Page 345 - Introduction to Business

CHAPTER 9 Developing the Product and Pricing Mixes 319

The marketing department can be an important source of new product ideas.
Marketing research people can uncover new product needs when they analyze
markets. Sales personnel should be looking for new product possibilities when they
call on their customers or potential customers. Brand managers need to be think-
ing of modifications for their products.
In general, internal sources are probably better for firms practicing a follow-the-
leader strategy and firms interested in developing products that are similar to pres-
ent offerings. External sources are more appropriate for firms attempting to be out
first with new products or those developing ones that are significantly different
from current offerings.

reality In the four most recent issues of Business Week, read the “Science and
CH ECK Technology” section. Determine if any of the articles indicate the
source of the new product ideas.

Once sources have been identified for new products, the new product ideas
must be generated. Most companies use some form of brainstorming, in which brainstorming Considering potential
participants offer new product ideas they think will be appropriate for their firm. new product ideas in a group setting
The major component of this process is that no one is allowed to critique favorably
or unfavorably any suggestion made. This restriction exists so that the free flow of
new product ideas will not be hindered. Evaluation of the new product idea occurs
in the screening stage of the new product development process.

SCREENING. Once a list of new product ideas has been developed, screening screening The step in the new product
occurs. The purpose of this step is to identify those offerings that have the best development process in which new
product ideas are subjected to an initial
chance of being commercially successful. In this regard, it is desirable to avoid two
evaluation
mistakes: selecting products that will fail and rejecting those that would have been
successful. The latter error is probably more dangerous, because there is little like-
lihood that a product idea, once rejected, will be reconsidered. On the other hand,
the few offerings that are considered to be feasible come under close scrutiny later
in the process, so there is the possibility that potential failures may be weeded out
then. However, it is better if products that will not pass muster at subsequent steps
are weeded out during the screening step, because steps further down the line
require a much greater expenditure of time and money than are needed in the
screening step. In the pharmaceutical industry, it is estimated that only one out of
9
5000 drug ideas is ever commercialized. Obviously, it is better if the 4999 that are
not marketed were dismissed during the screening stage.
In the screening process, new product candidates are evaluated on criteria the
company believes predict success:
• The product meets a specific, significant need of the market.
• The product is superior to products already on the market.
• The product allows the use of current channels of distribution.
• The R&D department has the capability to develop the new product.
• The product can be brought to the market in less than two years.
• The necessary financial resources to develop and market the product are
available.
If the candidate product successfully passes the screening hurdle, it moves to
the next step: concept testing.

CONCEPT TESTING. In concept testing, the general notion of the new product and concept testing Presenting the general
how it can benefit customers is presented to a sample of customers in order to get idea of a new product to a sample of the
market in order to get its reaction
their reactions. The main objective is to find out how likely it is that the market

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