Product Life Cycle Management (15ME835)

Module-3

PRODUCT DEVELOPMENT

By
PRATIBHA V PATIL Asst Professor

Dept of mechanical engineering

VNEC Shorapur
 INTRODUCTION TO PRODUCT DEVELOPMENT
• The activities involved in developing a new product starting from its initial conceptual
stage to final stage

• It also involves modification of the existing product, incorporating new features etc
OR

• Developing an entirely new product to satisfy the requirements of the customers.

Ex: Converting land line phones into wireless handsets for portability and full time access to

communication,

Modify an airplane into fighter jet to achieve a greater speed

Transform a traditional library into an e-library to facilitate faster searching and

accessibility of electronic books and digital documents.
 INTRODUCTION TO NEW PRODUCT DEVELOPMENT

• NPD refers to all the activities involved in developing a new product

rights from its initial conceptual stage to (introduction to market) final
product.
Reason/Need for NPD
Benefits Of NPD
 Structuring New Product Development
The success of a company’s NPD significantly depends on its ability to formability and
properly structure the development process . The various process, Stages or steps involved in
a NPD are as follows
1) Idea Generation
This stage involves creating a large pool of ideas from various sources as listed below
Internal sources: Company invites suggestions/workable ideas from employees
SWOT analysis: company may review its Strength, weakness, opportunities and
Threads and come up with a good feasible ideas
Customers: Reviews and feedback from the customers or even their ideas helps
companies to generate new product ideas
Competition: Competitor’s SWOT analysis can help the company generate ideas.
2) Idea screening:
This stage involves selecting a good and feasible idea, discarding the others. specific
screening criteria are set for this stage, looking at ROI (return on investment), affordability &
market potential. The criterions are set carefully so as to avoid product failure after
considerable investment down the line.

3) Concept development & testing:

The blue print version of the selected idea is developed and brought to the target market
,where a group of selected customers are given full information of the product in order to
analyse their reaction & opinion. Customer’s feedback helps to develop the concept further.

4) Business strategy analysis:

Once the concept has been tested and finalised, the company tends to analyse and decide
various business issues like, cost of the intended product, whether the demand for the product
is regular or seasonal, any competitors for the new product. Total sales and the expected
profit.
5) Product development
Once the all the strategies are approved, the product concept will be passed to the technical
and market development stage. A prototype or a limited production model will be created.

6) Test marketing :
Market testing is a customer testing. The prototype is introduced for research and feedback in
the test marketing phase. Customer’s feedbacks are taken and further changes if required are
made to the product. This product makes the company ready for the product launch

7) Commercializing product
Final decisions need to be made to move the product to its launch into the market. Prizing
and marketing plans need to be finalized and the sales team and distribution briefed, so that
the product and company is ready for the final stage.
 Building Decision support system (DSS)
• DSS is an interactive information system that uses communication and
technologies, data, documents, knowledge, and models to identify and solve
problem related to the complete decision making tasks, and make effective
decisions about various problems.
• In order to improve success rate of the NPD an intelligent Decision support
system is designed and developed.
• It helps companies to concentrate on developing competitive and customer
focused products.
• It may be either fully computerized or human powered.
• Ex: In an engineering firms that has bids on several projects, the management can
identify from being competitive with their costs.
 Components in Building Decision Support System

Components of DSS
It consists of three main components

 Database Management System

 Model Management System
 User Interface
 Database Management System (DBMS)

• The decision support system’s database is a software that contains data from
various sources, including internal data from the organization, data generated
by different applications and external data from the internet.

• The system is responsible for data access and manipulates and manages internal
as well as external stored data .
 Model Management System (MM’s)

• It uses various kinds of mathematical and analytical models to represents and

analyse complex data thereby producing required information

• A DSS includes different models, with each models performing specific

function.

• The DSS software usually contains the predefined models using which new
models can be built to support specific type of decisions.

The commonly used mathematical and statistical models are as follows :

• Statistical Models: It contains a wide range of statistical functions, such
as mean, median, mode, deviations etc. these models are used to
establish relationship between the occurrences of an event and various
factors related to the event.

• Sensitivity Analysis: Models are used to provide answers to what if

situations occurring frequently in an organization. During the analysis
the value of one variable is changed repeatedly and resulting changes on
other variables are observed.

• Optimization Analysis Models: Are used to find the optimum value for a
target variable under given circumstances. Widely used for making
decision related to optimum utilization of resources in an organization.
• Ex: In order to achieve higher level of production by varying job assign
to workers. (Some workers are skilled )
 User Interface

It is an interactive graphical interface which makes the interaction between the
DSS and its users. It displays the output of the analysis in various forms such as
text, table, chats, or graphics,

The user can select the appropriate option to view comparative sales data and
output according to his requirements.
 characteristics of a Decision support system
Must provide support for both individual and group of decision marker
Must present information to the customer In a way that is easy to understand
Must include variant types of models
A good DSS should be able to respond quickly to the changing needs of
decision makers
DSS must be intended for repeated/routine use.
Must have programming capability to generate many types of reports, all based
on user specifications.
An ideal DSS should not be used to make automatic decisions, instead assist and
encourage people in an effective decision making process.
• Advantages of DSS
DSS supports both individual and group of decision makers
DSS helps to improve accuracy, quality and overall effectiveness of a decision
Data collection and model construction experimentations are executed with
active users participation there by greatly facilitating communication among the
managers.

• Dis advantages of DSS

Building DSS is often very expensive and complex because people will vary in
terms of Knowledge, personalities, and ability of job they hold.
A computerized DSS may sometimes information overload, which is a major
problem for people involved in decision making
 Estimating The Market Opportunities For NPD
• Market opportunity is defined as the need or demand in market that a company
can capitalize by introducing a new product. Most companies fear whether new
product has enough market potential in the present business environment.
The various factors are discussed below
• Market size : Estimating the number of individuals In certain market who are
potential buyers /sellers of a product. companies are invested in knowing the
market size before launching a new product. Market size is the total market sales
potential of all different companies put together

• Market growth rate: The rise in sales or market size within a given customer base
on a specific period of time. It is important to know whether the market has
potential for growth or decline for a given product
• Profitability: Determining profitability is important to understand the market
potential . If the expected profit is low then volume of sales needs to be higher. It
based on three elements ,Return on investment, Return on sales, Return on net assets.

• Competitors: when evaluating the opportunities, there is a need to know and

understand the existing competition in the market for the product being launched. As
a result the company needs better financial support to take the product till
competition gets reduced.

• Product & customer type: Opportunities can also be found by examining the product
type and customer category. The frequency of the product purchase on a repeated
basis(Toothpaste, soaps) compared to one time purchase (Refrigerators, TV)
purchase situation be like seasonal changes need to be examined. That helps
companies to position their products appropriately determines the market
opportunities.
 New Product Financial Control
The success of new product is usually measured in terms of their financial
results.
The following estimations regards financial control as follows (Overall cost
involved in NPD)
Estimate the present financial status of the company
Determine the financial feasibility of the product during the conceptual phase by
developing cost estimation based on the designer’s idea
 Estimate the required investment that would be necessary for each stage of the
product development
Analyse costs for various risks associated with product development and
launching
Estimate feasible market share and forecasting the demands for likely profits.
 Financial Control Techniques
1) Budgetary Control
A numerical estimation or a price prepared in advance , That is duplicating the overall cost from
initial PD stage starting through delivery.
Preparation of budget gives certain control to estimated plan
Exercise control with the help of budgets is known as budgetary control
OR
BC involves comparing budgeted figures with actual performances or plans for calculating the
variances and taking corrective actions. It is the best resource to maximize the profit of the
company
2) Return On Investment (ROI)
One of the important tool or technique for financial control. It evaluates the efficiency of an
investment. It is usually calculated using the formula

It represents the various phases of the company’s operations that contribute to this ratio
 3) Break-Even-Analysis
It is used to determine the number of units the business needs to cell in order to avoid
losses
It can be evaluated by using formula or a graphical method

From figure at break even point the total sales equal to the total expenses. (Business
doesn’t experience any loss nor profit) Beyond the break-even point company experience
the profits.
It helps to provide a dynamic view of the relationship between sales, costs, & profits at
different levels
 4) Ratio Analysis
It is used to judge the financial performance of the company.
Ratio is computed by taking the proportion of one financial variable with another
related financial variable .
The ratio between two financial variables useful interpretations can be made with
ultimately helps make appropriate decisions.
It helps in preparation of the budget because different ratios acts as guide for
determining budgeted figures for different activities.
 Implementing New Product Development
It refers to the various steps or processes that a company goes through, in order to bring the
strategic plan for NPD into action.
The various steps involved in implementing NPD are
1) Defining the Product
The product performance requirements are defined with the voice of customer.
 It helps to focus all people involved in PD and avoid running out of resources(Skills & Time) late
design changes, multiple revisions and repeated costly validation testing.

2) Identify people
In this step the management should identify a project manager, define and develop the team having
right people with required skills that are needed to support and execute the plan for PD.
The project manager is to look after the project budget, stakeholders and sponsors. Objective and
scope of the project & also to direct and manage each and every activity of the PD stage .
3) Utilize resources
There is a need to assign resources accordingly in order to reduce the
development time & people including the top management know there roles and
responsibilities in advance
so the product will reach the customer and begin generating revenue sooner

4) Establish the time frames

Implementation of New Product requires a different functional perspective.
 Hence sufficient time should be allocated to certain activities based on their
functioning, while keeping in mind deadlines for implementation.
The ultimate aim is to develop the right product with right time.
5) Selecting best practices & processes
Engineers involved in manufacturing the product must be allowed to choose the
best practices and processes.
 In addition process documentation and quality controls are developed
accordingly.

6) Defining the market goals

The benefits of new product, the market frustration of existing products and
competitors, marketing strategy, distribution channels, and other necessary
details need to be analysed.
The product marketing team will review and ensure the features and
differentiators of the developed product. The product must be ready for getting
launched into the market.
 Market Entry Decisions
When a company with new product idea has made a decision to enter the market
with various factors to be taken into account. 
The following are the various factors (decisions) considered by the managers to
entering a new product market
1) Define the market
Identifying the market in terms of location with suitable population with large, middle-
class representation & their income levels, people characteristics, their needs and wants,
educational back ground and other necessary information for promoting products.
2) Perform market analysis
Expanding into new markets involves a great deal of market research in addition to
target customers.
Need for an in-depth understanding of market growth rates, market size, forecast
demands, existing products and level of competition, distributions/supply channels,
advertising channels, potential risks and barriers to market entry etc…
3) Access internal capabilities
Decision on how to enter a new market is driven by internal capabilities.
The existing financial situation of the company, human resources with
skilled and efficient people, existing infrastructure, distributions/supply
channels and so on.

4) Analyze the new product

Need to compare the features and functionality of the new product with
those existing in the market. Modifications more than existing product and
attracts customers.
Fixing a competitive product price, associated product discounts/offerings
so on
5) Analyze Government policies & regulations

Government regulations may create barriers to business entry and

growth. Companies need to examine the implications of such
regulations prior to committing the market entry.

There is a need to ensure that companies and there products actually

conform to the regulations.
 Launching & Tracking New Product Program

Most companies fear during their product launch and fear remains even after
launching the product into the market. fear of failure or getting distracted due to
mystifying reasons, leads to focusing on the most important aspects of product
launch.

It helps to identify various aspects of business promotion and strategies to built
sales & revenues through expansion of customer base.

The various aspects of product launching & tracking are discussed below.
 Product Launching Program
• It involves a planned series of activities or set of related measures that company goes through while
launching new product
• The common steps in product launching program are
1) Evaluate market before launch
There is long gap-duration between the preliminary stage of market analysis and the launch stage.
Hence prior to launch, there is a need to evaluate the target customers, existing competitors and their
marketing strategies and tactics including their marketing materials, ads, brochures, website etc.
An effective marketing strategy, along with a variety of marketing channels can be develop with this
evaluation.

2) Prepare for unlikely events

If the product launch is successful the company must be in a position to supply products in increasing
demand. Prior planning and arrangements should be made with respect to adequate staffing, process
and supply lines to handle the increased customer attention and demand .
3) Establish an Effective product promotion
A combination of traditional advertising as well as the inclusion of social media
tools can generate a wide range of interest in the new product.
The following methods shows an effective product promotion
Reviews/quotes from celebrities, brand ambassadors or expert people
Providing exclusive previews to customers and influencers by highlighting the
most valuable features of the product.
Starting a blog’s and creating posts that educate readers about the product
features. Need to update social media followers from time to time.
Submitting guest posts, Getting featured in various journals, publications, press
releases, etc
Providing customers with attractive offers, discounts, or even chance to win
free product
4) Activating sales team

To co-ordinate seminars, meetings and discussions with customers in an

organized way helps to prime the customers for the product launch, apart
from building enthusiasm and commitment to the launch
 Concept of product Redesign
• Is the process of modifying or changing an existing design of a product with the
objective of improving one or more aspects of the product’s capabilities .
Reasons/need for Redesign
 Benefits of Redesign

It helps to create new products with new features, which in turn drives new
business

It helps the company to stay ahead in the competitive market

Helps in exploring new markets

It creates an impression among the people for being innovative

Product redesign in a successful way comes with great prizes, like new
possibilities, new customers and new opportunities
 Drawbacks of Redesign

The process is iterative and complex in nature, Extensive use of computer based
technologies and skilled persons are essential .

Careless decisions during redesign lead to worthless product development.

It requires extensive time and resources and as such the company will not be
able to concentrate effectively on NPD

Redesign must not involve drastic changes in the product which was once a
user’s favourite. redesign must satisfy old customers as well as attract new ones.
 Steps involved in Product Redesign
1) Analyze Existing Product
Feedback from customers, distributors, supply agents and the product is
analysed from all perspectives. Since customer use the product often they are
best equipped to provide feedback regarding the drawbacks of the product and
how to improve the existing product.
2) Analyze competitive products

Identify competitors and analyse their products in terms of features,

performance, cost and other attributes.

It helps the company to determine and weight their attributes, assess their
strength and weakness, identify the short falls of the existing product.
3) Bring all geographies & functions in one room

Once a product has been identify for redesign all geographic business units,
different functions and organizational levels need to be brought into one room.

The team members should change the product’s required functions and attributes
need to be changed. The objective is to tap ideas and information from various
sources.

4) Select a concept for product Redesign

By evaluating all the concepts for product redesign a final choice is to select the
best requirements, specifications and customer need and wants.
5) Establish and refine target specifications
Once the new design features has been developed establish the specifications of a
prospective new product by taking into consideration the various technical constraints.
From figure (Flow chart for redesign process) input to the redesign module are initial design
and set of design specifications, At each cycle of redesign iterations a check is performed.
Once the specifications are satisfied the iterations stops to yield the improved or modified
design
If the design specifications cannot met the reasonable number of redesign iterations at that
time need to define a new set of design specifications.
END