New Product Development 1

A Idea generation

Idea generation is the systematic search for new ideas. It is the first step in the new product development (NPD) process. NPD is essential for companies to stay competitive. Ideas for product innovation can come from many sources – for example, internal brainstorming, distributors, or increasingly from customers. Many companies are adopting a customer-driven or customer-centric marketing approach, focused on identifying customer demands (what customers require to solve a particular problem).Market research techniques are used to identify gaps in the market.

Throughout the NPD process, marketers work closely with research and development (R&D) to create original products or to modify or improve existing products. New recipes (for example, Vanilla Coke) and limited or special editions (for example, Christmas tea) are examples of product improvements and product modifications. The product innovation may target a mass market or a specific niche market – product for left-handed people, for example.

B Idea screening

Launching new products is a risky business, so new product ideas are screened to select, or spot, potentially successful product ideas. A company has to assess which ideas are viable (will survive in a competitive marketplace), technically feasible (the company has the skills and resources to produce them), and profitable (will make money). The company also considers overall demand - how much they can expect to sell.

C Concept development and testing

An attractive idea is developed into several different product concepts. Concept testing measures customer response to a new product – what customers think of it – and gives an indication of the level of a customer acceptance – that is, how readily consumers will use the product. The objective is to successfully introduce the new product onto the market or penetrate the market, and to minimize the research and development costs.

D Marketing strategy and business analysis

The marketing strategy describes how to penetrate the market. You must decide which route to market is best for your product or service. You can produce it yourself, you can sell the idea, or you can license the product to another company to produce and market.

Before moving on to the product development phase, business needs to assess the financial attractiveness of the new product idea. Companies estimate the sales volume (how much they will be able to sell), the selling price (what consumers will pay for the product or service) and revenue expectations (how much income the product will generate).

Comprehension questions:

1. What is the first step in thew NPD?

2. What do marketers closely work with?

3. What does marketing strategy describe?