New Product Development – Problems of New Product Development
Meaning of New Product Development
Giving the rapid changes in consumer taste, technology, and competition, companies must plan and develop a steady stream of new products and services.The term product development are used by variety of organizations to present a wide range of activities. New product development is the organizations and evaluation of new ideas that can be profitability sold in the market place. It consists of determining the goods and services that an organization will market and the chrematistics of such goods services.
New product development is seen by (Umeh and Ude-Umanta, 2002:48) as “involving the process of anticipating the needs of the market place and initiating action towards identification and production of products and services which will best satisfy such needs. In a nut shell, product development compasses the technical activities that enable a company to determine what product is will market.
New product development involves various stages, which includes the screening and appraisal of an idea, analysis of the market, a actual and potential customers for product and the development and testing of the need for a careful research before new products development which need capable organization to develop, test and shepherd the new product, and it also need coordinated effort to launch and distribute it after production.
It is important to note that product development is one of the management control tasks. Without the existence of a product, there will be nothing to market and without marketing, there will be no business enterprise.
Promotional efforts, pricing tactics and management of channels of distribution are all activities that are basically designed to facilitate product and services management for purpose of satisfying perceive customers needs.
According to oxford Aifred .I (1995:332) product development in a comprehensive view involves those activities included in the process of determining specially these tangible and intangible attributes that leads to customer satisfaction which an organization should market and those technical activities involves in the creation, improvement and introduction in their form or situation research. The combined score of product development includes making decision in the following areas.
i. Which product should the firm make and which should it buy?
ii. Should the company market more or fewer product?
iii. What new uses are there for each product?
iv. What brand, package and label should be used for each product?
v. How should the product be styled and designed?
2.2 WHY NEW PRODUCT DEVELOPMENT
Because so many new products fail, companies are anxious to learn how to improve their odds of new-product success. To create successful new product, a company must understand its consumers, markets and competitors and develop products that deliver superior value to customers. Manufactures devote more time and money to the research and development of new product to meet changing consumer tastes. Since it is through its products that a company meet the needs of its consumer whose tastes change with time, it must constantly anticipate and plan for the replacement of its old products with the new ones. Sometimes firms are faced with increased challenges and pressures within their industry, to remain a step a head of their competitors, whatever the case may be. New products thus are the life blood of any organization. (Kotler and Armstrong, 2004 ).
W.G Bygue and B.K Chester born in their test work at product development stated that it is important in the sense that it attempts to discover what options are available and also the attributiveness of these options. Since without profit, no other good objective can be achieved, it becomes available for the firm to do the work even if a product is doing will in the market, there is still a continuous search for a better product and a more profitable market. This should be backed up with the desire for growth, prestige security and caring opportunities for management.
In their view, the need or important of product development cannot be over emphasized since any firm wanting to remain in the market and to achieve its goal and objectives must be prepared to meet the demand and challenges of new product development caused by the competitive adjustment towards the changing consumer’s taste.
2.3 NEW PRODUCT DEVELOPMENT PROCESS
The watch word of management must often be “innovate or die” and this innovating attitude can become a philosophy almost paraueling that of marketing concept.
By new product we mean development of original products, product improvements, product modifications, and new brands through in the firm’s own Research and development efforts. (kotler and Armstrong, 2004:315) According to Ozo. J.U (2005:89). A product is one that is new in any way for the company concerned. He stressed that a new product can become “new” in many ways. A fresh idea can be turned into a new product.
Product development process is a systematic process of originating, evaluating those that show promise that this can be adopting those sold in the market place. This management procedure must be employed to generate collect and secure idea for new product. (Aifred I. Okafor, 1995:334)
To create or develop a new product, we must follow the process. The research for following these process is to avoid making mistakes. We are more likely to succeed if we systematically go through the process than if we used a haphazard or unsystematic approach. For instance, many products did not really succeed after they had been developed or one of the fundamental reason why such products failure is that they did not go through the new product planning process.
(Ozo J.U 2005:88) The major process of new product development according to kotler and Armstrong (2004) are ideas generator idea screening, concept testing, product development, test marketing, and commercialization. At each step, management decides whether to move to the next stage, abandon the product or seek additional information.
2.4 IDEAS GENERATION STAGE2
This is a systematic search for new product ideas. The starting point of new product development process is the explanation and generation of feasible ideas that satisfy all the constraints (kotler and Armstrong, 2004:315)
Umeh and Ude-Umanta (2002:51) defined it as the first stage which involves ideas generation from market research, company employees, including research and development department, management brainstorming and external sources to the company.
A company has to general ideas in order to find a few good ones. Firms are constantly on the look out for product ideas that will enable them achieve desired product mix and line objective, but unfortunately only a few of them are commercially feasible major sources of new product ideas included the internal and external sources. Internal source include the firm engineering and designed department, Research and development (R and D), management External sources include dealers, consumers, outside consultants, research department of other companies, patents, in dependent investors, government research project etc.
Using the Internal sources, the company can find new ideas through formal research and development. In using external sources, the company find new ideas through formal research and development. In using external sources, the company may be involved in watching and listening to customers.
The company can analyzed customer questions and complaints to find new products that better solve consumer problems. The company can conduct surveys or focus groups to learn about consumer needs and wants.
Kotler and Armstrong, 2004:315-320)
The purpose of ideas generation is to produce a steady and reliable for few of new product ideas that may then be considered for possible adoption. The entire new product development process is process will grind to baut (Ozo, J.U 2005:93-94)
2.5 IDEA SCREENING
According to Umeh and Ude Umanta (2002:51)
This involves lived sifting and checking through the ideas to reduce the number to few viable ideas. The ideas that warrant further study can then be further investigated. Care should be taken not to drops good ideas or accept bad ones. In their view while screening on idea, the company must consider the following:
a. If the ideas are in line or consistent with the firms objective.
b. If the firm has the technical (e.g equipment, manpower, etc) financial and management ability to develop the product
c. If there really exists a large market for the product i.e will it really be marketable.
The screening of new product idea is the first critical evaluation in the new product process. It is the initial decision to commit, resources to a new project. Screening involves an objective and orderly assessment of new product or service idea, as no company want to throw that never materialize into commercial successes (Ozo J.U, 2005:110-165)
The aim of screening new product idea is to spot good ideas and drop poor onces as soon as possible. It is not enough exploring new product ideas. Rather, a more difficult problem is that of distinguishing the good from the poor ideas. The purpose of idea generation is to create a large number of ideas those that show promise that this can be profit as reducing stage is idea screening stage is to reduce that of the succeeding number. The first idea reducing stage is ideas and drop poor onces as soon as possible. It is at this stage that statement is subjected to preliminary screening analysis that determines the particularly of the ideas and amount of investment required, market possibilities, customer reactions and channel of distribution to be employed.
The screening stage is usually a two ways or two-step produced. First, new concepts are examined and those that are obviously inconsistent with the firms product policies and objectives are rejected. Those in the concept statement must be compatible with the company corporate philosophy, existing marketing strategy, product line and assortment mix. The second point is screening those products concepts that might be feasible, screening the products into ranks in accordance with the ideas and according to their attractiveness (kotler and Armstrong 2004:320)
2.6 CONCEPT DEVELOPMENT AND TESTING
After product ideas have been screened and accepted, the next stage is to transform them into product concepts. It is a serious mistake in the process of developing a new product not to transform ideas into concepts and than test those concepts with the target consumers. Product concept refers to the description of product idea and the benefits it will supposedly provide to the consumers (Ozo J.U 2005:130)
According to kotler and Armstrong (2004:320) this id detailed version of the new product idea stated in meaningful consumer terms. An attractive idea must be developed into distinguish between a product idea, product image. A product idea is a possible product that company can see itself offering to the market. Ozo (2005:130) defined it as the picture or though of a new product which has flashed into a persons mind.
A product image is the way consumers perceive an actual or potential product.
A product concept is the subjective meaning about a product that the company tries to communicate to consumer (Okafor Aifred I, 1995:33)
2.7 CONCEPT TESTING
This calls testing new-product concept, which has been development, must be tested with concepts have strong consumer appeal (kotler and Armstrong, 2004:321)
According Ozo 2005:135), Any concept, which has been developed, must tested with consumers. It is the testing that allows us to determine whether the product if developed would be acceptable and purchased by consumers in the market.
Concept testing involves presently target consumers and getting their reactions presented symbolically or physically presenting concepts symbolically means describing it on paper representing its pictorial form or paper for the consumer to see or read. Presenting the concept physically means making a representation on model of that product to reflect its real-life appearance or form. However, a more concrete and physical presentation of concept will increase the reliability of the concept test.
2.8 BUSINESS ANALYSIS
This involves a review of the sales, costs and profit projections for a new product to find out whether these factors satisfy the company’s objectives. If they do, product can move to the product development stage (Kotler and Armstrong 2004:323), it involves preparing sales cost, profit projection to determine whether they satisfy company objectives (Ozo, 2005:142).
To estimate sales, the company might look at the sales history of similar product and conduct surveys of market opinion. It can then estimate minimum and maximum sales to assess the range of risk.
After preparing the sales forecast, management can estimate the expected costs and profit for the product, including marketing Research and Development operations, accounting and finance costs. The company then uses the sales and costs figure to analyze the new product financial attractiveness. (Kotler and Armstrong, 2004:323).
2.9 PRODUCT DEVELOPMENT
This is the stage that involves the translation of the product ideas, which is a concept, into a physical product (Umeh and Ude-Umanta, 2002:52)
Product development is the act of developing the product concept into physical product in order to ensure that the product idea can be turned into a workable product (Kotler and Armstrong, 2004:232),
For many new product concepts, the product may have existed only as a word description, a drawing perhaps a cruel mock up. If the product passes the business test, it moves into product development.
This is a technical stage, which includes the development of product from idea to physical from. The Research and Development will develop and test one or more physical versions of the product concept. The product undergoes rigorous tests to make sure that they perform safely and effectively, or that consumers will find value in them. Consumers are shown the concept statement for evaluation from their own standpoint of need and use.
Their evaluation also includes suggestion of failure of attributes, which they would like to be added or deducted from the product. Because of the dynamics of the market circumstances and environment, it is important to make continuous study and contact with the market place.
2.10 PRODUCT TEST
These calls for testing new product concept with a group with a group of target consumers to find out if the concepts have strong consumer appeal.
For some products, it may become very necessary that the new product be exposed to a product test before advancing to market testing of the new product. Product testing is the detailed testing and evaluating of prototypes of the new product. Many firms routinely test new product with consumers before attempting to turn them into actual new products. This exercise is very vital because during product stage, some in-built faults (not easily detected) may exist with the new product. During the product testing stage, the product is exposed to the likely environment under which it will finally be utilized.
It is believed that only in built fault is likely to be made known during the product test stage. If there is minor fault, the product is taken back to product department for the problem to be ratified. However, if the product develops a major problem the whole product idea may need to be abandoned.
(Kotler and Armstrong, 2004:321).
2.11 TESTING MARKETING
If the product passes functional and consumer tests, the next step is test marketing. This is the stage of new product development in which the product and marketing programs are tested in more realistic market settings, that is after being satisfied with the product functional performance, the product will be tested with a brand name and preliminary marketing programme to test the product acceptability in a more realistic consumer setting. Test marketing is a scientific attempt to market product in a limited scale under rigidly controlled condition that tells firm what likely happens when full scale production is undertaken. (Kotler and Armstrong, 2004:324),
According to Ozo J.U. (2005:206) Test marketing is a controlled experiment conducted in one or more limited, but carefully selected parts of a market. He also defined it as the development and execution of a miniature of national market planning in order to gain experience, which provide the basic guidance in refining and executing a national plan that have a high probability of success.
According to Umeh and umanta (2002:52), the aim of test marketing is to assess consumer reaction terms of demand and acceptability of product. In their own view, reactions and complaints by buyers and initial users are taken note of, the product ca then be drawn and modifications made.
According to Ozo (2005:206) the aim is to use the test to predict and explore the consequences of one or more proposed marketing actions, notably new product introductions.
This is the last opportunity to modify the product or the marketing strategy. If test marketing is unsuccessful, the product may be withdraw from further consideration or shelves for change and later introduced.
Test marketing is undertaken to access this efforts of the marketing programme for the new product than to evaluate the product itself. The amount of test marketing needed varies with each new product. It is influenced by the investment cost, time and research cost.
Test marketing cost may be high, and it takes time that may allow competitors to gain advantage. When the costs of developing and introducing the product are low, or when the management is confidence about the new product the company may do litter or no test marketing.
However, when introducing a new product requires a big investment, or when the management is not sure of the product or marketing programme, a company may do a lot of test marketing.
Although test marketing cost can be high, they are often small when compared with the cost of making a major mistake. A promising new product may be killed through haste to get it to the market.
Test marketing gives the marketer experience with marketing the product before going to the great expanse of full introduction. It let the company test the product and its entire marketing programme, positioning strategy, advertising, distribution, pricing branding and packaging Kotler and Armstrong, 2004:324).
2.12 COMMERCIALIZATION
One the results of test marketing are satisfactory the company then goes ahead to produce the goods in large qualities and market the product fully. (Umeh and Umanta 2002:53)
Test marketing gives the management the information needed to make a final decision about whether to launch the product. Commercialization means introducing a new product into the market. Kotler and Armstrong, (2004:327).
As the last stage of the development process, commercialization involves finalizing decision to produce the new produce and launch it on full scale. The decision to engage in full-scale launch shows that all the problem detected at the test marketing stage that may inhibit market acceptance and profitability may have been corrected.
Commercialization takes two phases, first, the preparation phase involves argument to acquire funds needed for mass production. Also this stage involves final plans on mix of all the marketing tools and budget for the overall activity.
The second phase is launching and introduction, marks the beginning of the product life-cycle as physical appearance, or actual full-scale launch of the new product in the intended market characterizes it.
The company launching a new product must first decide on introduction timing. If the economy is down, the company may wait until following year to launch it. The company must decide where to launch the new product in a single location, a region, the national market or international market. The small companies may enter attractive cities or regions one awt a time the large may quickly introduce new models into several regions or into the full national market.
2.13 PRODUCT LIFE-CYCLE (PLC)
Product life-cycle commences immediately a new product is developed by the company. After launching the new product, management wants the product to enjoy a long and happy life. Although it does not expect the product to sell ever, the company wants to earn a decent profit to cover all the effort and risk that want into launching it.
According o Aifred I. Okafor (1995:40): The product life-cycle is an attempt to recognize distinct stages in the sales history of the product. It is also an importance concept in new product development process.
Ozo J.U (2005:5) defined it as the stage in the sale history of a product. Product are originated, developed and launched into the market.
It then grows, mature and eventually declines. In like manner, sales and profit grow along with it, the later changing from negative, peaks and then declines. (Umeh and Umanta 2004:54).
During a products life, a company will normally formulate and reformulate its marketing strategies several times. Consequently the company needs to plan for succession of strategies appropriate to each stage in the products life-cycle.
The company must think about how to extend the product life and profitability because knows that it will not last forever.
The product life-cycle involves or passes through four distinct stages, which are introductory, growth, and maturity and decline stages before they eventually die or are re-launched. Because each stages offers distinct opportunities and threats, promotion mix strategy must be attuned to the relevant stages. Not all products follow this product life-cycle. Some enter the decline stage and then are cycled back into the growth stage through promotion, or repositioning (Kotler and Armstrong 2004:330).
2.14 INTRODUCTORY STAGE
This is the product life-cycle stage in which the new product is first distributed and made available for purchase. It starts when the new product is first launched.
In the introductory stage, management created marketing programmes that will enable the produce to experience sales and profit growth. Here, much money is needed to attract distributors and build their inventories, profits are usually non-existence in this stage because of the large or heavy expanses of product introduction, and sales come slowly a firm attempt various penetration stages for survival or profit. Promotion primary roles is informative or awareness creating, this role should be adopted because it is assumed that the product is not yet known by many people.
Almost all the promotional elements are needed here to do this job effectively by advertising. Personal selling, and sales promotion are in the forefront, sales promotion in the form of free sample price-off contest etc. has caused the audience to make favourably disposition that may led to trial purchase, brands switching and brand loyalty.
A company. especially the market pioneer must choose a launch strategy that is consistent with the intended product positioning. It should realize that the initial strategy is just the first step in a grander marketing plan for the products entire life-cycle (Kotler and Armstrong 2004:332).
2.15 GROWTH STAGE
According to Ozo (2005:258) this is a period of rapid market acceptance and substantial profit improvement.
Kotler and Armstrong (2004:332) defined it as the product life-cycle stage in which a products sale starts climbing quickly. If the new product satisfied the market, it will enter a growth stage. The product enters the growth stage as the markets expand through increasing awareness of new product and repeat purchase by vital buyers. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favourable of words of mouth. Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets, and sales jump just to build reseller inventories.
Profit increases during the growth stage as promotion cost are spread over a target volume and as unit manufacturing costs fail. The firm used several strategies to sustain rapid market growth as long as possible.
Careful monitoring of the products performance in the introductory stage and early in the growth, squares the ultimate success and profitability of the new product. Thus, the manager’s tasks are to build brand preference and to solidify distribution strategy.
In the growth stage, the firm faces a trade off between high market share and high current profit. By spending a lot of money on product improvement, promotion and distribution, the company can capture a dominant position (Kotler and Armstrong 2004:332)
2.16 MATURITY STAGE
According to Umeh and Umanta (2002:55) have total sales continue growing but there is a slow down in rate of growth, due to acceptance of product by most of the potential buyers. Sales growth tapers off and is said to reach the saturation stage project stabilizes at this stage or start declining.
Kotler and Armstrong (2004:333) referred this stage as the period of show down in sales growth rate because the product has achieved acceptance by most potential buyers. Profit levels off on decline because of increased marketing outlays to defend the product against competition.
At some point a products sales growth will slow down, and the product enter maturity stage, otherwise called the shake out point. This maturity normally lasts longer than the previous stages, and it poses strong challenges to marketing management.
In their own view maturity stage maintains existing buyers by reminding them of the products/brands existence and its growth desirable attributes. The slow down in sales growth result in many producers with many product sell in turn, this over capacity leads to greater competition. Competitors begin marketing down prices, increasing their sales their advertising and sales. Advertising and sales promotions, and upping their Research and development budget etc. their better versions of the product. This steps leads to a drop in profit. Some of the weaker competitors start dropping out and the industry eventually conditions only well established competitors looms, it is the responsibility of the manger to see that the company’s product takes advantage of the market development. He may decide to try to increase the company’s product market share by actually investigating more of company resource in promotion and distribution. He should note that may customers, middlemen and salesmen lost to compactors at this stage will hard by comeback because the remind him with some stronger incentives. Product managers should defend their mature product they should consider modification the market, mix.
In modifying the market, the company tries to increase the consumption of the current product. It look for new users and market segments. How should look for ways to increase usage among present customers. The company may want to reposition the brand to segment.
The company might also try modifying the product changing characteristics such as quality, features, or style to attract new users and inspire more usage. The company might also new features that expand the products usefulness, safety, or convenience.
Finally, the company can try modifying the marketing mix-improving sales by changing one or more marketing mix elements. It can cut prices to attract new users and competitors customers. It can launch a better advertising campaign or use aggressive sales promotions, premiums, contests, cent-off and trade deals. The company can offer new or improved services to buyers.
2.17 DECLINE STAGE
This is the period when sales fall off and profit drop. The sales of most product forms and brands eventually dip. The decline may be slow, they may drop to a low level where they continue for many years. This is the decline stage.
Sales decline for many reasons, including technological advances, shifts in consumer tests, and increased competition.
As sales and profits decline some firms withdraw from the market. Those remaining may prune their product offering. They may cut the promotion budget and reduce their prices further.
The length of time that all products need to travel through each of the mentioned stages of product life-cycle is not the same. The increased rate with which new technology is being introduced into the market and the increased rate of changes in consumer taste and preferences has resulted in the shorting of the life-cycle of most newly introduced products.
For this reasons, companies need to pay more attention to their aging products. The firms tasks is first, to identifying product in the decline stage by regularly reviewing sales, market shares, costs and profit trends management must decide whether to maintain, harvest, or drop each of these declining products.
2.18 WHY NEW PRODUCTS FAIL
Despite the elaborate and elegant effort throughout the product development process, many new products still fail to meet the expected market target. According to Berkowitz et al (1997: 297), the thousand of product failure that occur every year cost companies billions of Naira.
According to Kotler and Armstrong (2004:315), there are several reasons. Although an idea may be good, the market size may have been overestimate. Perhaps the actual product was designed as well as it should have been or may be, it was in correctly positioned in the market, price too high, or advertised poor. A high level executive might push a favourite idea despite poor marketing research findings. Sometime the cost of produce development are higher than expect, and sometimes, competitors fight back harder than expected.
Marketing seasons according to Berkowitz et al (1997:298), for new product failure include, insignificance point difference poor product quality Bad timing, poor executive of the marketing mix. Incomplete market and product definition before product development starts, too little market attractiveness and no economic access to buyers.
Production fails to meet expected market and profit targets because mush attention and care are not paid to the product. Many manufacturing firms, have no formal development procedures, and ignore scientific procedures in favour of management launches and initiation in order words, management fails to recognize the importance of rapidly changing market environment.
Often management forgets that marketing deals with the consumer and the product must satisfy needs and wants of the consumer. Many firms have inadequate facilities for testing consumers attitudes about new product and many are reluctant to hire outside agency to do it.
The company may budget a certain amount but at the long run; the actual amount will be higher than expected which leads to higher than expected to higher prices and in turn lower sales volume than anticipated.
Failures of manufacturing firms to provide sufficient marketing personnel and failure to retain them for new products and new markets also have adverse effect on success of new product. Thus, it can be summarized (i.e why new product fail)
i. Unforeseen hidden product deficiency during productions, which only come up during usage by users.
ii. Inadequate marketing efforts to “push” and “pull” the new product along the distributive new work.
iii. When projected cost is lower than actual, this may result to higher selling prices and discouraging sales volume.
iv. Unforeseen changes in consumer taste and preference immediately product was introduced.
v. If competitors find it very easy to introduce their own brand of product almost along side the new product.
vi. New products do not offer consumers any added advantage over already existing brands.
2.19 PROBLEMS OF NEW PRODUCT DEVELOPMENT IN CONSUMER GOODS INDUSTRY
From the foregoing, it is deduced that product development is not an easy task. It is a risky and unascertained activity. Since every product depends on markets for survival forecasting the failure. This is the time a manufacturing when firms with poor skilled personnel and wit inadequate technical know how will certainly die off.
It is risky to devote much time and money in the development of a product, as the business word is dynamic. Technically and the product itself are also problems. In most cases, companies do not produce sufficient quantities to meet market demand for their products. So, this might make competitors to gain anticipated shares of the market.
Environment factors will increasingly affect or influence the decisions of development because no company will afford to was its natural resources particularly its scare scientific and technical talent.
There is a problem of the organization inability to draw up accurate in forecast of the necessary investments. Effective product development response is hard to achieve where there is internal organizational resistance to change.
There might be lack of enthusiasm to take on new product development risks. Another problem is competitor’s capacity to undertake product development. The competitors may have greater capacity and available resources to produce on a large scale. This kind of capacity may put the new product development activities of smaller competitors at increased price market acceptability and inadequate market analysis, such as failing to define market, or over estimating its size is also problem behind product development.
This article was extracted from a Project Research Work/Material Topic “PROBLEMS OF NEW PRODUCT DEVELOPMENT IN CONSUMER GOODS INDUSTRY (A CASE STUDY OF PATERSON ZOCHONIS PLC ABA)”
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