Lets dive deeply into the phases of product development, reasons for new product failure, and types of errors. Let’s make these concepts crystal clear with relatable examples and practical exam tips.
Stages of Product Development
Creating a successful product involves navigating through eight structured phases. Each phase plays a critical role in transforming an idea into a marketable product.
a. Idea Generation
- What it is: The process of brainstorming and collecting innovative ideas from diverse sources like customers, employees, competitors, and research.
- Example: Samsung identifies emerging technology trends to innovate its product lineup.
Tip: For UGC NET MCQs, focus on both internal (R&D, brainstorming) and external (market trends, customer feedback) idea sources.
b. Idea Screening
- What it is: Narrowing down ideas to the most feasible ones. The goal is to eliminate impractical or costly ideas early.
- Example: Apple may reject concepts that don't align with its brand or customer expectations.
c. Concept Testing
- What it is: Presenting the product concept to a select group of target customers to gather their feedback and insights.
- Example: Lay’s tests new chip flavors by conducting surveys with focus groups.
d. Marketing Strategy Development
- What it is: Outlining plans for product positioning, pricing, promotion, and distribution.
- Example: Tesla focuses on a premium, eco-friendly positioning for its electric cars.
Tip: Remember the "4Ps" (Product, Price, Place, Promotion) for strategy-related questions.
e. Business Analysis
- What it is: Evaluating the product’s financial viability, including cost projections, pricing, and profit potential.
- Key Metrics: Break-even point, projected sales.
f. Product Development
- What it is: Converting the concept into a tangible product through design and manufacturing.
- Example: Toyota creates prototypes for its hybrid vehicles during this stage.
g. Test Marketing
- What it is: Introducing the product in a limited area to assess its market performance.
- Example: McDonald’s tests new menu items in select cities before a nationwide launch.
h. Commercialization
- What it is: The full-scale launch of the product with extensive marketing campaigns.
- Example: Coca-Cola launches new drinks globally after successful test marketing.
Tip: Understand how each stage feeds into the next, as exam questions may ask you to sequence the stages.
Reasons for New Product Failure
Despite rigorous development, many products fail to thrive in the market. Here are the key reasons:
a. Not Well-Designed
- Explanation: Products that fail to meet customer needs or have poor usability often flop.
- Example: Google Glass failed due to its impractical design and privacy concerns.
b. High Development Cost
- Explanation: Products that are too expensive to develop may not generate sufficient returns.
- Example: Sony’s Betamax video format was costly to produce and lost to VHS.
c. Capital Shortage
- Explanation: Insufficient funds can halt development, marketing, or distribution efforts.
- Example: Many startups fail due to a lack of financial resources for scaling.
d. Shorter Product Life Cycle
- Explanation: Products that quickly become obsolete due to technological advancements fail to sustain in the market.
- Example: Blackberry lost relevance with the advent of touchscreen smartphones.
e. Overestimation of Market
- Explanation: Assuming a larger demand than exists can lead to overproduction and losses.
- Example: Tata Nano failed because it misjudged the demand for ultra-cheap cars in India.
Types of Errors in Product Development
Errors in decision-making during product development can significantly impact success. Let’s break down the four main types of errors:
a. Go Error (Type I Error)
- What it is: Launching a flawed product that should have been stopped during the screening process.
- Example: The Segway’s high price and niche appeal made it a market failure.
b. Drop Error (Type II Error)
- What it is: Rejecting a potentially successful product idea.
- Example: Kodak dropping its early digital camera prototypes, allowing competitors to dominate.
c. Absolute Product Failure
- What it is: A product fails to cover even its production costs.
- Example: Microsoft Zune couldn’t recover its development costs due to poor reception.
d. Relative Product Failure
- What it is: A product covers costs but fails to meet expected profits.
- Example: Amazon’s Fire Phone sold units but did not achieve its sales target.
Tip: Understand the difference between absolute and relative product failures for conceptual clarity.