How Are New Products and Services Developed in Businesses?
Developing new products and services is a high-risk endeavor. The costs of research and development, ranging from consumer testing to machinery upgrades, constantly increase. Moreover, the pace of technological change means that even the most successful innovations can become outdated before they get a chance to turn a profit. Despite these challenges, today's manufacturers launch more new products and services than ever before.
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Significance
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Companies take on the risk of new product development to stay competitive. With easy access to a constant stream of information about alternative brands, consumers will not long remain loyal to outdated goods. Global competition means the marketplace has a continual flood of innovations from abroad. However, by offering new choices to their target buyers, firms can demonstrate an ongoing commitment to understanding and satisfying their wants and needs.
Considerations
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In the past, firms could afford to take chances on new products and services that might succeed solely based on luck or good timing. These factors can still help create a successful launch, but today they are rarely enough to rely on. The costs are too high, and the competition is too stiff to proceed without careful planning and screening. These are the reasons why most companies now use a rigorous new product development process.
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Features
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While there are some variations, the basic features of the new product development process are similar across industries. These seven features include:
1. Generating new ideas from internal and/or external sources
2. Expanding ideas into new product concepts that describe how a new product would benefit consumers
3. Developing a marketing strategy to support the proposed launch
4. Conducting a business analysis to estimate market demand and profit potential
5. Technical development of a new product prototype
6. Test marketing each element of the proposed marketing mix in one or more small markets
7. Commercialization, or full-scale national rollout, of the new product
Benefits
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Each step in the new product development process helps the firm by reducing risks and enhancing the likelihood of success. At the start, because they deliberately solicit new product ideas, marketers do not need to hope for a random inspiration. Then they ensure consideration of market appeal by expanding each idea into a consumer-oriented product concept. For example, an idea for a powdered nutritional additive for milk could become an instant breakfast concept. At other stages of the process, the firm carefully tests the profit potential, technical feasibility and competitive positioning of the new product before investing in a national launch.
Potential
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Ultimately, the buyers themselves determine the market potential of a new product or service. Collectively, some groups of consumers tend to be more receptive to new products than other groups. For example, young, well-educated people will often try a technological innovation sooner than their parents would.
Individually, consumers also vary in how quickly they adopt something new into their lives. Marketers may influence a potential buyer by ensuring she is aware of the new product, and that it will meet her expectations after convincing her to buy it.
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References
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