Principles and practice of management question and answer

Your organization has identified a need in the market, which it seeks to satisfy through new product.

a) State and describe the stages in new product development.
b) What factors contribute to the success of new product development?


A. State and describe the stages in new product development.

The following are the reasons why new products are developed:
a) New products may help business organizations meet the pressure of competition. The probability of consumers choosing a give company’s product increases if the company has more brands available.
b) A new product may utilize excess production and marketing capacity. If a new product can be profitably introduced to utilize excess capacity, then organizations should do it.
c) New products can be used to sustain a company’s growth. This is because products have a life cycle. New products should therefore be introduced as old ones will decline over time.
d) Sometimes new customer needs may only be satisfied new products. Human needs change over time as a result of changes in the environment.

Stages in new product development

1. Idea Generation
A pool of ideas generated in the hope that it will be developed into a successful product. Since products are developed to satisfy consumer needs or wants, customers are a very important source of new product ideas. Another important source of new product ideas are the company laboratories. Scientists, while experimenting in laboratories, come up with very rich ideas.

Competitors are another source of new product ideas. The firm evaluates and studies new products of competitors. This is a reactive approach which the company should not adopt.

The firms sales persons and dealers are also a source of good ideas because of their closeness to the market and the fact that they interact with actual and potential customers on a daily basis.

2. Idea screening
The generation stage may yield thousands of ideas some of which may not be worthwhile. Others may be so viable that they need further review. Idea screening is the first phase of idea evaluation and planning.

The pruning process involves the new product developer weighing his new product against the following factors.
a) The extent of existing or potential demand for the new product, if developed.
b) The extent to which the proposed product harmonizes with the existing marketing variables.
c) Durability of the product.
d) The extent to which the existing product is in harmony with the existing marketing variables.
e) The long term expected sales growth of the proposed product.

These factors can be reviewed to assess the various new product ideas.

3. Business Analysis
The new product developer here is concerned with projecting future sales, profits, rates of return of the proposed new product and with determining whether these are in line with the company objectives.

4. Product development
It is at this stage that the firm tries to find out if the product is technically feasible. Brand name and packaging problems are also resolved here.

5. Test marketing
This entails introducing the product in a small scale and in pre-selected environment to determine how customers react to it. If the reaction is positive, then the new product developer can commercialize.

6. Commercialization
The new product should now be introduced to the whole market. To successfully accomplish this, investing in new production equipment and facilities and developing a new marketing program may be necessary.

b) Factors that contribute to the success of new product development
• Teamwork: New product development is most effective when there is teamwork among research and development, engineering, manufacturing, purchasing, marketing and finance departments from the very beginning. The product idea must be researched from the marketing point of view, and a specific cross-functional team must guide the project through out its development.
• The company should have a unique and superior product. For example, higher quality, new features, higher value in use and so forth. Products with a high product advantage have an excellent success rate.
• There should be a well defined product concept prior to development:
– The company must carefully define and assess the target market. The new product’s market size must not be overestimated.
– Product requirements must also be correctly estimated so that development costs do not become higher than expected.
• There should be quality in executing all the stages of the new product development. Quality personnel are needed to ensure that the best action is taken at each stage. Such personnel must be objective so as not to push through ‘pet ideas’ despite negative research findings.
• Another factor is a good understanding of customer needs.
• The new product should have a fast development time so that it is introduced ahead of competition. Many competitors are likely to get the same idea at the same time and victory goes to the swiftest.
• Top management support is another key success factor.

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