NEW PRODUCT NEW PRODUCT DEVELOPMENTDEVELOPMENT

New product developmentNew product development

A company may find itself in a situation where it may be A company may find itself in a situation where it may be advisable to develop a new product. advisable to develop a new product.

When sales of its current range of products have been When sales of its current range of products have been declining over the past few years or when it receives declining over the past few years or when it receives complaints about its products from customers, distributors, complaints about its products from customers, distributors, retailers, it may have to find the possible reasons for the same.retailers, it may have to find the possible reasons for the same.

The concept of product lifecycle suggests that a product passes The concept of product lifecycle suggests that a product passes through different stages. When a company finds that some of through different stages. When a company finds that some of its products have entered the declining stage, it may have to its products have entered the declining stage, it may have to take concrete measures to replace them.take concrete measures to replace them.

This can be achieved in 2 ways: Acquisition and InnovationThis can be achieved in 2 ways: Acquisition and Innovation

New product developmentNew product development

New product development can be carried out in one of the New product development can be carried out in one of the following ways:following ways:

1.1. New product features can be developed by adapting, New product features can be developed by adapting, modifying, magnifying, minimizing, substituting, modifying, magnifying, minimizing, substituting, rearranging or combining the existing features of a product.rearranging or combining the existing features of a product.

2.2. Different quality versions of the existing product can be Different quality versions of the existing product can be developed so that the needs of the different markets can be developed so that the needs of the different markets can be met.met.

3.3. Additional models and sizes of the existing product can be Additional models and sizes of the existing product can be brought out.brought out.

Internal Innovation & Contract Internal Innovation & Contract InnovationInnovation

If the company pursues the policy of internal innovation, it If the company pursues the policy of internal innovation, it implies that it has its own research and development implies that it has its own research and development department which is engaged in the development of new department which is engaged in the development of new products including modifications and improvements in the products including modifications and improvements in the existing ones.existing ones.

If, on the other hand, the company pursues contract If, on the other hand, the company pursues contract innovation, it implies that it has engaged the services of innovation, it implies that it has engaged the services of outside researchers or new product development agencies for outside researchers or new product development agencies for introducing new products for the company.introducing new products for the company.

New product developmentNew product development

There is a dilemma faced by the management with respect to There is a dilemma faced by the management with respect to new product development. On the one hand, the company new product development. On the one hand, the company finds that it is necessary to develop new products.finds that it is necessary to develop new products.

On the other hand, the stake involved in the new product On the other hand, the stake involved in the new product development is very high on account of research and development is very high on account of research and development activity being highly capital intensive.development activity being highly capital intensive.

If the new product fails in the market, the company has to If the new product fails in the market, the company has to sustain a heavy loss.sustain a heavy loss.

It is therefore necessary that new product development be It is therefore necessary that new product development be carried out with extreme caution.carried out with extreme caution.

New product development is an extremely difficult process.New product development is an extremely difficult process. One has to be fully informed about the market and product One has to be fully informed about the market and product

opportunities before entering into a new product development opportunities before entering into a new product development project.project.

New product development processNew product development process

This involves the following stages:This involves the following stages:

1.1. Idea generationIdea generation

2.2. Concept development and testingConcept development and testing

3.3. Product evaluation and developmentProduct evaluation and development

4.4. Business analysis andBusiness analysis and

5.5. Commercialization.Commercialization.

I. Idea GenerationI. Idea Generation

The objective of this stage is to obtainThe objective of this stage is to obtain1.1. New ideas for productsNew ideas for products2.2. New attributes for the existing products andNew attributes for the existing products and3.3. New uses of the existing productsNew uses of the existing productsThere are several sources of new product ideas such as There are several sources of new product ideas such as

customers, company salesman, dealers, scientists, customers, company salesman, dealers, scientists, competitors, top management, industrial consultants, competitors, top management, industrial consultants, advertising agencies, marketing research firms, industrial advertising agencies, marketing research firms, industrial publications, universities and commercial laboratories.publications, universities and commercial laboratories.

1. Attribute Listing1. Attribute Listing

Major attributes of an existing product are listed.Major attributes of an existing product are listed. Then, one is asked to imagine how each of these attributes can Then, one is asked to imagine how each of these attributes can

be modified so that the product will improve.be modified so that the product will improve. New ideas can be generated with reference to a particular New ideas can be generated with reference to a particular

product:product: Can it be put to other uses?Can it be put to other uses? Can we Adapt? Modify? Magnify? Minify? Substitute? Can we Adapt? Modify? Magnify? Minify? Substitute?

Rearrange? Reverse? Combine?Rearrange? Reverse? Combine?

2.Forced relationships2.Forced relationships

This technique involves listing of several objects and then This technique involves listing of several objects and then trying to find how each object can be combined with the other trying to find how each object can be combined with the other objects. objects.

For example, a bed and a sofa set, two separate products are For example, a bed and a sofa set, two separate products are combined into one – bed – cum- sofa set – fulfilling a felt need combined into one – bed – cum- sofa set – fulfilling a felt need of using furniture in a limited space.of using furniture in a limited space.

3. Morphological analysis3. Morphological analysis

Morphological analysis will enable identification of the Morphological analysis will enable identification of the components of current successful products and find new components of current successful products and find new combinations of attractive features.combinations of attractive features.

Such an analysis has been extremely useful in the Such an analysis has been extremely useful in the development of new technologies.development of new technologies.

Morphological analysis is time consuming.Morphological analysis is time consuming. A thorough search of all the possible combinations would not A thorough search of all the possible combinations would not

be possible without morphological analysis.be possible without morphological analysis.

4. Problem analysis4. Problem analysis

Here, the consumers are approached to find out if they have Here, the consumers are approached to find out if they have experienced any problem while using a particular product or experienced any problem while using a particular product or product category.product category.

One can then select one or two major problems from such a One can then select one or two major problems from such a list on the basis of their importance, the frequency of their list on the basis of their importance, the frequency of their occurrence, and the cost of effecting improvement in the occurrence, and the cost of effecting improvement in the

productproduct..

5. Brain storming5. Brain storming

This technique involves the use of a small number (usually This technique involves the use of a small number (usually between six and ten) of consumers who are asked to between six and ten) of consumers who are asked to participate in a brain storming session.participate in a brain storming session.

The purpose of such a session is to generate a new product The purpose of such a session is to generate a new product ideas.ideas.

In order to ensure that a brain storming session is effective:In order to ensure that a brain storming session is effective:1.1. No criticism of any new idea should be madeNo criticism of any new idea should be made2.2. Freewheeling is welcomed, indicating that the wilder the Freewheeling is welcomed, indicating that the wilder the

idea, the better it is.idea, the better it is.3.3. A good number of ideas must be generatedA good number of ideas must be generated4.4. Participants should suggest how two or more ideas can be Participants should suggest how two or more ideas can be

combined into still another idea. combined into still another idea.

6. Synectics6. Synectics

Some authors feel that a major limitation of brain storming Some authors feel that a major limitation of brain storming session is that it produces solutions too quickly before session is that it produces solutions too quickly before developing some perspectives.developing some perspectives.

Instead of defining the problem specifically as in brain Instead of defining the problem specifically as in brain storming sessions, the synectic approach defines the problem storming sessions, the synectic approach defines the problem so broadly for the participants in the group who have no idea so broadly for the participants in the group who have no idea of the specific problem.of the specific problem.

In such exercises, the participants give their view points and as In such exercises, the participants give their view points and as more and more facts are gradually interjected, their discussion more and more facts are gradually interjected, their discussion tends to move towards specificity.tends to move towards specificity.

II. Concept Development & TestingII. Concept Development & Testing

It should be obvious that all the new product ideas generated It should be obvious that all the new product ideas generated , cannot be pursued., cannot be pursued.

This may be on account of several reasons:This may be on account of several reasons:1.1. The company may find that a particular new product idea is The company may find that a particular new product idea is

incompatible with its major objectives.incompatible with its major objectives.2.2. Another reason for not pursuing a new product is that it may Another reason for not pursuing a new product is that it may

not be technologically feasible.not be technologically feasible.3.3. Thus, a preliminary screening will eliminate a number of Thus, a preliminary screening will eliminate a number of

new product ideas.new product ideas.

Concept testingConcept testing

The new product ideas which survive in screening are then The new product ideas which survive in screening are then pursued further through concept testing. The major pursued further through concept testing. The major objectives of concept testing are:objectives of concept testing are:

1.1. To get the reaction of consumers’ views of yhe new product To get the reaction of consumers’ views of yhe new product idea.idea.

2.2. To give direction regarding the development of the project.To give direction regarding the development of the project.3.3. To choose the most promising concepts for development.To choose the most promising concepts for development.4.4. To ascertain whether the product in question has adequate To ascertain whether the product in question has adequate

potential for its commercialization.potential for its commercialization.

Concept testingConcept testing

The concept test can take three different forms:The concept test can take three different forms:1.1. It can be entirely verbal – A statement about what it does.It can be entirely verbal – A statement about what it does.2.2. It can be visual – in form of a photograph or drawing.It can be visual – in form of a photograph or drawing.3.3. A mockup of the product may be used – this is merely a A mockup of the product may be used – this is merely a

dummy product to get across the idea.dummy product to get across the idea.

1. Focus group interviews1. Focus group interviews

Focus group interviews are conducted with 8 to 12 participants Focus group interviews are conducted with 8 to 12 participants where the moderator gives the group discussion a more where the moderator gives the group discussion a more specific direction.specific direction.

The main objective is to have a deeper insight so that the The main objective is to have a deeper insight so that the concepts can be further refined.concepts can be further refined.

2. Monadic tests2. Monadic tests

In monadic testing, a respondent evaluates a single item in In monadic testing, a respondent evaluates a single item in isolation from the other alternatives.isolation from the other alternatives.

The respondents are divided into groups and the number of The respondents are divided into groups and the number of groups depends on the number of new product concepts.groups depends on the number of new product concepts.

Each respondent evaluates only one concept on uniform Each respondent evaluates only one concept on uniform dimensions as are used with respect to other concepts.dimensions as are used with respect to other concepts.

When each respondent has given his rating on the specified When each respondent has given his rating on the specified dimensions, an average score for each product is calculated.dimensions, an average score for each product is calculated.

The new product concept that obtains the highest score is The new product concept that obtains the highest score is chosen for further evaluation.chosen for further evaluation.

3. Paired comparison tests3. Paired comparison tests

Instead of examining only one product concept as in the Instead of examining only one product concept as in the preceding method, the respondent examines two product preceding method, the respondent examines two product concepts at a time indicating which of the two is preferable.concepts at a time indicating which of the two is preferable.

4. Conjoint analysis4. Conjoint analysis

This method attempts to ascertain the joint effects of two or This method attempts to ascertain the joint effects of two or more nominal independent variables on the ordering of a more nominal independent variables on the ordering of a dependent variable.dependent variable.

Here, the respondents give their ratings on two or more Here, the respondents give their ratings on two or more attributes at a time.attributes at a time.

The use of conjoint analysis will not only indicate the relative The use of conjoint analysis will not only indicate the relative importance of product attributes but also the manner in which importance of product attributes but also the manner in which they are related to each other.they are related to each other.

This will enable the researcher to identify the best This will enable the researcher to identify the best combination of product attributes.combination of product attributes.

III. Product evaluation & DevelopmentIII. Product evaluation & Development

The objective of product testing is to ascertain the market The objective of product testing is to ascertain the market response to the proposed product so that the management can response to the proposed product so that the management can decide whether or not the product should be carried forward.decide whether or not the product should be carried forward.

This would involve a more realistic plan for the product This would involve a more realistic plan for the product exposure.exposure.

Another major difference between the product testing stage Another major difference between the product testing stage and the concept development and testing stage is that the and the concept development and testing stage is that the former involves the trial use of the product by a group of former involves the trial use of the product by a group of respondents, while the later attempts to measure only the respondents, while the later attempts to measure only the initial interest in the proposed product.initial interest in the proposed product.

Here, some kind of usage test is undertaken to find out Here, some kind of usage test is undertaken to find out whether the respondents would be interested in it and whether whether the respondents would be interested in it and whether they would subsequently buy it if it were available in the they would subsequently buy it if it were available in the market.market.

1. Usage tests1. Usage tests

There are 2 types of usage tests:There are 2 types of usage tests:1.1. Laboratory usage testsLaboratory usage tests2.2. Consumer usage testsConsumer usage testsIn the laboratory usage tests, R & D people may test a new In the laboratory usage tests, R & D people may test a new

product with respect to one or more attributes. For example, product with respect to one or more attributes. For example, a car manufacturing unit will have its R & D department a car manufacturing unit will have its R & D department whose task is to effect improvements in the car, say, whose task is to effect improvements in the car, say, economy in fuel consumption. economy in fuel consumption.

R & D personnel may evaluate the proposed vehicle by R & D personnel may evaluate the proposed vehicle by undertaking test drives under varying conditions.undertaking test drives under varying conditions.

Consumer usage testsConsumer usage tests

The consumer usage tests and the laboratory tests may give The consumer usage tests and the laboratory tests may give different evaluations of the same product.different evaluations of the same product.

This is because consumers’ perception may be different and This is because consumers’ perception may be different and accordingly they may attach importance to those attributes accordingly they may attach importance to those attributes which were not considered by the R & D department.which were not considered by the R & D department.

In a consumer usage test, a small number of consumers are In a consumer usage test, a small number of consumers are given a sample of the new product.given a sample of the new product.

They are asked to use it in a normal fashion and later indicate They are asked to use it in a normal fashion and later indicate their reaction to it as also the defects tgat they have noticed.their reaction to it as also the defects tgat they have noticed.

IV. Business analysis & IV. Business analysis & CommercializationCommercialization

New product ideas that survive the product evaluation and New product ideas that survive the product evaluation and development stage are then taken up for an in- depth analysis development stage are then taken up for an in- depth analysis to ascertain their business attractiveness.to ascertain their business attractiveness.

For this purpose, it is necessary to project the future sales, For this purpose, it is necessary to project the future sales, costs and profit, and if such estimates are reasonably good, the costs and profit, and if such estimates are reasonably good, the product in question is commercialized.product in question is commercialized.

However, as new information becomes available, the estimates However, as new information becomes available, the estimates of sales, costs and profit may have to be revised.of sales, costs and profit may have to be revised.

In order to carry out business analysis and commercialization In order to carry out business analysis and commercialization of the new product, two important techniques – test marketing of the new product, two important techniques – test marketing and simulated test marketing are used.and simulated test marketing are used.

Test marketingTest marketing

After the concept testing and development of a new product, it After the concept testing and development of a new product, it is necessary to find out whether it is going to be accepted or is necessary to find out whether it is going to be accepted or not in the market. This is achieved through test marketing.not in the market. This is achieved through test marketing.

The main objective of test marketing a new product is to The main objective of test marketing a new product is to reduce the commercial risk when it is brought in the market.reduce the commercial risk when it is brought in the market.

Test marketingTest marketing

Test marketing is a controlled experiment, done in a limited Test marketing is a controlled experiment, done in a limited but carefully selected part of the market place, whose aim is but carefully selected part of the market place, whose aim is to predict the sales or profit consequences, either in absolute to predict the sales or profit consequences, either in absolute or in relative terms, of one or more proposed marketing or in relative terms, of one or more proposed marketing actions.actions.

It is essentially the use of the market place as a laboratory It is essentially the use of the market place as a laboratory and of a direct sales measurement which differentiates this and of a direct sales measurement which differentiates this test from other types of market research.test from other types of market research.

Uses:Uses:1.1. It may be used as a tool for managerial control.It may be used as a tool for managerial control.2.2. It may also be used as a predictive research tool. It may also be used as a predictive research tool.