Page 526 - Business Principles and Management

Chapter 19 • Product Planning and Production Management

FIGURE 19-1 The Steps in Product Development

1. Develop an idea for a new product that customers want to buy.
Conduct consumer research.
Conduct product research.
2. Turn the idea into a workable product design.
Build and test models of the product.
Determine what resources will be needed to produce large
quantities of the product.
Determine the costs of producing the product and compare
them to the product's price.
3. Be able to produce the product and make it available to consumers
at a price they are willing to pay.
Build or remodel manufacturing facilities, if necessary.
Purchase raw materials.
Train employees.
Promote, distribute, and sell the product.

survive, it must continually search for ways to improve even its most successful
products and regularly develop new products. Product development drives other
business activities. Before a company can market, advertise, distribute, and sell a
product, it must create and produce it. Think of the millions of dollars that were
invested to develop the new store, Millennium, described at the beginning of the
chapter. The investors in that business are excited by the new business idea, but
to earn a return on their investment, the product must succeed.

CREATING PRODUCT IDEAS
The first step in product development is to come up with a good new product
idea. You have probably seen a new product and said to yourself, “I could
have thought of that.” But developing successful product ideas is not easy. The
process for coming up with product ideas is both creative and scientific.
Ideas for new products can come from many sources. People inside and out-
side the company may suggest new product ideas. A company may get ideas
from salespeople and production personnel, from other businesspeople, and
from research projects. Many companies employ people whose primary respon-
sibility is to create and test new products.

CONSUMER RESEARCH Many companies gather information to help in product de-
velopment by contacting the people who are likely to purchase the product. One
of the best sources of ideas for product improvements or new products is a com-
pany’s customers. They have used the company’s products and know what they
like and don’t like, and what new products they would like to have. Companies
can get this information from customers in many ways. Some companies send
questionnaires to people who recently bought a product, asking for their opin-
ions. Others have telephone numbers that customers can call or e-mail addresses
they can use when they have questions or problems.

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