CHAPTER FOUR
PRODUCT AND SERVICE CONCEPTS
4.1. Product Development Process
Product development process is part of the overall new-venture creation process. Even though
there are many models that advocate what the product generation process should look like. There
are 8 stages of new product development process:
1. Idea Generation
The new product development process starts with search for ideas. Companies have to encourage
any new idea coming.
2. Idea Screening
In the 2nd stage the purpose is to minimize the number of ideas to few valuable ideas. The ideas
should be written down and reviewed each week by an idea committee which should sort the
ideas in to three groups: Promising ideas, marginal ideas, and rejected. Each promising idea
should be researched by committee member.
3. Concept Development and Testing
Attractive ideas must be refined in to fast able product concepts. People do not purchase ideas
but they buy concepts. Any product idea can be turned in to several product concepts. The
questions asked include.
Who will use the product?
What benefits should the product provide?
When will people consume the produced?
Concept testing:- calls for testing product concepts with an appropriate group of target
consumers, then getting the consumers reactions. At this stage the concepts can be in words or
picture description.
4. Marketing Strategy Development
After testing the new product the manger must develop a preliminary marketing strategy plan for
introducing the new product into the market. The marketing strategy will undergo further
refinement in subsequent stages.
The marketing strategy plan consists of:
1. Market size, structure, behavior
2. Planned price, distribution strategy, and marketing budget of 1st year
3. Long run sales and profit goals, marketing mix strategy.
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5. Business Analysis
After management develops product concept and marketing strategy, it can evaluate the
proposals business attractiveness. Management needs to prepare sales, cost and profit projections
to determine whether they satisfy the company's objective.
Estimated total sales:- Management needs to estimate whether sales will be high enough to
yield satisfactory profit.
Estimating cost and profits:- After sales forecast the management should estimate the expected
cost and profit at various levels of sale.
The company can use other financial measure to evaluate the merit of a new product proposal.
The simplest is breakeven analysis.
6. Product Development
If product concept passes the business test, it moves to R&D or engineering to be developed to
one or more physical version of the product concept. Its goal is to find a prototype that the
consumers see as embodying the key attribute described in the product concept statement,
Scientists must not only design the products required functional characteristics but also know
how to communicate its psychological aspects through physical cues.
How will consumer react to different colors, sizes, weight & other physical cues?
When the prototypes are ready, they must be put through regroups functions and consumer test.
Functional test are conducted under laboratory & field conditions to make sure that the product
performs, safely and effectively (Durability, speed, cost etc) Consumer testing can take variety of
forms, from braining consumers in to laboratory to giving them samples to use in their homes.
7. Market Testing
After management is satisfied with the products functional and psychological performance, the
product is ready to be dressed up with the brand name.
The goals are to test the new product is more authentic consumer settings and to learn how large
the market is and how consumers and dealers react to handling, using and repurchasing the actual
product.
Most company know that market testing can yield valuable information about buyers, dealers,
marketing program effectiveness, market potential & other matter.
Test Marketing yield several benefits like:-
More reliable forecast of future sale
Pretesting of alternative of future sale
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8. Commercialization
The new product if the company goes ahead with commercialization it will face its larges cost to
date. The company will have to contract for manufacture or build or rent a full scale
manufacturing.
