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CHALLENGES TO NEW PRODUCT DEVELOPMENT

CHALLENGES TO NEW PRODUCT DEVELOPMENT

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.

H

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?

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.

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.

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

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 believes the equation Apple =

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

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 long-

awaited 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.

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.

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.

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 was actually a technologically advanced

motorized scooter, they were 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 MICROMAX recently

introduced its smartphone model CANVAS.

Knowing that it faces a tough competition from

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 mark, the producers

adopted a first of its kind

advertisement strategy.

Newspapers, 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.

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 mid-

1980s 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.

CHALLENGES TO NEW PRODUCT DEVELOPMENT

REFERENCES

1. www.wikipedia.org

2. www.forbes.com

3. www.economictimes.com

4. www.businessworld.com