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.
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
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
=
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.
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
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
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.
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.
CHALLENGES TO NEW PRODUCT DEVELOPMENT
REFERENCES
1. www.wikipedia.org
2. www.forbes.com
3. www.economictimes.com
4. www.businessworld.com