 Identify the steps to develop a new product

(from Concept to Market)

 Understand the ways on how to develop
winning products for emerging markets
 Enumerate the process in developing new
Products
 Introduction
All products start with a well-defined strategy
focused on customers and the
market. The last module will essentially help to
identify the product direction and give
clarity of what you really want to achieve in your
future business
 New product development is the process of
bringing an original product idea to market.
 Although it differs by industry, it can
essentially be broken down into six
stages: ideation, research, planning, prototyping,
sourcing, and costing.
Here's how to develop your own original product
idea and what to consider at each
stage.
1. Ideation
 Many aspiring entrepreneurs get stuck on
ideation, often because they‘re waiting
for a stroke of genius to reveal the perfect
product they should sell.
 While building something fundamentally
"new" can be creatively fulfilling, many of the
best ideas are the result of iterating upon on
an existing product.
 The SCAMPER model is a useful tool for quickly
coming up with product ideas by asking
questions about existing products.
 Each letter stands for a prompt:
- Substitute (e.g. faux fur for fur)
- Combine (e.g. a phone case and a battery pack)
- Adapt (e.g. a bra with front clasps for nursing)
- Modify (e.g. an electric toothbrush with a
sleeker design)
- Put to another use (e.g. memory-foam dog beds)
- Eliminate (e.g. get rid of the middleman to sell
sunglasses and pass the savings
on to consumers)
- Reverse/Rearrange (e.g. a duffle bag that
doesn‘t wrinkle your suits)
 By asking these questions, you can come up
with novel ways to transform existing ideas or
even adapt them for a new target audience or
problem.
2. Research
 With your product idea in mind, you may
inclined to leapfrog ahead to production,
that can become a misstep if you fail to
validate your idea first.
 Product validation ensures you‘re creating a
product people will pay for and that you won‘t
waste time, money, and effort on an idea that
won't sell.
There are several ways you can validate your
product ideas, including:
- Talking about your idea with family and friends
- Sending out an online survey to get feedback
- Starting a crowd funding campaign
- Asking for feedback on forums
- Researching online demand using Google
Trends
- Launching a ―coming soon‖ page to gauge
interest via email opt-ins or pre-orders  
3. Planning
 Since product development can
quickly become complicated, it‘s important
to take the time to plan before you begin to
build your prototype.
 When you eventually approach
manufacturers or start looking for materials,
if you don‘t have a concrete idea of your
product's design and how it will function, it‘s
easy to get lost in the subsequent steps.
 The best place to begin planning is
with a hand-drawn sketch of what your
product will look like.
 The sketch should be as detailed as possible,
with labels explaining the various features and
functions.
 You don't need a professional quality drawing
since you won‘t be submitting it
to a manufacturer at this stage.
 However, if you are not confident that you can
produce a legible diagram that will make
sense of your product, it is easy to find
illustrators for hire.
 Try to use your diagram to create a list of the
different components or materials you will
need in order to bring the product to life.
 The list does not need to be inclusive
of all potential components, but it should allow
you to begin planning what you will
need in order to create the product.
For example, a drawing of a purse design could
be accompanied by this list:
- Zippers (large and small)
- Silver clasps
- Leather straps
- Protection pouch
- Embossed label
- Interior wallet
 Along with the components, you should also
begin to consider the retail price or category
your product will fall into. Will the product be
an everyday item or for special occasions?
 Will it use premium materials or be
environmentally friendly?
 These are all questions to consider in the
planning phase since they will help guide you
through not only your product development
process but also your brand positioning and
marketing strategy.
 The packaging, labels, and overall quality of
your materials should be considered as well
before you continue to the sourcing and
costing stages.
 These will have an effect on how you market
your product to your target customer, so it‘s
important to take these aspects of your product
into consideration during the planning
phase too.
4. Prototyping
 The goal of the prototyping phase during
product development is to create a finished
product to use as a sample for mass production.

 It‘s unlikely you will get to your finished

product in a single attempt, prototyping usually
involves experimenting with several versions of
your product, slowly eliminating options and
making improvements until you feel satisfied
with a final sample.
5. Sourcing
 Once you have a product prototype you‘re
satisfied with, it's time to start gathering the
materials and securing the partners needed
for production.
 This is also referred to as building your supply
chain: the vendors, activities, and resources
needed to create a product and get it into a
customer's hands.
6. Costing
 After research, planning, prototyping, and
sourcing is done, you should have a clearer
picture of what it will cost to produce your
product.
 Costing is the process of taking all of the
information gathered thus far and adding up
what your cost of goods sold will be, so you
can determine a retail price and gross margin.
 This should include all of your raw materials,
factory setup costs, manufacturing costs, and
shipping costs.
 It is important to factor in shipping, import
fees, and any duties you will need to pay in
order to get your final product into the
customer's hands, as these fees can have a
significant impact on your cost of goods sold,
depending on where you are producing the
product.
THREE PRODUCT INNOVATION STRATEGIES FOR
EMERGING MARKETS AND HOW TO CHOOSE

 Emerging markets such as India or China

represent lucrative new markets but also
present a set of challenges, including lower
income customers, poor infrastructure and
poor service availability.
 There are three fundamentally different types
of product and service innovation that can
serve these markets: cost, frugal and good-
enough innovation.
 Understanding the differences can help
companies choose the right emerging market
product innovation strategy for them.
Idea Summary
 It is hard to resist the pull of emerging
markets, such as India and China. Given
 the immense population in such countries,
even the small percentage of the total
population that can be considered.
 Reverse innovation, a hot topic in the
conversation about emerging market
innovation, is a market concept, not a product
concept.
 Reverse innovation refers to the
sale of products developed for emerging markets
— whether through cost, good-enough
or frugal innovation — and then sold in
developed markets.
 Which is the best emerging market product
innovation strategy for your company?

 The answer lies in matching the technological

and organizational capabilities of your
company with the capabilities required by the
different types of innovation.
 The success of cost innovation, for example,
depends on process capabilities, notably the
ability of your company to manage production
facilities in low-cost areas of the world.
 Some process capabilities are more complex
than simply planting a factory in a low-cost
region;
 the lithium battery example mentioned above
was possible due to development capabilities
that allowed the battery to be produced at
ambient temperature.
THE NEW PRODUCT DEVELOPMENT PROCESS
(NPD) – OBTAIN NEW
PRODUCTS
 In order to stay successful in the face of
maturing products, companies have to obtain
new ones by a carefully executed new product
development process.
 We will go into the eight major steps in the
new product development process.
1. Idea generation
 The new product development process starts
with idea generation.
 Idea generation
refers to the systematic search for new-product
ideas.
 Typically, a company generates
hundreds of ideas, maybe even thousands, to
find a handful of good ones in the end.
Two sources of new ideas can be identified:
 Internal idea sources: the company finds new ideas
internally. That means
R&D, but also contributions from employees.
 External idea sources: the company finds new ideas
externally.
 This refers to all kinds of external sources, e.g.
distributors and suppliers, but also
competitors.
 The most important external source are customers,
because the
new product development process should focus on
creating customer value.
2. Idea screening
 The next step in the new product
development process is idea screening.
 Idea screening means nothing else than
filtering the ideas to pick out good ones.
 In other words, all ideas generated are
screened to spot good ones and drop poor
ones as soon as possible.
 While the purpose of idea generation was to
create a large number of ideas, the purpose
of the succeeding stages is to reduce that
number.
 The reason is that product
development costs rise greatly in later stages.
 Therefore, the company would like to go
ahead only with those product ideas that will
turn into profitable products.
3. Concept development and Testing
 To go on in the new product development
process, attractive ideas must be developed
into a product concept.
 A product concept is a detailed version of the
new-product idea
stated in meaningful consumer terms.

You should distinguish

- A product idea à an idea for a possible product
-
A product concept à a detailed version of the
idea stated in meaningful consumer
terms
- A product image à the way consumers
perceive an actual or potential product.
4. Marketing strategy development
 The next step in the new product
development process is the marketing
strategy development.
 When a promising concept has been
developed and tested, it is time to
design an initial marketing strategy for the new
product based on the product concept
for introducing this new product to the market.
The marketing strategy statement consists of three
parts and should be formulated
carefully:
- A description of the target market, the planned
value proposition, and the sales,
market share and profit goals for the first few years
- An outline of the product‘s planned price,
distribution and marketing budget for
the first year
- The planned long-term sales, profit goals and the
marketing mix strategy.
5. Business analysis
 Once decided upon a product concept and
marketing strategy, management can
evaluate the business attractiveness of the
proposed new product.
 The fifth step in the new product
development process involves a review of the
sales, costs and profit projections for the new
product to find out whether these factors
satisfy the company‘s objectives.
 If they do, the product can be moved on to
the product development stage.
 In order to estimate sales, the company could
look at the sales history of similar
products and conduct market surveys.
 Then, it should be able to estimate minimum
and maximum sales to assess the range of
risk.
 When the sales forecast is prepared, the firm
can estimate the expected costs and profits for a
product, including marketing, R&D,
operations etc.
All the sales and costs figure together can
eventually be used to analyses
the new product‘s financial attractiveness.
6. Product development
 The new product development process goes on
with the actual product development.
 Up to this point, for many new product concepts,
there may exist only a word
description, a drawing or perhaps a rough prototype.
But if the product concept passes
the business test, it must be developed into a
physical product to ensure that the product
idea can be turned into a workable market offering.
 The problem is, though, that at this
stage, R&D and engineering costs cause a huge jump
in investment.

 The R&D department will develop and test one or

more physical versions of the product
concept.
 Developing a successful prototype, however, can
take days, weeks, months or
even years, depending on the product and prototype
methods.
 Also, products often
undergo tests to make sure they perform safely and effectively.
This can be done by the
firm itself or outsourced.

7. Test marketing
 The last stage before commercialization in the new product
development process is test
marketing.
 In this stage of the new product development process, the
product and its
proposed marketing programmed are tested in realistic market
settings.
 Therefore, test
marketing gives the marketer experience with
marketing the product before going to
the great expense of full introduction.
8. Commercialization
 Test marketing has given management the
information needed to make the final
decision: launch or do not launch the new
product.
 The final stage in the new product
development process is commercialization.
Commercialization means nothing else than
introducing a new product into the market.
Some factors should be considered before the
product is commercialized:
- Introduction timing. For instance, if the
economy is down, it might be wise to
wait until the following year to launch the
product. However, if competitors are
ready to introduce their own products, the
company should push to introduce
the new product sooner.
- Introduction place. Where to launch the new
product? Should it be launched
in a single location, a region, the national
market, or the international market?
Normally, companies don‘t have the confidence,
capital and capacity to launch
new products into full national or international
distribution from the start.
Instead, they usually develop a planned market
rollout over time.