New Product Development
Importance of developing new products
Companies need to design and develop a new range of products it offers to the market in to ensure that the company continues to thrive to high horizons in the business field. In order to stay ahead or keep up with the prevailing levels of competition, a business entity needs to be innovative in the delivery of products it supplies to the market. Production of a single product over long periods of time results to the decline in the sales volume and this makes it difficult for the company to maximize profits. This defines the reasons why product development is vital to the success of any company?
The change in the needs, tastes and preferences of customers makes it necessary for the company to diversify the portfolio of its product supply. This also enables the company to retain customers and at the same time continue to enjoy the market share. A good example can be seen in the food sector. Many consumers are now becoming health conscious and their consumption habits are changing towards what their health dictates them to do. Companies dealing with products in this line are now forced to introduce low sugar and fat content foods to their product portfolios. A good example is the Coca Cola Company that recently introduced the coca cola zero (Robin and Nelson).
Another motive for introducing a new product to the market is to replace the declining product. The existing product might have attained its shell life and is thus required to introduce a totally new product or update the versions of the existing products. This often occurs in the technological industry whereby innovation of new products is required to keep pace with the ever changing situations. This is evidenced in the mobile telecommunication industry where networks are expanding each moment such as 2G, 3G and 3GS and so on. Mobile manufacturers must be in a position to manufacture compatible devices.
The changing environment also calls for new product innovations in order for it to capitalize on the favorable marketing conditions. For example, with the advent of the internet, music companies are able to increase their sale through online shops whereby customers are able to download music directly to their compatible devices. This is a different approach from what it used to be when music was sold through music shops.
Development of new products also allows companies to maintain their competitive advantage or to be ahead of their rivals. This enables them to stay in business despite facing cut throat competition from their rivals. The introduction of a new product into the market enables a company to maintain its market share by offering a variety of choices to consumers and at the same time maintain the firm’s reputation as the leading product provider (Gustafson).
Introduction of new products is sometimes aimed at utilizing the organizations resources to full capacity and also enables it to improve its relation with the existing distributors. It also enables the firm to fill gaps that exist in the market particularly if the introduced product is totally new.
The medical industry is one industry in which development of new products is a necessity. Drug manufacturers must utilize the existing technologies in coming up with new forms of drugs to meet the ever increasing demand. Human beings are always becoming immune to certain drugs which render the existing drug ineffective. Without innovation of new products, drug manufacturers risk shutting down their businesses. Competition is also very high and companies are trying their level best to stay ahead of their competitors. Also in a quest to find a cure for terminal illnesses such as HIV & AIDS, substantial research is being undertaken to come up with a possible solution and also to be associated with a big success story.. Advancement of generic drugs is also another reason that makes competition in this industry a night mare.
To find out whether a new product is needed in the markets requires a number of stages to be undertaken. This entails carrying out of market research in order to come up with a concrete decision. The first stage involves the generation and screening of ideas. Then the concept is developed and tested and the best strategy is chosen. The major step is to formulate the marketing strategy criteria that will be applied. Business analysis is then carried out whereby product sale, costs and profit projections are made to see if they meet the company’s objectives. Testing is carried out to find how response will be towards the product.
Product life cycle
This refers to the stages that a new product passes through from the time it is introduced to the time it declines in market appeal after maturing. These changes are associated with the changes in the market situation. There are four distinct stages namely: the introduction stage where a firm seeks to build awareness, then the growth stage where a firm establishes its brand name and enjoys the market share. The third stage is the maturity stage characterized by diminishing sales due to competition from similar products. The last stage is the decline stage in which there are no more significant improvements. The need to develop a new product is a possibility.
Product life cycle analysis shows that products have their own life cycles and that these products have a limited shelf life and as they pass the different stages in the market new challenges and opportunities arises. Profits also tend to fluctuate at different stages during the products life time. Maximum utilization must be realized when the product is at its peak
Every business would wish to extend the maturity stage because at this stage, costs are low as a result of high production volumes. The sales are also at their peak and the number of competitors entering the market is declining. The level of profits is also high. To extend this stage a business must maximize profits by defending its share of the market. It must also diversify its brand portfolio and reduce its prices to match those of the competitors. More intensive lines of distribution must also be built
New products might fail because they might have been introduced to the market place without determining if they meet the perceived standards of consumers. Another reason might be that the market is already saturated with products of the same nature and therefore it s introduction adds no value.
The cost of introducing the product can also be higher than the net amount of return on the product. Failure of the staff to get involved in the promotion of the product development can also lead to low levels of success. A product must first be tested before introducing it to the market (Gruenwald).
A patent is legal document that defines ownership in a particular area of invention. It is mostly given to innovators of a new technology and it gives them exclusive rights for a specified period of time for disclosure of this invention to the public. A patent enables a business to enjoy exclusive rights over the product it invented. It also prevents the business from outside competition since it enjoys monopoly for its hard work.
Work cited list
Gruenwald, George. New Product Development: Responding to Market Demand. NTC
Gustafson, E. Research and development, new products and productivity.
Harvard university, 2005
Robin K. and Nelson B. New product development for dummies.
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