TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 6 :

NEW PRODUCT DEVELOPMENT

ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 1

 Definition of New Product Development

• New product development is defined as

the process by which entrepreneur
designs and creates new product or
service that will be sold to customers.

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2

 THE IMPORTANCE OF NEW PRODUCT
DEVELOPMENT

1. For Survival
– Introduction of new product provides a platform for the
company to compete
– Companies that are able to develop and introduce new
and improved products will have a distinct advantage to
compete
– Competition has become more intense as technological
products become more complex and the technological
product life-cycle getting shorter
– Companies face threat of losing market share when
competitors come up with their new products
– Thus company have to come up with new products to
ensure survival

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3

 Cont….
The Importance of New Product Development

2. Strategy for Growth

– Development of new products can ensure
business to grow by:
• Introducing new products to existing
markets
• Introducing new products to new markets

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4

 Defining a New Product

• The outcome of product development process is

a new product
• The new product can be:
– a completely new product
– not a completely new product but an existing
product that has undergone significant
improvements
• A new product is any product “perceived to be
new” in the mind of the consumers.

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 5

 Classifications of New Products

Two Classification of New Products:

1. Completely New Product
2. Improvements on Existing Products
1. Completely New Product
• New-to-the world products
– The first of its kind (new inventions)
– Create new market
• New to the firm (new product lines)
– New to the company but not new to the
marketplace

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2. Improvements on Existing Products
• Addition to existing lines
– Subsets to the new product lines
– Perhaps targeted to different market segments
– e.g Shampoo dandruff, then produce shampoo for hairfall
• Improvements and revisions to existing products
– New products to replace existing products with cosmetic
and functional enhancements e.g. proton Persona to
persona facelift..
• Cost reductions
– Offer no new benefits to the consumer other than possibly
reduced price
– Provides enormous added-value to the firm (financial
rewards too)
• Repositioning
– New applications to existing products
– More to do with consumer perception rather than technical
development e.g change the size, design & calour. Such
as smart phone.
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 8
 Product and New Product Development

• A product is an item or service that serves the needs

of customers
• A product has many dimensions, which includes:
• Features
• Quality Specifications
• Packaging
• Price
• Brand Name
• Technology
• Theoretically, it is possible to label a product as new
when any changes or modifications are made to any
of the product dimensions

ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9

 Product Dimensions

Packaging
Price

Quality Brand Name

Specifications PRODUCT

Technolog
Features
y

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 10

Different examples of changes in product dimensions that
can create a new product:
• Changing the performance capabilities of the product
(e.g. a new, improved washing detergent).
• Changing the application advice for the product (e.g.
the use of liquid instead of powder detergent).
• Changing the after-sales service for the product (e.g.
frequency of service for a motor car).
• Changing the promoted image of the product (e.g. the
use of bio-degradable packaging material).
• Changing the availability of the product (e.g. the use of
vending machines for top-up cards).

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 New Product Development Process

• New product development process for

technology ventures usually begins with
research and development to product
design to concept testing to building
prototypes and to test marketing (before
full-scale commercialization)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12

 Product Development Process

1. RESEARCH AND DEVELOPMENT

2. PRODUCT DESIGN

3. CONCEPT TESTING

4. BUILD PROTOTYPE

5. TEST MARKETING

COMMERCIALIZATION

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13

 Product Development Process:
1. Research and Development

• New product is often characterized by very high rate

of failures
• This may be due to very limited historical or
preliminary data
• Therefore, research and development is a critical
step in the new product development
• Research and development (R & D) refers to
organized efforts that are directed towards
discovering new knowledge, product or process
• Usually, innovation is involve in the R & D for new
product

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 14

 Product Development Process:
1. Research and Development (cont.)

• Product development research is conducted

to:
– helps company to response to market
changes more effectively
– understand the attitudes of customers
towards the new technology that is going
to be introduced

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 15

 Product Development Process:
2. Product Design

• Product design refers to the conceptual

translation of a new product idea or concept

• It includes design of the product and its

architecture (physical design), artistic design
(aesthetics) as well as the required
parameters to satisfy the market needs

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 16

 Product Development Process:
2. Product Design (cont.)

• When designing the product, the basic

product performance criteria must be taken
into consideration. This includes:
– Performance
– Reliability
– Safety in use
– Durability
– Special features

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 17

 Product Design:
Product Performance Criteria
• Performance
– The main characteristics of the product or services

• Reliability
– The consistency of performance and dependability

• Safety in use
– Risk of injury or harm

• Durability
– The useful life of the product

• Special features
– extra characteristics

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 18

 Product Development Process:
3. Concept Testing

• Concept testing is the initial test for most new

product designed

• It involves the process of using quantitative

and qualitative methods to evaluate
consumer response to a product idea prior to
the introduction of product to the market

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 19

 Product Development Process:
3. Concept Testing (cont.)

• It involves showing a preliminary description

of the product or service idea to prospective
customers to gauge customer interest and
purchase intent

• If strong acceptance is found, the next step

will be the preparation of the prototype

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 20

Purpose of Concept Testing

• The main purpose of concept testing are:

– To choose the most promising alternative from a

set of alternatives

– To get an initial notion of the commercial

prospects of a concept

– To find out who is most interested in the concept

– To indicate what direction further development

work should take

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 21

Concept Testing: The Process

• Define the purpose of the test

• Choose a survey population
• Choose a survey format
• Communicate the concept
• Measure customer response
• Interpret the results

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 22

 Example: Concept Testing for the emPower
Electric Scooter (shown below)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 23

 Example: Concept Testing for the emPower
Electric Scooter

• The purpose of concept test:

– To identify what market to be in?

• Sample population
– College students who live 2-5 km from
campus
– Commercial transportation

• Survey format:
– Face-to face interview

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(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter

• Communicating the concept can be done by:

– Verbal description
– Sketch
– Rendering (a drawing in perspective of a
proposed structure)
– Storyboard (illustrations or images displayed
in sequence for the purpose of pre-visualizing)
– Physical appearance model

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 Example: Concept Testing for the
emPower Electric Scooter
Example of Verbal Description
• The product is a lightweight electric scooter that can
be easily folded and taken with you inside a building
or on a public transportation
• The scooter weighs about 15 kilos. It travels at speed
of up to 20 km/hr and can go about 20 km on a single
charge
• The scooter can be recharged in about 2 hours from a
standard electric outlet.
• The scooter is easy to ride and has a simple controls
– just an accelerator and a brake

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 26

 Example: Concept Testing for the emPower
Electric Scooter (Sketch)

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter (Rendering)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 28

 Example: Concept Testing for the emPower
Electric Scooter (Storyboard)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29

 Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 30

 Example: Concept Testing for the emPower
Electric Scooter : Customer Response

• Measure of customer response through survey:

– Part 1: Qualification
– Part 2: Product Description
– Part 3: Purchase Intent
– Part 4: Comments
– Part 5: Interpret Results

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(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 1: Qualification
– How far do you live from campus?
• If not within the specified radius, thank the
respondent and end interview

– How do you currently get to campus from

home?

– How do you currently get around campus?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 32

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 2: Product Description

– Present the concept description as in the
previous verbal description

– Get comments from respondents

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 33

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 3: Purchase Intent

– If the product were priced according to your expectations, how
likely would you be to purchase the scooter within the next year?

I would I would I might or I would I would

definitely not probably not might not probably definitely
purchase the purchase purchase purchase purchase
scooter the scooter the scooter the scooter the scooter

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 34

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 4: Comments
– What would you expect the price of the
scooter to be?

– What concerns do you have about the product

concept?

– Can you make any suggestions for improving

the product concept?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 5: Interpreting the results

– From the data set gathered during the
interview, forecast the potential of the product
for commercialization

– Make estimate in terms of:

• Size of the market
• Selling price
• Sales forecast

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 Product Development Process:
4. Build Prototype
• A prototype is the first physical depiction model of the
new product or service
• It is usually in a rough or tentative mode
• This model has the essential features of the proposed
product or services but the model is open to
modification
• Prototypes can be used to elicit comments from
designers and users to learn more about the product
• One of the objectives of having prototype is it permits
usability testing

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 Usability of Products

• Usability is a measure of a user’s experience

when interacting with a product

• Five factors determining usability:

– Ease of learning
– Efficiency of use
– Memorability
– Error frequency and severity
– Satisfaction

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 39

 Usability of Products
• Ease of learning
– How long does it take to learn the product’s
operation?
• Efficiency of use
– Once experienced, how fast can the user
complete the necessary steps?
• Memorability
– Can the user remember how to use the product?
• Error frequency and severity
– How often do the users make errors, and how
serious are these errors?
• Satisfaction
– Does the user like operating the product?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 40

 Product Development Process:
5. Test Marketing
• Test marketing is usually carried out prior to
a full-scale launching of a new product

• In test marketing, the new developed product

will be introduced to a representative sample
of population to assess the market’s reaction

• The purpose of carrying out test marketing is

to predict sales and profits from a major
product launch

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