Idea Development and Market Research
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Marketing is the study and management of exchange relationships. Marketing is the business process of creating relationships with and satisfying customers. With its focus on the customer, marketing is one of the premier components of business management.
New product development is a task taken by the company to introduce newer products in the market. Regularly there will arise a need in the business for new product development.
Your existing products may be technologically outdated, you have different segments to target or you want to cannibalize an existing product. In such cases, New product development is the answer for the company.
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There are 7 stages of new product development and they are as follows.
New product development
1) Idea generation
in this you are basically involved in the systematic search for new product Ideas. A company has to generate many ideas in order to find one that is worth pursuing. The Major sources of new product ideas include internal sources, customers, competitors, distributors and suppliers.
Almost 55% of all new product ideas come from internal sources according to one study. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas.
Almost 28% of new product ideas come from watching and listening to customers. Customers: even create new products on their own, and companies can benefit by finding these products and putting them on the market.
Example – Pillsbury gets promising new products from its annual Bake-off. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off winners’ recipes.
2) Idea Screening
The second step in New product development is Idea screening. The purpose of idea generation is to create a large pool of ideas. The purpose of this stage is to pare these down to those that are genuinely worth pursuing. Companies have different methods for doing this from product review committees to formal market research.
It, is helpful at this stage to have a checklist that can be used to rate each idea based on the factors required for successfully launching the product in the marketplace and their relative importance.
Against these, management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. Finally, the management can obtain an overall rating of the company’s ability to launch the product successfully.
3) Concept Development and Testing
The third step in New product development is Concept Development and Testing. An attractive idea has to be developed into a Product concept. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers, a product concept is a detailed version of the idea stated in meaningful consumer terms.
This is different again from a product image, which is the consumers’ perception of an actual or potential product. Once the concepts are developed, these need to be tested with consumers either symbolically or physically. For some concept tests, a word or a picture may be sufficient, however, a physical presentation will increase the reliability of the concept test.
After being exposed to the concept, consumers are asked to respond to it by answering a set of questions designed to help the company decide which concept has the strongest appeal. The company can then project these findings to the full market to estimate sales volume.
4) Marketing Strategy Development
This is the next step in new product development. The strategy statement consists of three parts: the first part describes the target market, the planned product positioning and the sales, market share and profit goals for the first few years.
The second part outlines the product’s planned price, distribution, and marketing budget for the first year. The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and the marketing mix strategy.
Business Analysis – Once the management has decided on the marketing strategy, it can evaluate the attractiveness of the business proposal.
Business analysis involves the review of projected sales, costs and profits to find out whether they satisfy a company’s objectives. If they do, the product can move to the product development stage.
5) Product Development
Here, R&D or engineering develops the product concept into a physical product. This step calls for a large investment. It will show whether the product idea can be developed into a full- fledged workable product.
First, R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. When the prototypes are ready, they must be tested. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively.
6) Test Marketing
If the product passes the functional tests, the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch.
The amount of test marketing varies with the type of product. Costs of test marketing can be enormous and it can also allow competitors to launch a “me-too” product or even sabotage the testing so that the marketer gets skewed results. Hence, at times, management may decide to do away with this stage and proceed straight to the next one:
7) Commercialization
The final step in new product development is Commercialization. Introducing the product to the market – it will face high costs for manufacturing and advertising and promotion. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional, national or international). This depends a lot on the ability of the company to bear risk and the reach of its distribution network.
Today, in order to increase speed to market, many companies are dropping this sequential approach to development and are adopting the faster, more flexible, simultaneous development approach. Under this approach, many company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness.
Above was the complete process of New product development. You can also read this related article on why new product development is necessary for survival.
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Internal sources:
New products ideas can come from several sources. They may come from internal sources marketing managers, researchers, sales personnel, engineers, or other organizational personnel. Brainstorming and incentives or rewards for good ideas are typical intrafirm device for stimulation the development of products ideas.
External sources:
Direct observation of competitors' products, customers' evaluations of their product features, and the grapevine of suppliers and other who serve competitors often contributes ideas.
External sources are more important as compare to internal sources as internal sources are only based on employees and external sources are based on information from market situation , external idea sources are highly valued in new product development literature.
Target market-a particular group of consumers at which a product or service is aimed.
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As depicted by name Desk Research is the research technique which is mainly acquired by sitting at a desk. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. However, it could also be a complete waste of time and money if the researcher does not have the proper knowledge of how the research in performed.
Desk research is very effective and can be conducted in starting phase of market research as it is quite quick and cheap and most of the basic information could be easily fetched which can be used as benchmark in the research process.
There are basically two types of desk research techniques:
Internal Desk Research - Internal desk research can be treated as the most reasonable starting point of research for any organization. Much Information could be generated internally within the organization as a course of normal process. Account related information which indicates what type of products are sold, in how much quantity and at what cost, sold to which type of customers including their geographical location and so on. The main advantage here in performing internal desk research is that it involves internal and existing organizational resources to organize the collected data in such a way that it is not only efficient but also usable. Internal desk research is comparatively very cheap and effective as internal recourses are deputed and the expenditure in getting data from outside is less.
External Desk Research - External Desk Research involves research done outside the organizational boundaries and collecting relevant information. These outside resources are described below:
Online Desk Research - There is incredible amount of data available online on internet. It’s important for organization to be information specific while fetching out this information as there are billions of pages available on internet. There could be two approaches for digging out the relevant information from internet, one is directly browsing the specific information from industrial, marketing or business sites and extracting the information out of these sites. Secondly, using the various search engines like www.google.com, www.yahoo.com, www.infoseek.go.com, www.altavista.com etc, for modulated searching. The important aspect here is to refine the searching techniques in such a way that results are promising and relevant. For this it is necessary that the researcher should know the importance of the research and follow the guideline intellectually to reduce the efforts made and time consumed in searching.
Government published data - Government usually publishes a great extent of data online that can be used in the research process. This data is related to social, financial and economical aspects. The government websites are mostly free to access and contains most prominent information. Thus, this could be the cheapest medium of gathering the information.
Customer desk research - One of the best and most prominent ways of extracting information for research is directly communicating with existing or prospect customer. Customers are the one who are considered the most informed as they are actually using products and services and are aware of the current market trends more than any other. Hence the feedback and information provided by customers is the most accurate and useful data which can be used most effectively in the further process of research.
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Field Research deals with creation and collection of actual and authentic information by field of operation in any organization. The process involves determining what precise data is necessary and from where this information needs to be obtained. After determining this information the data is actually gathered. Thus this research technique is treated as the primary research approach because the determined data is specific to the purpose of gathering that data.
Field research is generally performed in person, telephonic or by electronic media like teleconferencing, web - meetings and emails. Many of the big organizations involve outside vendors or companies to perform this task which they usually refer as outsourcing, but small organizations or new companies do this themselves by involving their internal resources. The outsourcing depends on the type and amount of information to be gathered in the research. If the required data is less and limited to some small and specific modules then big organization also prefer to do this task in-house.
Field research is expensive and involves more and experienced resources as compared to desk research which is not as accurate as field research. Being expensive it is required to perform the research in efficient manner and obtain or determine only specific information and answer only particular questions as irrelevant data is a waste and will be of no use for further research processes. The following are the importance sources for field research:
Customers: These can be existing customer or prospect customers. Customers are the most important and efficient sources for field research process and can provide following useful information:
Useful information regarding competitors and new strategies they are going to implement.
Present market trend.
Actual and innovative market requirement.
Market distribution channels.
Production and consumption channels and product usefulness.
Competitors: It is difficult to fetch out information from own competitors but if this is possible then competitors are the basic and useful source of information and provide information regarding:
Newer and upcoming technologies and software.
Types of product which prominent and mostly preferred by customers.
Efficient and affordable pricing strategies.
Promotional efforts that could turn around the marketing strategies.
Information of other ruling competitors.
Industrialists or marketing experts: These are the most knowledgeable personals who could provide in depth information regarding:
The future trend of market.
Economical imbalances regarding particular segments of products.
New range of raw materials available in the market.
New research and marketing methodologies and application of vibrant technologies.
Distributors and Suppliers: Distributors and suppliers are also very good source of information. They can provide information like:
Availability of raw materials in market.
Pricing details and negotiation techniques.
Best distributing channels.
New marketing processes.
How to deal with compliance issues.
There are many other less prominent sources like interviews, trade shows, and promotional programs etc. and much of the relevant information could be gathered from these sources as well. All the information gathered from the above sources is then manipulated and segmented. As in field research most of the information is relevant as it is actually gathered for a particular purpose, so regular round of work around on the data is not required. After validating the information it is then fetched into the CRM system and is converted into intelligent data which can be accessed on real time.