New Product Development - Coursework Example

NEW PRODUCT DEVELOPMENT Introduction: Organizations in the 21st century have become increasing global and hence competitive. Companies face extreme pressure to keep up with the market demands and cater to the changing needs and preferences of the consumers. However, this is a highly complex task given that industries experience varying degrees of market conditions, ranging from a comparatively constant market to one which is highly unsteady and dynamic (Calantone, 20031), with constantly shifting consumer preferences (Teoh & Sim, 19972). In order to survive and sustain their competitive positioning within the industry companies often resort to innovative strategies, most of which revolve around launching of a new product in the market. However, such a strategy requires comprehensive planning and care on the part of the management, since the product may or may not be accepted well by the consumers and also because consumer’s tastes and preferences change and so does other factors such as technology, economy, and availability of other similar substitutes in the market. Thus, while developing a new product the companies must “test” the product concept, and ensure its viability in order to avoid huge losses. This paper discusses the various aspects associated with concept testing, which is an integral part of the NPD (New Product Development) process. Brief Overview: Concept testing is a critical aspect of the new product development process (see figure below) and may also be regarded as one of the most advantageous alternative to the design problem. Figure 1: The Booz Allen Hamilton Model (Baker et al, 2007, Pp. 261) The development and testing of a newly developed idea / concept are critical for the success of the product in the market since it informs the management about the utility of the proposed product concept from the perspective of the target customers, as well as other internal aspects such as its technical and financial feasibility. In the absence of such a process, allocation of appropriate funds / resources to the project would be impossible and would be quite a challenge especially considering the dynamic nature of the markets, in which the company operates. Apart from the uncertainties which the management has to face, the basic setbacks commonly encountered by the management include misinformation about the customer preferences, unknown or unproven product designs and / or technologies to be used etc. Concept testing thus, helps the management in overcoming such obstacles since it covers a gamut of methods and procedures which can be used to gauge the performance of the product and process under development (OShaughnessy, 19953). The key to a successful launch of a new product / concept is to avoid total reliance on internal company sources and / or judgment of the personnel involved. Management should take adequate care to take into consideration views obtained from external sources as well as that of current and prospective / target customers. Such data comprising of views and preferences of the prospective customers would help the management in clarifying or substantiating their assumptions made previously through internal sources. Concept Testing: Concept testing is undeniably one the most crucial aspects in the NPD process. It offers various advantages in the form of offering all the critical data required by the management for analyzing the new concept, a brief overview of the reactions of the target consumers and the viability of the product against the backdrop of the existing market conditions. According to Cooper and Kleinschmidt (19934), of the six critical success factors, concept testing contributes to at least three of them which includes – NPP (New Product Process), early product definition and the modification of the idea through customer input. A product concept is a highly structured account of the original product idea, communicated in terms which are consequential to the consumers. A concept can be expressed through statements or graphically, or both. It may also be communicated through either a realistic language or through a promotional language which are referred to in the literature as “core idea concepts” and “positioning concepts” (Page & Rosenbaum, 19925) The main purposes of concept testing include: identifying the concepts which are not feasible so that they may be eliminated in the initial stages itself; estimating the potential market size; identifying the areas which can be modified to suit the market requirements; developing suitable product positioning strategies – including those associated with pricing, promotion, and distribution of the product being developed; identifying the prospective consumption patterns of the existing products etc. Both Kelley (1993)6 and de Bono (1993)7 refer to the recurrent nature of concept/product development. Idyllically concept tests concept testing must occur at every stage of the new product development process since it would ensure improvisation in the concept at all the critical stages and the concept would get an opportunity to be revalued prior to exposing it to the dynamic market. Such a strategy of persistent evaluation of the concept at each and every stage is particularly relevant to products whose development cycles run in years rather than months however the actual existence of setbacks such as time and cost, more often than not, supersede the suggested model. During the early stages of NPD process, concept testing is performed to substantiate the viability of the new product concept and identify those which are approved by the target consumers. Various types of concept testing can be used simultaneously. These include – use of the narrative statement, pictorial representation, prototype, and virtual reality. The first type of testing uses a narrative statement, which comprises of statements that offer its target consumers a written description of the prospective product which they are offered to evaluate. The pictorial testing, includes a method whereby the consumers are given a graphic representation of the product which they are asked to evaluate. The prototype method of testing offers the consumers a working model of the product which they can experience directly and evaluate accordingly and lastly the virtual reality method, offers the consumer an opportunity to experience the product features through computer simulation. For instance the testing team may commence testing of the concept by showing the consumers with a sequence of descriptive product statements and invite their intial responses to the same. The use of such a method of testing would help in drawing prompt reactions from the consumers which would in turn, let the management know whether such an idea is accepted by the target consumers or not. Subsequently the consumers would then be exposed to a sequence of pictures and then be requested to comment on the same, for feedback. This would help in dealing with the problems associated with the basic forms / structures of the product concept in the opinion of the consumer. Later on, the consumers may be asked to directly experience the product through a prototype or a virtual simulation of the same. The exposure of the consumers to the prototype or computer simulation of the proposed product would help the management in evaluating whether the experience drawn from their initial reactions are valid and whether their expectations could be fulfilled through the product. Since all these methods of concept testing vary largely, the responses generated from the consumers also vary accordingly. Thus giving the management a wide variety of choices of responses to choose from and test, giving them a better understanding of the reactions and perceptions of the consumers. Although what type of questions are asked during the each of the aforementioned stages may vary according the objective of the company in launching in the product or the product itself, however a vital question in which the management would be most likely be interested in is the – likelihood of purchase (Kahn, 2006)8. Limitations of Concept Testing: However, despite the various advantages offered by this method, there are certain inherent limitations associated with this process, since not all the concept tests conducted are likely to envisage precise results concerning the success or failure of the product, when launched. In fact there may be various products which may have been dropped by the management owing to the results derived from concept testing, which may have been successes in reality. Some of such limitations are discussed hereunder: Various factors are involved in concept testing which includes the product concept, presentation styles, positioning strategy as well as the overall execution of the concept i.e. through descriptive or illustrative means. Opinions and views regarding appropriate methods to be used for concept testing vary significantly. Stanton et al (1991)9, argues that the process of concept testing must be restricted to the testing of the product idea alone while others such as (Page & Rosenbaum, 1992)10 argue that it is not pragmatic and that the concept in its entirety must be tested to generate accurate consumer responses. While yet others suggest a combination of both be used for concept testing. Secondly, it is often observed that the management makes several changes to the original product idea, after analyzing the responses of the consumers, and hence it becomes extremely complex to understand the whether the changes had any significant impact on the final product or not (Moore, 1982)11. Furthermore, it is highly likely that the external forces may undergo a change by the time the product is finally launched in the market, for instance, the marketplace is quite dynamic in nature and consumer tastes and preferences change instantly, also there may be various changes in terms of the legal or regulatory laws concerning the type of product to be launched which may affect the results derived through concept testing (Moore, 1982). Test prices i.e., price of the product prior to launching of the product cannot be converted into implementation prices i.e. prices of the product when it is actually launched in the market, since implementation prices are dependent on the level of satisfaction derived by the consumers from the actual product (i.e. product which is finally launched in the market for consumption) and this cannot be measured through the concept testing process (Tauber, 1972)12. Another significant drawback of the concept testing process lies in the fact that in case of a product line, which has several variations (for instance flavors in the case of food products) where only one of the variant is tested. Generalizing the results derived (for instance consumer responses) and applying them to the entire product line may prove to be dangerous and the management may have to face huge losses (Urban & Hauser, 1993)13. A similar problem occurs if the product to be tested can be given away as “free sample” in exchange for a favorable response as a part of the product promotion strategy (Lewis, 1984)14 since this may misguide the management regarding its acceptability by the target consumers, who may or may not actually approve of the same. Certain products which involves the application of the consumer’s sensory organs i.e. smell, touch or taste are relatively vulnerable to wrong judgments since it is extremely difficult to concept test such products (Crawford, 1991)15. Lastly products which involve state of the art technological innovation are also difficult to test since the consumers may not be able to understand or visualize its applicability, use and significance instantly. For instance products such as digital cameras Xerox machines, ATMs etc (Crawford, 1991). Regardless of the aforementioned limitations concept testing is undeniably the key to successful product development provided that it is conducted by taking into consideration the various limitations and choosing the appropriate research objectives that seek to eliminate them and which are in accordance with the company goals. Appendix 1: Types of Uncertainties in Concept Testing Source: Baker, M. J., (2003). The Marketing Book, Butterworth-Heinemann Publication, Pp. 326 References: Baker, M. J., (2003). The Marketing Book, Butterworth-Heinemann Publication, Pp. 326 Calantone, R., Garcia, R. & Droge, C., 2003, The Effects of Environmental Turbulence on New Product Development Strategy Planning, Journal of Product Innovation Management, Vol. 20, pp. 90-103 Cooper, R.G. and Kleinschmidt, E.J. (1993). New product success in the chemical industry. Industrial Marketing Management 22, pp 85-99 Crawford, C.M., (1991). New products management. Irwin, Boston De Bono, E., (1993). Serious creativity. Fontana, London Kahn, K. B., (2006). New Product Forecasting: An Applied Approach, M.E. Sharpe Publication, Pp. 68 - 69 Kelley, D., (1993). Creative challenges of product development: lessons form the front lines. Paper presented at the AMA Business to Business Conference Lewis, I.M., (1984). Do concept scores measure the message or the method? Journal of Advertising Research 24, pp 54-56 Moore, W.L. , (1982).Concept testing. Journal of Business Research 10, pp 279-294 OShaughnessy, J.,(1995). Competitive Marketing: A Stanton, Miller, Layton., (1991). Fundamentals of marketing. McGraw-Hill, Australia Strategic Approach, Routledge, Pp. 373 - 375 Page, A.L. and Rosenbaum, H.F., (1992). Developing a concept testing program. Journal of Product Innovation Management 9, pp 267-277 Tauber, E.M., (1972). What is measured by concept testing? Journal of Advertising Research 12 pp 35-37 Teoh, H, P, & Sim, A. B., 1997, Strategy Types in Malaysian Industrial Companies, Malaysian Management Review, Vol 32, No. 4, December Urban, G.L. and Hauser, J.R., (1993). Design and marketing of new products. Prentice Hall, New Jersey Read More