Unit 6 ENT600 New Product Development

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UNIT 6 :NEW PRODUCT DEVELOPMENT

Entrepreneurship Dept, FBM (2009) 1ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT

TECHNOLOGY ENTREPRENEURSHIP

(ENT600)



Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2

Definition of New Product Development

• New product development is defined as the process by

which entrepreneur designs and creates new product or

service that will be sold to customers




The Importance of New Product

Development

• For Survival

– Introduction of new product provides a platform for thecompany to compete

– Companies that are able to develop and introduce new

and improved products will have a distinct advantage tocompete

– Competition has become more intense as technologicalproducts become more complex and the technologicalproduct life-cycle getting shorter

– Companies face threat of losing market share whencompetitors come up with their new products

– Thus company have to come up with new products toensure survival




The Importance of New Product

Development

• Strategy for growth

– Development of new products can ensure business to

grow by:

• Introducing new products to existing markets

• Introducing new products to new markets



Defining a New Product

• The outcome of product development process is a

new product

• The new product can be:

– a completely new product

– not a completely new product but an existing

product that has undergone significant

improvements• A new product is any product “perceived to be

new” in the mind of the consumers




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Classifications of new products

Two classification of new products:

• Completely New Product

• Improvements on Existing Products

Completely New Product• New-to-the world products

– The first of its kind (new inventions)

– Create new market

• New to the firm (new product lines)

– New to the company but not new to themarketplace




Improvements on Existing Products

• Addition to existing lines

– Subsets to the new product lines – Perhaps targeted to different market segments

• Improvements and revisions to existing products

– New products to replace existing products with cosmetic andfunctional enhancements

• Cost reductions

– Offer no new benefits to the consumer other than possibly reducedprice

– Provides enormous added-value to the firm (financial rewards too)

• Repositioning – New applications to existing products

– More to do with consumer perception rather than technicaldevelopment





Product Dimensions

Price

Brand Name

TechnologyFeatures

Quality

Specifications

Packaging

PRODUCT




Different examples of changes in product dimensions that can

create a new product:

• Changing the performance capabilities of the product

(e.g. a new, improved washing detergent)

• Changing the application advice for the product (e.g. the

use of liquid instead of powder detergent)

• Changing the after-sales service for the product (e.g.frequency of service for a motor car)




Different examples of changes in product

dimensions that can create a new product (cont.):• Changing the promoted image of the product

(e.g. the use of bio-degradable packaging

material)

• Changing the availability of the product (e.g. the

use of vending machines for top-up cards)




New Product Development

Process

• New product development process for technology

ventures usually begins with research and

development to product design to concept testing

to building prototypes and to test marketing(before full-scale commercialization)




Product Development Process

1. RESEARCH AND DEVELOPMENT

2. PRODUCT DESIGN

3. CONCEPT TESTING

4. BUILD PROTOTYPE

5. TEST MARKETING

COMMERCIALIZATION




Product Development Process:

1. Research and Development

• New product is often characterized by very high rate offailures

• This may be due to very limited historical or preliminarydata

• Therefore, research and development is a critical step inthe new product development

• Research and development (R & D) refers to organized

efforts that are directed towards discovering newknowledge, product or process

• Usually, innovation is involve in the R & D for new product




1. Research and Development (cont.)

• Product development research is conducted to:

– helps company to response to market changes more

effectively

– understand the attitudes of customers towards the newtechnology that is going to be introduced






2. Product Design

• Product design refers to the conceptual translation of a

new product idea or concept

• It includes design of the product and its architecture(physical design), artistic design (aesthetics) as well as the

required parameters to satisfy the market needs




2. Product Design (cont.)

• When designing the product, the basic product

performance criteria must be taken into

consideration. This includes:

– Performance

– Reliability

– Safety in use

– Durability – Special features




Product Design:

Product Performance Criteria

• Performance – The main characteristics of the product or services

• Reliability – The consistency of performance and dependability

• Safety in use – Risk of injury or harm

• Durability – The useful life of the product

• Special features – extra characteristics






3. Concept Testing

• Concept testing is the initial test for most new

product designed

• It involves the process of using quantitative andqualitative methods to evaluate consumer

response to a product idea prior to the introduction

of product to the market




3. Concept Testing (cont.)

• It involves showing a preliminary description of

the product or service idea to prospective

customers to gauge customer interest and

purchase intent

• If strong acceptance is found, the next step will be

the preparation of the prototype





Purpose of Concept Testing

• The main purpose of concept testing are:

– To choose the most promising alternative from a set ofalternatives

– To get an initial notion of the commercial prospects of aconcept

– To find out who is most interested in the concept

– To indicate what direction further development workshould take




Concept Testing: The Process

• Define the purpose of the test

• Choose a survey population

• Choose a survey format

• Communicate the concept

• Measure customer response

• Interpret the results




Example: Concept Testing for the emPower

Electric Scooter (shown below)



Example: Concept Testing for the emPowerElectric Scooter

• Communicating the concept can be done by:

– Verbal description

– Sketch

– Rendering (a drawing in perspective of a

proposed structure)

– Storyboard (illustrations or images displayed in

sequence for the purpose of pre-visualizing) – Physical appearance model

Entrepreneurship Dept, FBM(2009)

ENT600/UNIT 6 : NEW PRODUCTDEVELOPMENT

25




Electric Scooter (Sketch)



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Electric Scooter (Rendering)





Electric Scooter (Storyboard)




Example: Concept Testing for the emPower Electric

Scooter (Physical Appearance Model)



Example: Concept Testing for the emPowerElectric Scooter : Customer Response

• Measure of customer response through survey:

– Part 1: Qualification

– Part 2: Product Description

– Part 3: Purchase Intent

– Part 4: Comments

– Part 5: Interpret Results



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Electric Scooter: Measure Customer Response

• Part 1: Qualification

– How far do you live from campus?

• If not within the specified radius, thank the

respondent and end interview

– How do you currently get to campus fromhome?

– How do you currently get around campus?






• Part 2: Product Description

– Present the concept description as in the

previous verbal description

– Get comments from respondents






• Part 3: Purchase Intent – If the product were priced according to your expectations, how

likely would you be to purchase the scooter within the next year?

I would

definitely not

purchase thescooter

I would

probably not

purchasethe scooter

I might or

might not

purchasethe scooter

I would

probably

purchasethe scooter

I would

definitely

purchasethe scooter






• Part 4: Comments

– What would you expect the price of the scooter

to be?

– What concerns do you have about the product

concept?

– Can you make any suggestions for improvingthe product concept?



Example: Concept Testing for the emPowerElectric Scooter: Measure Customer Response

• Part 5: Interpreting the results

– From the data set gathered during the interview,forecast the potential of the product forcommercialization

– Make estimate in terms of:

• Size of the market

• Selling price• Sales forecast



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Usability of Products

• Usability is a measure of a user’s experiencewhen interacting with a product

• Five factors determining usability:

– Ease of learning – Efficiency of use

– Memorability

– Error frequency and severity

– Satisfaction




Usability of Products

• Ease of learning

– How long does it take to learn the product’s operation?

• Efficiency of use

– Once experienced, how fast can the user complete the necessarysteps?

• Memorability

– Can the user remember how to use the product?

• Error frequency and severity

– How often do the users make errors, and how serious are these

errors?

• Satisfaction

– Does the user like operating the product?




E hi D FBM (2009) ENT600/UNIT 6 NEW PRODUCT DEVELOPMENT 40


5. Test Marketing

• Test marketing is usually carried out prior to a full-scale launching of a new product

• In test marketing, the new developed product will

be introduced to a representative sample ofpopulation to assess the market’s reaction

• The purpose of carrying out test marketing is to

predict sales and profits from a major productlaunch

Unit 6 ENT600 New Product Development

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