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17/11/2015 04:04:38 PM

New product

I. What is a New Product?

- Newness compared with existing products is one way to define new products.

- Newness in legal terms, another definition, views a product as new for up to six months after it enters regular distribution.

- Newness from the company perspective is whether it is a revised product or completely new innovation. Companies often use an objective measure such as market share or sales as an indicator of newness.

- Newness from the consumer's perspective is with regard to the degree of learning required. Discontinuous involves the most learning, dynamically continuous has some learning, and continuous involves no new learning.

II. Why Products Fail

There are several reasons for new product failure:

- Insignificant point of difference

- Incomplete market and product definition before product development

- Too little market attractiveness

- Poor execution of the marketing mix

-  Poor product quality on critical factors

- Bad timing

-  No economical access to buyers

III. The New Product Process

The new product process consists of seven steps, as described below:

1. New Product Strategy Development

In this first stage companies define the role for new products in terms of their overall corporate objectives.

- Objectives of the stage: Identify markets and strategic roles. Companies use environmental scanning to identify trends that can be opportunities or threats. Strategies can be proactive to identify and seize opportunities or reactive to take a defensive stance.

-  Cross-functional teams - a small number of people from different departments in an organization who are mutually accountable to a common set of performance goals

2. Idea Generation 

In the second stage, companies develop a pool of concepts that are candidates to become new products. These ideas can come from several sources:

- Customer suggestions or complaints often lead to product ideas.

- Employees and co-workers can provide suggestions.

- Research and development breakthroughs are another source of new products.

- Competitive products can be a source of ideas.

3. Screening and Evaluation

In the third stage the purpose is to eliminate ideas that do not warrant further effort.

- Internal approach. Internally, the firm evaluates the technical feasibility and whether the concept meets objectives. Some companies use a weighted point system, which establishes screening criteria and weights to evaluate ideas.

- External approach. External evaluations with concept tests are conducted with potential consumers.

4. Business Analysis

This stage involves specifying the features of the product and the marketing strategy needed to commercialize it. Financial projections also are made.

5. Development

Product ideas are turned into prototypes.

6. Market Testing

The market testing stage involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy it. Test marketing involves examining the commercial viability and marketing strategy.

- Test marketing. Involves offering a product for sale on a limited basis in a defined area. Standard markets are where the company tests a product through normal distribution channels. Selected controlled markets are those in which a test is conducted by an outside agency. Disadvantages with test markets are projecting results, revealing plans to competitors, and costs.

- Simulated test markets. A technique that simulates a full-scale test market but in a limited fashion, usually in shopping malls. Time, cost and confidentiality problems of test markets are the prime reasons for simulations.

7. Commercialization

The product is brought into full scale market introduction.

- Increasing success rate of new products. Parallel development is the simultaneous development by cross-functional teams of both the product and the production process as marketing, manufacturing, and R&D personnel stay with the product from conception to production.

- The risks and uncertainties of the commercialization stage. Retailers are now requiring slotting fees, a payment to place a new item on a shelf, and failure fees, a penalty payment if the product does not meet predetermined sales targets.

Pham Thi Thuy Mien