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Challengestonewproductdevelopmentfile 130224082159-phpapp02

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  • 1. CHALLENGES TO NEW PRODUCT DEVELOPMENT CHALLENGES TO NEW PRODUCT DEVELOPMENT H ow does one make a successful product such as an iPad, an app, a drug, or a widget? You might think that companies start with an idea about a product, something that seems cool or somehow promising. They then build a prototype to prove the concept that the product can indeed be built or made. And then they make more products and sell them. If only it were that easy! Unfortunately, products need a lot of work before they actually sell. The expected demand may turn out to not be there; the price might be too high; the product might be clunky; or there might be regulatory hurdles. Much of that work is done in product development. Because product development is underestimated, most people think that the most important part of innovation is invention, the glamorous moment where a genius thinks of something new in a flash. But in reality ideas are a dime a dozen whereas product development is the hard slog that really makes a difference. NEW PRODUCT DEVELOPMENT In business and engineering, new product development (NPD) is the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new product within the overall strategic process of product life cycle management used to maintain or grow their market share.
  • 2. CHALLENGES TO NEW PRODUCT DEVELOPMENT STAGES IN NEW PRODUCT DEVELOPMENT 1. Idea Generation is often called the "fuzzy front end" of the NPD process. Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats). Market and consumer trends, company's R&D Dept., competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features. Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step). 2. Idea Screening The object is to eliminate unsound concepts prior to devoting resources to them. The screeners should ask several questions:  Will the customer in the target market benefit from the product?  What is the size and growth forecasts of the market segment / target market?  What is the current or expected competitive pressure for the product idea?  What are the industry sales and market trends the product idea is based on?  Is it technically feasible to manufacture the product?  Will the product be profitable when manufactured and delivered to the customer at the target price? 3. Concept Development and Testing Develop the marketing and engineering details. Investigate intellectual property issues and search patent databases  Who is the target market and who is the decision maker in the purchasing process?  What product features must the product incorporate?  What benefits will the product provide?  How will consumers react to the product?
  • 3. CHALLENGES TO NEW PRODUCT DEVELOPMENT  How will the product be produced most cost effectively? 4. Business Analysis Estimate likely selling price based upon competition and customer feedback. Estimate sales volume based upon size of market. Estimate profitability and break-even point. 5. Beta Testing and Market Testing  Produce a physical prototype or mock-up  Test the product (and its packaging) in typical usage situations  Conduct focus group customer interviews or introduce at trade show  Make adjustments where necessary  Produce an initial run of the product and sell it in a test market area to determine customer acceptance 6. Technical Implementation  New program initiation  Finalize Quality management system  Resource estimation  Requirement publication  Publish technical communications such as data sheets  Contingencies - what-if planning 7. New Product Pricing  Impact of new product on the entire product portfolio.  Value Analysis (internal & external).  Competition and alternative competitive technologies.
  • 4. CHALLENGES TO NEW PRODUCT DEVELOPMENT CHALLENGES TO NEW PRODUCT DEVELOPMENT 1. Global competition 2. Time 3. Market potential 4. Technological change 5. Distribution 6. New features 7. Price 8. Critical unmet needs 9. Promotion 10. Resistance To Change 11. Market size 1. GLOBAL COMPETITION Global competition is often a major factor impacting the challenges of new product development. Since the playing field is large and diverse, often spanning the globe, it may be very difficult for companies to gather intelligence on competitors. A company may invest heavily in a new product, yet be unaware that an overseas competitor is set to release a similar product imminently. As a result, shepherding a new product from concept to market is often done under intense time pressure, as product developers attempt to bring the product to market ahead of their competition. Mahindra & Mahindra scored its first SUV hit with bolero in 2000. Building on this success, in 2002 it launched the Scorpio, a model that signalled M & M had finally achieved the right mix of design, power, and price. Not it was a looker and a performer; it cost less than its rivals. The Xylo, launched in 2009 and the XUV500 in 2011 have helped M&M consolidate its position.
  • 5. CHALLENGES TO NEW PRODUCT DEVELOPMENT 2. TIME The companies today are facing time as one of the critical challenges in new product challenge. Introducing the new product at the right time reduces the ambiguity about the failure of the product. Giving the market a product at a time when there the need for such a product/service is not required is surely a planned way to head for the edge. Spanish apparel brand ZARA takes just two weeks to create a new product line out of high street fashion design and ship it to stores making it the world‟s most popular „fast fashion‟ brand. Zara has replicated a model that has worked for it globally - creating affordable, copycat versions of the latest fashions or designer-wear and making them available to shoppers in doublequick time. Zara is known for its fresh fashion delivery every week. Their weekly delivery supply chain is the best in the world. 3. MARKET POTENTIAL A company needs to know their current and future competitors. In today’s economic climate only two products will be successful in any given market. Unless your product is far superior to your competition, you will not be able to enter a market successfully or retain your leadership in the market. While it is initially fine to get to know your competition from searching online, it cannot replace feedback from customers who use the product. Knowing your future competitors will help you to develop a strategy to retain your competitive advantage. The social media network Facebook has taken the world by storm since it was introduced to the web in 2004. The Harvard student Mark Zuckerberg had no way of knowing how quickly and readily accepted his social networking site would be. An app, known
  • 6. CHALLENGES TO NEW PRODUCT DEVELOPMENT as Instagram, was developed to make photo-sharing easier and quicker for users. Not only could users share their photos quickly, but they could edit them and add special effects to their photos before sharing them. With 1 million iPhone and Android users being added each and every day, Facebook saw Instagram as its fastest growing competitor and decided to take control before it became a problem for Facebook. Facebook acquired Instagram for $ 1 billion which was not an easy or cheap process, but it eliminated the stress of a future competitor, or even worse, the app being acquired by an already powerful competitor such as Google or Twitter. 4. TECNOLOGICAL CHANGE Rapid advancement of technology may be considered by many to be among the top challenges of new product development. A technological arms race may put product developers in a precarious position of uncertainty. Product developers may not know what the next development might be. If a firm chooses a pathway to creating functionality using a form of technology that may be soon obsolete, the company’s investors could lose a sizable investment. Without question, nearly everyone Innovation is a fundamental truth. Starting from the first Macintosh to the ipod, ipad, iphone , the list is still growing and apple has time again proved that innovation is the ultimate success of a new product. That‟s why the company stands out of the crowd when it comes to its innovation. The company is a leader in producing believes the equation Apple =
  • 7. CHALLENGES TO NEW PRODUCT DEVELOPMENT innovating products and amazing the customers and making them think that this is it, but not for Apple. This year, Apple will spend $10 billion investing in its future innovations. The company is ranked number 5 in The World‟s Most Innovative Companies as per the Forbes list. 5. DISTRIBUTION Who's going to sell the product? Can you use the same distribution channels you currently use? Can you use the same independent representatives or sales force? Is there sufficient sales potential in the new product to convince a distributor, retailer, or agent to take on the new line? There are significant up-front selling costs involved in introducing new products. Everyone in the channel wants some assurance that the investment of time and money will be recovered. Taking the first step towards its longawaited entry into India, US coffee chain Starbucks on Thursday said it has signed a pact with Tata group firm Tata Coffee for a possible alliance that could include retail operations and sourcing. Starbucks Coffee Company and Tata Coffee signed a non-binding Memorandum of Understanding (MoU) to collaborate in sourcing of coffee beans and roasting facilities, relating to Starbucks entering retail operations in India initially. The collaboration would also explore other Asian countries over a period of time. The two companies will also collaborate on the promotion of responsible agronomy practices, including training for local farmers, technicians and agronomists, to improve their coffee-growing and milling skills. The brand‟s ranking is 54th in the most powerful brands of the world.
  • 8. CHALLENGES TO NEW PRODUCT DEVELOPMENT 6. NEW FEATURES Competitive advantage needs to be articulated to your customers: how does the product (or attributes of the product) meet your customers’ unmet need that no other product can. This is the reason why customers will use your product over any other product. Knowing your competition will validate or invalidate your competitive advantage and potential market leadership. Adding new features can increase your overall product value and consequently, increase your market share. What makes new product development different from product development? While new product development can be revolutionary, product development (i.e. adding new features) is an evolutionary process. Google is a leader in both areas. The search giant develops revolutionary products (i.e. new product development) and finds ways of improving upon them (i.e. product development). Gmail is one of many Google products that illustrate this point. Once Google mastered the end product, the search giant was able to add new features to increase the products overall value. For instance, enables users to make large changes, such as adding a customized inbox skin or SMS through Gmail chat, and small adjustments, such as YouTube e-mail previews. The company is ranked 7th in the most innovative company. 7. CRITICAL UNMET NEEDS Statistics on the success rates of new products show that for every four new products that enter development, only one becomes a commercial success. Research by Calantone and Cooper shows that the number one reason for a new product to fail is the lack of attention paid to the real needs and wants of the marketplace. There are three key elements to meeting a customer’s need when developing new products or services.
  • 9. CHALLENGES TO NEW PRODUCT DEVELOPMENT Desirability: the new product or service must be desirable, i.e. a person wants to use it Purpose: the new product or service must have a useful purpose, i.e. a person will use it User Experience: the new product or service must provide customer satisfaction, i.e. a person is happy using it. When creating and designing a new product or service it is important to consider the use of the product (what does the product do), the level of usability of the product (how does it work, can it be used comfortably) and the meaning that the product conveys. Considering that the Men cosmetic segment was still untouched in India and thinking of a fairness cream as a unmet need of the customers EMAMI introduced the fair and handsome cream particularly targeting the men consumers. The brand has rightly positioned itself in the new segment though it now faces competition from Vaseline and Garnier. Though communications of this type have raised criticisms from some sectors of the society arguing that fairness of skin implies better acceptability, the market is growing by over 10% per annum. 8. MARKET SIZE It is also important to keep an eye on the market size as well as the market potential for the product in meeting the business goals of the company. The last thing you want to find out is that there is no market for the product or that the customer isn’t buying the product. In addition to meeting a critical unmet need you need to be in a market where you sell a significant amount of product to develop more products and expand your business. It often makes sense to outsource to someone who can determine the size of the market and the market potential for the product in meeting the business goals of the company through market research and talking to potential customers.
  • 10. CHALLENGES TO NEW PRODUCT DEVELOPMENT A secret new product created by the renowned inventor Dean Kamen was leaked to the press nearly 12 months before the product‟s release. When investors and the public learned that the invention motorized was actually scooter, a they technologically were advanced dumbfounded. Ads showing riders who looked like circus performers perching on weird-looking chariots didn‟t help, nor did the price tag $5,000. Instead of selling 10,000 machines a week, as Kamen had predicted, the Segway sold about 24,000 in its first five years. Now it sells for far less to police forces, urban tour guides, and warehouse companies, not the general public. If there was ever a product to disprove the axiom “If you build it, they will come,” it‟s the Segway. 9. PRICE Setting the right price of the product before introducing it in the market is also a challenge for the organisation. Suppose you set the price of your product almost same as that of your competitor and assuming the product is similar in quality and features and the competitor holds a good position in the marketplace, then the success of your product will depend on the market and in my opinion your ‘LUCK’. Well good luck if you believe your luck is good. Else anyone would surely believe that the product has hardly any chances of survival. Thus setting your product at the right price at the right time is a challenge. When introduced MICROMAX its smartphone model recently CANVAS. Knowing that it faces a tough competition from
  • 11. CHALLENGES TO NEW PRODUCT DEVELOPMENT the large market leaders like APPLE, SAMSUNG, the company has introduced a beautiful and striking product which is not only unique from its other products but is also economical in meeting the Indian customer needs. The ultimate success of the product was its price which not only ensured the longevity of the product but also opened gamut of opportunities for the company. Currently the mobile is giving a slight competition to Samsung SIII and is quickly running out of stock. 10. PROMOTION Promoting a new product in the new market or in the current market is the job of every marketer and the utmost requirement for the longevity of the product in the market. Firms who hardly promote their product are rarely recognised by the market and thus remain a mystery product for the consumers. Promotion techniques adopted by the firms from print media to social websites is all a one step of the staircase approach of NPD. Thus promotion is must process for the new product hit. RA ONE was a kind of new product in itself for the Indian movie watchers. Knowing that the movie wasn‟t up to the adopted mark, a the first of advertisement Newspapers, producers its kind strategy. popular websites, magazines, music channels etc. were and are all flooded with advertisement posters of the movie, showcasing to the people the unique characters much before the movie was released. Tie-ups with popular brands such as McDonalds, KFC was done as a part of co-branding and increasing the credibility of the movie. Even before its release, Ra One managed to earn a revenue of Rs132 crore simply by giving away the rights of the movie. The cost of the movie was 100 crores and 52 crore were spent only in its promotion.
  • 12. CHALLENGES TO NEW PRODUCT DEVELOPMENT 11. RESISTANCE TO CHANGE Most customers, so the argument goes, are intrinsically conservative and resist innovation. Apart from the few early adopters, whose enthusiasm for new products knows no bounds, the broad mass of customers sees innovation as risky and finds new unproven products less attractive than tried and tested alternatives. Consequently, any innovative product, particularly if it has a high technological component, will meet resistance and will sell slowly until it is perceived as safe by potential customers. Often cited as the ultimate example of one of the most notorious product flops - and brand missteps - of all time, New Coke was launched in the mid1980s by Coca Cola in an attempt to help the soda company stay ahead of competitors during the so-called "cola wars." Instead, it just annoyed consumers. The tacky way it was introduced made it seem as though the regular Coke drinkers mattered little to the company and a boycott was started.
  • 13. CHALLENGES TO NEW PRODUCT DEVELOPMENT REFERENCES 1. www.wikipedia.org 2. www.forbes.com 3. www.economictimes.com 4. www.businessworld.com

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