For how long do you think companies like Unilever Nig. Plc, Nestle Nigeria Plc and other companies have been in the market? What do you think is keeping them in the market? It is because these companies continuously improve existing products and constantly introduce new ones. Product availability in the market place is what convinces the consumer that a company exists. This module explains to you how companies can improve the existing products as well as how they can introduce new ones into the market. Therefore, to convey its presence and create lasting impression in the mind of the public, good products should be provided that satisfies the needs and wants of the consumers. However, much innovation goes into development of new products to attract customers and managing existing ones to retain the old customers. This article describes and analyses activities of marketing personnel concerning what their new products should look like, how to develop new product, types of market to be served, how to ensure that members of the society adopt the product, how to manage the new product to enable it grow to maturity over a long period identifying causes of new product failure.
Product Development and product concept categories
Product development and New product development
Product development is a process by which a firm transforms data on market opportunities and technical possibilities into information assets for commercial production. New product development (NPD) is the term used to describe the complete process of bringing a new product or service to the market. Busari, Olannye and Taiwo regard a new product as making available a product that is sufficiently different from the existing alternatives. It does not have a ready substitute. Somehow it may be imitative ME TOO product or seconder which is a slight improvement on an innovative product.
Concept of New Product
New product may be defined as any product, service, or idea not currently made or marketed by a company or m which the consumer may perceive as new. According to Kotler, by new product we mean original product, product improvement, product modification and new brands that the firms develop through its own research-and- development efforts. A firm can obtain a new product in two ways: one is through acquisition by buying a whole company’s else product. The other is through new product development in the company’s own research-and-development department. Butler asserts that a new product is anything which is perceived as such by the consumers or which the firm has no previous experience. He believes that the concept of a new product is subjective. Generally, a product is ‘new’ if it is being perceived as new by the consumer. Adeyanju regards a new product as any modification in any of the ‘sub-product’ making up the established product is either new or not as the market perceives it. If the buyer perceives that a given product is significantly different to the competitive items in some characteristics (appearance, performance), then it is a new product.
Categories of New Product
According to Adeyanju, there are categories of new product.
Real innovative: Products which are really innovative that are truly unique. These are products that are new to the market as well as to the manufacturing firms.
Adaptive replacements of existing products: This is an adjustment in an established product. These products are not new to the company as well as the market but for the adjustment e.g. medium size instant coffee replaced ground coffee market e.g.
Imitative products: These are products which are new to the company but not new to the ‘Robert’ soap and ‘Asepso’ by PZ and Unilever respectively. The two products were introduced by the two companies because of the ban on importation of soap which affected “Made in England” “Roberts and Asepso’ soaps.
Wait and wash: These are products which are new to the company but closely related to the one in the market e.g ‘Flourish Toothpaste’, ‘Dental Clean’.
Cost reduction: These are new products that provide similar performance at lower cost.
Re-apportioning: These are new products that are targeted to new market or market segment Bower and Clayton identified four categories of new products as:
New-To-The-World products: These are new inventions like in-line skates and health maintenance organisation.
New category entries such as sport utility vehicles are products or service that are now to a firm.
Additions to product line: These add products or services to a firm’s current market. For example, when a power laundry detergent offers a liquid version, it is considered a line extension.
Product improvements: These types of new product are common to every product and product category
How will you categorise the following products: Palm top computer, Unilag bottle water, Unilag bread, a new discovery from the Faculty of Science that will increase fish production by 30%
Real innovative: product that will increase fish production by 30%, adaptive replacement: palmtop computer, imitative product: Unilag bread, Unilag bottle water
Reasons for New Product
Butler states that embarking on product development through creation of new product or substantial modification of existing ones by management is no doubt the resultant effect of some compelling factors which include:
Profit improvement: Management may decide to improve profit. Improved product will surely lead to higher profit through bringing more customers/ consumers into the product consumption fold. The changing phases of technology are usually accompanied with major or minor improvement in an existing product. This usually results in the introduction of new product. An example is the computer replacing the calculator and adding machine.
Planned obsolescence: Management may deliberately introduce improvement of an existing product into the market to make such product outdated. Example includes ‘Peugeot 504′ replacing the 404 brand’. The introduction of colour television and compact disc (CD) is to make black and white television and cassette radio outdated.
Merger and Acquisition: The coming together of two or more companies or a total purchase of one company by another usually results in either the introduction of or an adjustment in an existing product. The acquisition of Lipton (Nigeria) Limited, by Unilever Plc which led to the introduction of Lipton tea by the latter company.
New uses for existing product: A minor or major change may be effected in order to find new uses for an existing product. This is meant to expand the market base for such product.
Changes in consumer needs: Consumer needs and desires change frequently. Therefore, product undergoes major and minor improvement so as to better satisfy the consumers’ changing needs.
Management: The management may also embark on product development to replace obsolete product with new ones.
Stanton also enumerates the following benefits of new products planning and development:
- New products are essential for a firm’s growth since all products are mortal. Their replacement must be constantly planned; in order to sustain the company’s sales, profits and growth objectives.
- New products help to lessen a firm’s dependence on one product or product line and so reduce marketing and financial risk through product diversification.
- New products help companies to maximize their productive and distributive efficiency such as optimize use of established distribution channels.
- New products can help maximize use of the company’s resources as well as environmental considerations.
Stages of new product development
Box Stages of Product Development
Stage 1 Ideas generation
Stage 2 Ideas screening
Stage 3 Concept development and testing
Stage 4 Business analysis
Stage 5 Product development
Stage 6 Marketing strategy development
Stage 7 Product testing and test marketing
Stage 8 Commercialization
This is the first stage of new product development. Firms vary in how they go about finding ideas. Some are casual and keep their ears open to new possibilities while others identify product categories in which to concentrate their search effort. Firm can obtain new products internally or externally. Internal development means the firm develops the new product itself. This is riskier than external development because the company bears all of the costs associated with the new product development and implementation. It is within the organisation that creation of a product and the development of such product is being planned. Internally, ideas are sourced from the management, employees and departments.
External sourcing means the company acquires the product or service, or obtains the right to market the products or services from another organisation. Such external sources are competitors, suppliers, consumers, etc.
Sources of new products: The following are other sources of new product ideas
Internal Sources: That is written by the company’s personnel through the research and development department.
Customer: Through writing and listening to customer or customer survey.
Competitor: Through analyzing competitor product and other strategies.
Distributorship supplier: They are close to the customers and can pass along information about consumers’ needs, problems, etc.
By modifying existing products through innovation adaptation imitation.
By developing and adding a complementary product to a company’s product portfolio.
By acquiring new product ideas from its existing products.
The published literature of polytechnics, professional institutes, universities, the trade and technical press and government owned research centres
Scientists, as well as research and development personnel
Individual managers who may brainstorm to make useful suggestions
The large pool of product ideas is screened to bring the number of such ideas to a manageable level. The management develops a method of screening, which may provide the criteria that each idea must pass in order to be considered for development. The criteria are weighted to indicate the relative importance of each product idea.
The job of screening in firms is to spot and drop poor ideas as early as possible. The rationale is that product development costs rise substantially at each successful stage of the process. When products reach later stages, firms often feel that although so much has been invested in the in developing the product, such should not be launched. This is done in the hope of preventing poor product idea from going far. The screening ensures that there is adequate market demand for the product, that the idea meets the current environmental and social standards and that it fits into the existing company’s facilities like production, manpower, financial, marketing structure and legal requirement.
Concept Development and Testing
Those ideas that survive screening undergo further development into fully matured product concepts. However, a product idea is quite different from product concept. A product idea is a possible product described in objective functional terms, that the firm can see itself offering the market, while product concept is a particular subjective consumer meaning the firm tries to build into the product idea.
Concept testing calls for testing a new product concept with a group for target consumers. Consumers’ reaction to the concept will help the company to decide on the concept with the strongest appeal. This involves pretesting to decide the product ideas. All efforts at this stage is geared towards ascertaining the compatibility of the company and the consumer’s view with the proposed product. In concept development; attractive ideas must be refined into testable product concepts. The concept test can take three different forms:
i. Verbal: Statement about what it does.
ii. Visual: In form of photograph or drawing.
iii. Mock-up: The mock-up of the product may be used.
The firm must however narrow down the choice to one of these concepts. It introduces criteria that it wants to achieve with this new product such as good rate of return, high sales volume, utilization of idle capacity, etc. More data are collected on the remaining concepts until one is finally chosen as the core product concept. Concept testing calls for taking these concepts to a group of target consumers and seeing their reactions.
Business analysis means evaluation of attractiveness of the product. It involves a review of the sales cost, profit projection to find out whether they satisfy the company’s objectives. If they do, the product can be moved to the product development stage. The idea is expanded into concrete element of proposal in which the management tries to:
i. Identify relative product features and advantages.
ii. Estimate market demand and profitability.
iii. Establish programmes to develop the products.
iv. Assign responsibility for further study of the product feasibility.
v. Financial analysis of expected revenue, financial return.
Business or economic analysis entails detailed analysis of the product or service evaluation, the likely profitability, cost of production, expected sales volume, and return on investments (ROI) of the product. After this analysis, the product concept can be moved to the product development stage. Business analysis, which starts at this stage, will be revised at critical review periods during the product’s development.
Orenuga posits that at this stage the marketer projects cost, profits and returns on investment for the new product in order to determine whether the project will meet financial objectives of the company. This is a realistic projection of the minimum and maximum sales of the product and their impact on the company.
This stage will answer whether the product ideas can be translated into a technical and commercial feasible product. Osuagwu and Eniola remarked that produce development is the process whereby the desired new product or service is created. If the concept passes the business test or moves into product development here, the research and development (R&D) and engineering units develop the product into a physical product or prototype. Thus, the product or service becomes more than an idea. It is now a real object rather than a picture prototype of model. A brand name is sought for the idea or concept, packages are developed to suit the product and all the other major elements of the marketing mix are established.
Product development enables the firm to know exactly what its product or service will look like, and whether it can be produced at a lower critical analysis. It calls for a large investment in production of the proposed new product. Time and money often go into trying to develop a technically feasible product. Three stages are involved in the product development stage namely; (1) prototype development and testing, (2) branding and (3) packaging. If the first four stages of the product development (new product ideas’ generation, ideas screening, concept development and testing as well as business analysis) provide good chance of the feasibility of marketing the product, the product goes into this fifth stage.