense relationship between these three. They are interdependent, which leads to the success of the launching of a product.

Stages of New Product Development

The various stages involved in developing the product may be listed as:

1) Venture New Product Ideas

New ideas for the selection and development of the product in general may be generated by:

i) Imitation: Imitation means marketing another product similar to one in the market. For example, when one firm has introduced a refrigerator with an automatic defrosting unit, another firm may imitate their refrigerator having a similar unit.

ii) Adaptations: Adaptation involves developing an improved product for an already existing in the market. For example, the introduction of electronic and automatic clocks against mechanical spring wound clocks, the development of a moped with low fuel consumption, etc.

iii) Invention: New designs come from invention. Newly conceived ideas are developed and turned into new products. This procedure involves a lot of money, time, and risk of failure in the consumer market. For this reason, the greatest flow of new designs is not from invention but by imitation.

iv) Other Sources: Sometimes new ideas may be obtained from the following sources:

a) Dealers and customers.

b) Through advertisement, businesses ask people to send their ideas and announce prizes for the best ideas.

c) Success stories of friends/relatives, experience of other manufacturers.

d) Charices of producing substitute of an article for which there is a good demand.

e) Internal sources for new ideas are employees including R & D staff, sales representatives, production workers etc.

2) Idea Screening

The various project ideas are then carefully screened. Poor ideas are dropped, and through elimination, only the most feasible, promising, and profitable ideas are selected for further detailed investigation and evaluation. The entrepreneur should consider his strengths and limitations. It is important to generate product ideas. However, many of these product ideas may be found incapable of developing into suitable products. Such ideas should be dropped and only a few ideas are selected.

3) Concept Development

All product ideas selected after primary investigation (screening) are subjected to thorough investigation and analysis. The purpose is to develop ideas into mature product concepts, which possess utility and can be marketed profitably. A precise description of the ideas and features of the proposed product is made.

4) Product Analysis

Product analysis or production analysis is carried out in concurrence with product design. Many factors have to be analyzed in association with development and design. Some of these factors may be categorized as follows:

i) Marketing Aspects: First, it is necessary to establish that the proposed product will satisfy a demand in the market and that what it is supposed to do and the services it can offer are both acceptable and desirable. Market research is a handy tool in these cases.

ii) Product Characteristics: The product characteristics include the following aspects:

a) Functional aspects.

b) Operational aspects.

c) Durability and dependability, accessibility.

d) Aesthetic aspects.

iii) Economic Analysis: An economic analysis is the key to management decisions in product development. The economic analysis may include:

a) Profit a consideration.

b) The effect of standardisation, simplification and specialisation.

c) The break-even analysis.

iv) Production Aspects: The product needs not only to be well-planned on the drawing board, but its design must also be capable of being eventually translated into palpable fact. The designer must, thus, face a multitude of practical production problems.

The design and its characteristics have to undergo an economic analysis and must be studied in light of available production facilities and techniques. A costing analysis is dependent on the sales volume, hence the suggested design has to be re-evaluated by market research so that the sales forecast can be worked out. This expected sales volume provides the basis for a further study from the production method aspect, and the economic analysis has to be rechecked and modified if necessary.

5) Product Design and Development Programme

It is necessary to design the product before starting its manufacture, When a product idea is conceived and then developed to the point at which it shows itself to be both technically and commercially viable, it is considered how the product should be made. Design is the conversion of knowledge and requirements into a form, convenient and suitable for use or manufacture Product design deals with its form and function. Form implies the shape and appearance of the product, while the function is related to the product’s working.

6) Test Marketing

Once the product has been developed, it has to be tested in the actual marketplace to learn how consumers react to the product’s features, its performance and its marketing programme including branding, packaging, price and distribution. Test marketing decisions involve determining the test. Cities or geographical areas where testing is to be done and deciding the strategies to be tested like packaging advertising and sampling

The product is manufactured on a limited scale and introduced in a well-selected test market before starting full-scale production. Customer’s reactions are then studied under normal market conditions. The reactions of the customer will give additional valuable clues for the product development and necessary modifications to make it more acceptable to the customers.

7) Commercialization

Once the test marketing gives a green signal the company can undertake the full-scale manufacture, considering the necessary modifications. The marketing management can then launch a full-fledged advertising and promotion campaign for the distribution of the product in the entire market. Marketing management will have to undertake constant checking of the new product throughout its life cycle. Product improvement search will be a continuous affair to introduce the necessary improvements, modifications, innovations etc., in the existing product based on changing consumer preferences as well as on account of technological developments.

Importance of New Product Development

An effective product development approach offers three key importance:

1) Resource Utilization: They improve resource utilization by leveraging the capacity of such resources as research and development, factories, the sales force, and field service personnel.

2) Organizational Renewal and Enhancement: The excitement associated with new product development efforts often renews a company by fostering creativity and demonstrating a commitment to innovation. Product development is, despite its benefits, also a necessity.

3) Market Position: New products enhance market position by creating barriers to entry for competitors and establishing a leadership image that translates into market dominance, wider product lines, and increased market share.

Factors Responsible for New Product Development

There are two factors responsible for product development which are as follows:

1) Success Factors

The important success factors for product development are as follows:

i) Product superiority and uniqueness are the most important success factors. It means superior quality and new features that give the product a competitive advantage in the marketplace.

ii) Market knowledge or market effectiveness is considered important because the company understands the needs and wants of target markets, and defines the same at the product concept stage of the new product development process translating this learning into marketing strategies and action plans.

iii) Technical and production capabilities are essential because they translate the product concept into product development and commercial production. Cross-functional teamwork is required to achieve synergy between commercial and technical functions.

2) Failure Factors

The following are the factors which are responsible for the failure of the product:

i) New products only satisfy the needs of a few potential customers. The failure results from an inadequate coordination between marketing and R&D functions.

ii) New products are not significantly different from the existing products. They are similar and imitations of the existing products.

iii) New products need to deliver the expected performance. The companies understand the market or customer expectations but need better product design to meet those expectations.

iv) The companies with weak new product development processes are beaten by competitors who copy their products but have superior product quality and marketing effectiveness.

v) The costs of the new products are much higher than the value perceived by the buyers. This might be because the companies want to recover the cost of product development, design, and market introduction too quickly.

Sometimes, a firm may decide to buy the products and sell them by its name because it is more profitable to do so than to make itself. It will not like to commit itself to huge capital investment and be involved in labour trouble. It earns profit by marketing the products manufactured by other companies. This is done by a large number of shoe distributors in our country as pointed out earlier. Consequently, production is sometimes preferable for the regularity of supply and commitments to distributors. They can also maintain standards through production, thereby creating goodwill for their products.

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