Product Development Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Product development refers to the process of creating new goods and services or modifying existing goods and services. Why do companies develop products? Companies have financial, sales, and market share goals; products can be developed to reach these goals. In addition, companies can initiate product development to respond to rivals’ actions, to commercialize an invention, to get benefit of a new technology, to get involved in global markets, or to modify the product with respect to its life-cycle phases. Being a source of revenue, and thus profit, goods and services are the heart of any business. Nowadays, technologies have been changing very quickly, and this rapid change brings new technologies that ultimately result in changes in products by shortening their life span. Therefore, product development is crucially important for both domestic and international companies, because successful new products increase company revenues.

To be successful in developing new products and modifying existing products, companies need to be able to answer various questions: Does a new or modified product satisfy customers’ perceived needs? Is it likely to survive in the competition? How will the competitors fight back? What is the size and growth of the (target) market? Is the company a market leader or follower? What are the monetary and engineering requirements to develop the product, and how capable is the company in meeting these requirements?

Marketing plays an important role in answering some of these questions, and in product development. Technology will be used to create products that consumers need and want; in addition, products should be positioned and competitively priced in a way to meet market needs and expectations. When a marketing element in product development is missing, products may not be effectively engineered and priced. Therefore, marketing helps effectively design and develop products.

Product development can be classified into two categories, the development of new goods and services that were not available earlier and the development of the existing products through modifications. For instance, cell phones and laptops with new features that were not available earlier can be examples of the second category of product development. Both types of product development are important. The first type introduces a new product and service, and if these are successful, the company is expected to lead the industry. However, this leadership is contingent on how successfully the company develops, upgrades, and modifies the new product through time against the attacks of rivals.

In today’s business environment, competition becomes more and more intensified every day. Companies struggle to decrease production costs, increase productivity, develop new products, modify existing products, acquire or partner with other companies, construct close relationships with their suppliers, expand across national borders, and follow and adopt the latest technology. The major goals of these practices are no doubt to survive in a competitive business environment and to create and sustain competitive advantage over rivals.

Although all these practices are important, perhaps product development is more important than others, because products are the sources of revenues and are crucial to successful and increased company growth and profit. Companies can get the latest technology, hire good employees, expand overseas markets, and engage in partnerships with other companies. In these instances, money is important. However, developing products requires much more than money.

There are essential questions to be answered. How to come up with some potential ideas to be converted into physical goods and services? What products to develop? How to develop products? What features to include? Is there really demand for it? Is it profitable? Is it strategic? How long does it last? These and many other related questions are not easy to answer. That is why product development is very difficult, costly, and risky. Nevertheless, the success in product development is very rewarding.

A company successful in developing a product can easily be a market leader, set standards, and be a unique brand in the market. A good example in this regard would be Microsoft with its operating system that has been leading the industry and has become a unique brand among operating systems. Therefore, product development is very important in surviving and leading in today’s competitive business environment.

Product Development Process

Product development is a process consisting of opportunity identification, design, testing and improving, and introduction. Product development approaches can be classified in two ways: reactive and proactive product development. When companies develop products just to respond to rivals’ actions, this is a reactive way of approaching product development; however, when companies develop products under a strategic plan and according to their perceptions of the market’s current and future needs, then this is a proactive way of approaching product development. There is no single answer as to which one is the best way of initiating product development; conditions may determine the appropriate type.

The first step in the product development process is opportunity identification. Market definition is important in this step, because it shows the boundaries and scope of the competition. Markets can be defined using different criteria such as products competing with each other, customer needs, demographics, attitudes, preferences for product benefits, price, decision rules, usage, product form, and so forth. Ultimately, the market definition will be useful in identifying the related customer groups or segments, in finding the customers and determining their basic needs and habits, as well as in understanding competing products within the segments. Idea generation involves formulating creative ideas that will be converted into products having value for customers in the markets defined earlier. Creative ideas can come from many different sources, such as employees, managers, customers, suppliers, environments, and company departments, such as research and development departments. These product ideas are then subjected to strict analyses to see whether they are feasible, useful, and appropriate for the company objectives.

The second step in the product development process is the design stage, which involves the identification of key values the product will offer, the positioning of these values versus those of competitive products, and the development of physical products, marketing strategy, and service policy to accomplish these values. Customers buy products based on their judgment of the product’s ability to satisfy needs. The aim in the design stage is to identify the needs and priorities of consumers and develop an appropriate design to deliver and communicate values to satisfy consumers’ needs. Some keys features of the design stage are that a new product becomes a tangible entity and is psychologically positioned. In addition to its features, how customers think of it (positioning) is important. The design is iterative and integrative; product design requires many attempts in which the design is evaluated, refined, and modified. Therefore, different organizational departments such as production, marketing, research and development, and engineering should work in a cooperative manner.

The next step in the product development process is the testing phase, which involves advertising and product testing, pretest and prelaunch market forecasting, and test marketing. The quality of advertising content is important in creating awareness and communicating the product. Through advertising testing, a good ad can be selected among many available alternatives; in addition, advertising testing can provide managers with insights into whether a particular ad is sufficient for a new product introduction. Product testing involves an analysis of whether the product performs or delivers its intended benefits; this test can be useful in identifying product deficiencies and thus improving the product. Laboratory tests, expert evaluation, and customer tests are some ways of conducting product testing.

After the test of the product design with respect to its physical and communication features, the integrated new product also needs to be tested. This test can give managers a more precise conjecture so that potential failure risks can be minimized or prevented. However, a pretest market analysis can be beneficial if the company is able to obtain enough accurate predictions, if the analysis can be done without using a large number of resources, if new knowledge to improve the product can be obtained, and if the cost of such an analysis is within the budget of the testing. At the end of this analysis, the company expects to obtain a forecast of sales and diagnostics. Some ways of implementing pretest market analysis are judgment and past product experience, trial/repeat measurement, laboratory measurements, and attitude change analysis. The last test in the testing phase is test marketing that is targeted at acquiring market information to reduce risk and improve the product. Test marketing is actually introducing the product to a limited number of customers in a number of cities representative of the country and/or at controlled stores.

In the last step, if all tests have been successful, then the product is approved and ready to be introduced to the market. At this point the company has a physical product, advertising, personal selling tactics, promotion plans, price, distribution channels, and service procedures in place. There are two alternatives with respect to the introduction phase if a test market was not implemented: introduction under a quick adaptive control system and market by market introduction to control the failure risk. Learning from the customer feedback and production experience is the key in such introductions. In addition, an effective coordination of production and marketing activities is necessary to ensure all the components of the introduction work properly and are timely.

The product development process becomes the product life cycle management process with the product introduction. Like people, products have different periods in their life: introduction, growth, maturity, decline, and death. The life cycle begins with the introduction; as the product becomes successful, there will be more demand and the product will grow until the demand reaches its highest level, called the maturity phase, or market saturation. After a while, the demand will decline as the product is not demanded anymore, and the company will sooner or later stop producing the product. There are many strategies to manage the product throughout its life cycle. However, these are beyond the scope of this essay.

In sum, product development is a strategic process, and product development and design activities are important corporate tools that are essential to wealth creation. However, product development involves risks and uncertainties; it can be very costly and can last years in some industries, for example, in the aviation and pharmaceutical industries. In addition, product development is complicated; the management of products themselves, their sales and sustainability, and their environmental impacts are not easy to manage. However, a very carefully planned management of the product development process can increase the likelihood of success. Companies that are able to compress or shorten their product development cycles are also in a more advantageous position.

Bibliography:

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Margaret Bruce and Wim G. Biemans, Product Development: Meeting the Challenge of the Design-Marketing Interface (Wiley, 1995);
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Steven C. Wheelwright and Kim B. Clark, Leading Product Development: The Senior Manager’s Guide to Creating and Shipping the Enterprise (Free Press, 1995).

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