new product development

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Fig. 60 New product development. Steps in the process of developing a new product.

new product development

the process of creating NEW PRODUCTS by a firm as part of its ongoing PRODUCT STRATEGY. New product development involves a number of steps as indicated in Fig. 60. New product ideas can arise from two broad sources:
  1. product concepts based on ideas for new products generated by the firm's own marketing or production staff, or ideas from customers or suppliers (see BRAINSTORMING, NOMINAL GROUP TECHNIQUE);
  2. product technology generated by the firm's RESEARCH AND DEVELOPMENT department or licensed from outside the firm.

Any product ideas arising from either of these sources are then subjected to an initial product screening which explores their viability in terms of possible consumer acceptance, technological feasibility and likely cost. Product ideas which seem viable in terms of this initial screening justify further development expenditures and proceed to the next phase. This phase involves:

  1. further testing of the product concept to gauge its consumer acceptability, perhaps using consumer discussion groups and questionnaire field research;
  2. product design to make product prototypes and test them in a laboratory situation.

The results of these two processes will then be subjected to further screening on marketing, technology and cost grounds, and a product design will be agreed upon for product ideas which survive the second screening. In order to test further both consumer acceptability and the operating efficiency of the product design, prototypes may be distributed to a consumer test panel for their use and results collected from them.

Feedback from this pretest can then be used to make final modifications to the product design if the basic design proves to be broadly acceptable.

Finally the firm may undertake extensive MARKETING RESEARCH into the potential market for the designed product, establish pilot production facilities for it and test market it in a limited geographical area in order to gauge consumer reaction. If TEST MARKETING proves successful then full-scale production facilities will be created and a full product launch undertaken, backed up by appropriate advertising and sales promotion.

A very high proportion of new product ideas are eliminated by the firm through its screening processes. Despite this only a small proportion of those surviving new products which are launched succeed in establishing themselves in the market. See CONCURRENT ENGINEERING.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
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