1. Idea Generation
The new product development begins with idea generation. There
are many sources of discovering new ideas. Some important sources are following:
- Internal sources: Firms may give incentive to their employees to come up with workable ideas. According to a study, 55% new ideas come from internal sources.
- SWOT analysis: Corporations may analyze their strengths, weaknesses, opportunities and threats in order to generate good ideas.
- Market research: Conducting marketing research in order to find out consumer’s needs.
- Invitation: Inviting suggestions and feedback from consumers and dealers.
- Competitors: Studying the competitor’s success and failures.
2. Idea Screening
Coming with ideas is easy but generating good one is not an easy
task. In the first step large amount of ideas are generated. In the second step
good and workable idea is selected. If many ideas are selected, a company must
prioritise which one move to the next level in the process. At the screening step, safety concerns of the
product must be considered, because at a later time, a company may be held
responsible for producing and selling unsafe products. Marketing managers must
be aware of legal and ethical matters while screening new product ideas.
3. Concept Testing
When an idea is selected, it is evaluated more thoroughly.
Companies evaluate the idea by using concept testing – which is the method of
obtaining reactions from customers towards the new product idea. For this, the
marketing managers select the small group of customers. Then they are asked
what they feel about the product. Does the product fulfill their need? Will
they buy it when its actually launched?
Concept testing gives a business chance to develop the concept further.
4. Business Analysis
Once the concept has been tested, assessment is taken place
whether the product will be profitable or not.
Under business analysis, the company assesses the following points.
- Is there any demand for the new product? Whether this demand is regular or seasonal?
- What will be the cost of the new product?
- What will be the profit margin of the new product?
- What will be the expenses of promotion?
- Is there any competitor of the new product?
- Percentage of new product sales.
- Break even analysis.
In short, the company analysis the new product from every angle.
If the product is profitable, then it is accepted otherwise the idea is
terminated at this stage.
5. Product Development
Product development entails engineering effort to design and
develop the physical part of the product. In case of service offering, the
company will arrange equipment and provide training required to render service. At this stage, all the necessary steps are taken to produce and distribute the product. The
production department becomes busy in the production of product. The marketing
department makes plan to distribute the product. The finance department
provides finance for introducing the new product.
6. Test Marketing
In this stage, the product is introduced to the market in a
small scale. If customers like the product then it is introduced on a large
scale. Conversely, if customers do not like the product then the company
figures out the causes of its failure. The company makes some necessary changes
and introduces the product again. The purpose of test marketing is to obtain
suggestions and feedback from customers regarding the new product. The test
marketing helps determine what needs to be done before an official launch of
the product.
7. Commercialization
The final step in the new product development is
commercialization. The commercializing means promoting the product on the large
scale by means of advertisements such as newspapers, magazines, TV, radio and
internet. At this stage, the highest cost may be incurred, if company is
entering a high competitive market.
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