Development of new product has to be defined in terms of overall corporate objectives. Of late, many companies have adopted this step into their new product development process for ideas and concepts to be developed later on. In this stage company scans the marketing environment to find out opportunities or threats in the external environment and strengths and weaknesses in the internal environment.
New product development process is restricted not only to developing a new product, but also identifying the market. In case of 3M, the cross functional team and six sigma in it has helped to make new discoveries. “Innovation is the key driver in marketing and what is most needed is anticipating the needs of the consumer even before they realise it.” For new product development there may be two approaches – one is top down (also called “inside out”), where a CEO may provide a great idea and ask his technical team to develop, and two is bottom-up (or outside in), whereby the products are developed in co-creation with the customers.
1. Idea Generation:
New product ideas can come from different quarters. Firms now actively involve customers and suppliers for product development process. Thus focus shifts from what they want to produce what products should actually do for them.
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2. Screening and Evaluation:
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To eliminate bad ideas from the good ones both internal and external evaluations are made. Internally firm evaluates the technical feasibility of the idea as to whether the idea meets the objectives defined in the first step, i.e., new-product development strategy. External analysis is done to test the new-product idea.
It is done through concept testing which relies on written description of the product. Many questions are asked in concept testing: how does the customer perceive the product? Who would like to use? And How it would be used? PepsiCo did involve in big exercise for its ‘Kurkure’. Marketing research concentrates on focus groups and web surveys (nowadays).
After concept testing the marketing manager will have a better sense of what type of products and features are most attractive to customers. Secondly, it is an internal assessment about what has potential and what should be discarded. Once some concept is discarded there might be another round of ‘refined-concept’ testing.
3. Business Analysis:
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Some writers on marketing like to call this step as Project evaluation. At this stage product features and marketing strategy are specified and necessary financial projections are made to commercialise the product. This is the last stage before significant capital is allocated for creating prototype.
At this stage analysis includes of economic forces, marketing strategy review, and legal forces relating to the new product. For marketing analysis it is to be seen in relation to marketing programme support. Will it lead to cannibalism of existing products? What will be the reactions of existing channel members and whether new outlets will be required? Also projections are to be made about different costs relating to R&D, production, marketing, and profitability. Legal aspects are to be analysed with regard to patents, especially for the new pharmaceutical products.
4. Development:
Post business analysis whatever ideas are left, proceed to actual development stage. It is a time to turn the idea on paper into a prototype. Many difficulties in product manufacturing come across while developing the prototype. In the Pharmaceutical industry out of 5,000 to 10,000 ideas only one compound is finally developed. Some of the companies later on try to learn from their failures, like Eli Lily. This has helped the company to find ways to succeed. For knowing whether the product will succeed the companies go in for clinical testing. Similarly auto companies go in for product safety tests through crashing the cars.