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New product development (NPD) is a process which is designed to develop, test and consider the viability of products which are new to the market. Continuous innovation in NPD is helping to ensure the growth or survival of the organization. NPD can be done in several ways, such as development of new products, changes or enhancement on design of established products, or use of new materials or components in manufacture of established products. Efficient NPD contribute to successful innovations in the organization by implementing and monitoring the following stages: 1. Idea Generation 1st stage requires gathering ideas to be evaluated as potential product options. For many companies idea generation is an ongoing process with contributions from inside and outside the organization. Many methods and techniques are used to encourage ideas including: brainstorming, running focus groups with consumers, channel members, the company’s sales force, and gaining insight on competitive product developments through secondary data sources. The basic approach is to harness creativity in some form for the development of new ideas. 2. Idea Screening This stage calls for an explicit listing of criteria to be used in the judgement of new product proposals. It is in essence an information-seeking and appraisal process. This process should consists of a series of finer and finer meshes so that only those ideas which appear to have a reasonable chance of success are subjected to detailed evaluation and consider for further development. 3. Concept Development & Testing With a few ideas in hand the marketer now attempts to obtain initial feedback from customers, distributors and its own employees. Generally, focus groups are convened where the ideas are presented to a group, often in the form of concept board presentations (i.e., storyboards) and not in actual working form. During focus groups with customers the marketer seeks information that may include: likes and dislike of the concept; level of interest in purchasing the product; frequency of purchase (used to help forecast demand); and price points to determine how much customers are willing to spend to acquire the product.
Business Analysis At this stage the process becomes very dependent on market research as efforts are
made to analyze the viability of the product ideas. The key objective at this stage is to obtain useful forecasts of market size (e.g., overall demand), operational costs (e.g., production costs) and financial projections (e.g., sales and profits). Additionally, the organization must determine if the product will fit within the company’s overall mission and strategy. Much effort is directed at both internal research, such as discussions with production and purchasing personnel, and external marketing research, such as customer and distributor surveys, secondary research, and competitor analysis. 5. Product Development Ideas passing through business analysis are given serious consideration for development. Companies direct their research and development teams to construct an initial design or prototype of the idea. Once the prototype is ready the marketer seeks customer input. In this stage the customer gets to experience the real product as well as other aspects of the marketing mix. Favourable customer reaction helps solidify the implementation of NPD and provides other valuable information such as estimated purchase rates and understanding how the product will be used by the customer. Reaction that is less favourable may suggest the need for adjustments to elements of the product & marketing mix. In addition to gaining customer feedback, this step is used to gauge the feasibility of large-scale, cost effective production for manufactured products. 6. Test Marketing Products surviving to Stage 6 are ready to be tested as real products. In some cases the marketer accepts what was learned from concept testing and skips over market testing to launch the idea as a fully marketed product. There are 3 methods for test marketing. Standard Test Market is to launch a full marketing campaign in a small number of representative cities. Controlled Test Market is choosing a few stores that have agreed to carry new products for a fee payable to them. Whereby, Simulated Test Market is a test in a simulated shopping environment to a sample of consumers. 7. Commercialisation If market testing displays promising results the product is ready to be introduced to a wider market. Some firms introduce or roll-out the product in waves with parts of the market receiving the product on different schedules. This allows the company to ramp up production in a more controlled way and to fine tune the marketing mix as the product is distributed to new areas. 2
Time to market and speed are among the most important factors in making a successful innovation NPD. An innovative organisation must move ahead of its rivals in creating a unique and superior product that could set apart and create differentiation from the competitors. A successful new product should be designed in a way of market driven and customer focus. A non-attractive or too complex product is considered as a failure in innovation. The product should be aimed at attractive markets that create a strong identity and competitive edge for the organisation. Besides that, full support and backing from the top management is essential in ensuring the NPD is successful implemented and achieve targeted objective of the organisation. All resources must be put in place in order to increase the work efficiency while achieving economies of scale. Innovation in NPD is essential to ensure the company moving toward a right direction. An innovative product could help to increase, or defend the market share by offering more choices to the consumers. It must appeal to existing or new market segments in order to help the company to diversify into new market segments. Besides that, innovative products help to generate some competitive advantage to the company in a highly competitive marketplace. The organisation is able to maintain its reputation as a leading edge company. Toyota and General Electrics are among highly innovative companies that leading in today’s fast pace marketplace. Last but not least, innovative product development also helps to improve the relationship between the organisation and its distribution channels which could enhance the profitability for both parties. Continuous innovation would help to increase brand loyalty of consumers and also assist the organisation to make better use of the scarce resources.