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)
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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
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3
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
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4
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
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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
Entrepreneurship Dept, FBM (2009) 5ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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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
Entrepreneurship Dept, FBM (2009) 6ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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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
Entrepreneurship Dept, FBM (2009) 7ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9
Product Dimensions
Price
Brand Name
TechnologyFeatures
Quality
Specifications
Packaging
PRODUCT
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 10
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)
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 11
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)
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12
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)
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13
Product Development Process
1. RESEARCH AND DEVELOPMENT
2. PRODUCT DESIGN
3. CONCEPT TESTING
4. BUILD PROTOTYPE
5. TEST MARKETING
COMMERCIALIZATION
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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
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Product Development Process:
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
Entrepreneurship Dept, FBM (2009) 15ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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Product Development Process:
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
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Product Development Process:
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
Entrepreneurship Dept, FBM (2009) 17ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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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
Entrepreneurship Dept, FBM (2009) 18ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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Product Development Process:
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
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Product Development Process:
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
Entrepreneurship Dept, FBM (2009) 20ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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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
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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
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Example: Concept Testing for the emPower
Electric Scooter (shown below)
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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
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Example: Concept Testing for the emPower
Electric Scooter (Sketch)
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Example: Concept Testing for the emPower
Electric Scooter (Rendering)
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29
Example: Concept Testing for the emPower
Electric Scooter (Storyboard)
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Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)
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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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Example: Concept Testing for the emPower
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?
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Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
• Part 2: Product Description
– Present the concept description as in the
previous verbal description
– Get comments from respondents
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Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
• 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
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
• 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?
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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
Entrepreneurship Dept, FBM (2009) 38ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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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?
Entrepreneurship Dept, FBM (2009) 39ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT
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E hi D FBM (2009) ENT600/UNIT 6 NEW PRODUCT DEVELOPMENT 40
Product Development Process:
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