Development of New Product
R & D in Industry
Importance of R & D in Industry : Research & Development constitute up to 10% of the profit in some industries. It is always important to look for new products, processes as well as diversification in emerging areas.
New Products : These can be combinations of
- Existing Product replaced by new name and image
- Improved version of old product
- Completely new product
Major Functions of R & D:
New Product Development : It is a formidable task. Finding a new product idea and testing of product technically and commercially is very important. Quality should be balanced against profits.
The basic steps are
- Generation of Idea:
- This is the most important step in development of a new product.
- The idea stage is not costly so many companies take months or years to develop a new product.
- It is important to know all of the details of a potential new product, including consumer demand, source and cost of raw materials, supply, technology involved etc.
- Where do ideas come from?
The idea can follow a forward or a backward path given above.
- Many products or product ideas exist abroad but not yet introduced in the country.
- Communication with consumer: It is important and new ideas can be obtained from suggestions and complaints from salesmen, retailers and consumers about existing products. New releases of computer programs is an example of this.
- Communication inside company: The R & D section should always be on a look out. Also marketing, advertising and production sources can generate new ideas.
- Ideas from top management: These people have good vision and their ideas are far reaching.
- The company should have mechanism for
- Creating a brand new product profile
- Identifying opportunities ready for exploitation, including markets, technological breakthroughs, and high profit margins
- Identifying and investigating idea sources internally through wholesales, retailers and consumers
- Encouraging the free generation of ideas
- Selecting a multi-disciplinary team to co-ordinate the collection of ideas and subsequent stages
- Detailed and approved budgets, schedules and controls
- Screening of the idea: This is done to check following.
- Will the product return profit?
- Does the product satisfy consumer needs?
- Will the product be acceptable to consumers, wholesalers and retailer?
- Is it unique and does it have certain characteristics that offer totally new service to the customer?
- Does the product fit the capabilities of the company from the standpoint of production and marketing skills as well as complement the existing product line.
- Is the new product a novel or copy of existing product of another manufacturer? Market development for new product is to be done from scratch, while that for existing product it is penetration in already existing market.
- Does our company have capabilities for development of such a product?
- How much capital is required for development of product and is it available in time?
- Preliminary evaluation: This is done by evaluation and getting opinions of the following:
- Universities where new products are developed
- Successful products in overseas market
- Consumer preferences
- Stockiest and retailers
- Internal members of company
- Company economist
- Magazines, Literatures and Patents
- Conferences and exhibitions
- Actual Uses
- Changing Habits
- Correct dosage of product
- Competitive ingredients suppliers
- Offshoots of existing products
- The following points can lead to failure and products should be evaluated with respect of these
- Insignificant difference with respect to existing product.
- Timing of introduction of product when market is in bad shape. Also untested product is hurriedly introduced in market, which leads to failure.
- Poor product positioning, like
- Insignificant: The product is not better than existing ones, in that category, so consumer neglects it.
- Confused: There is lack of understanding on the part of the consumer.
- Mismatched: The performance of the product does not match the appeal.
- Poor product performance: The product does not give required results.
- Wrong Market for the company: Non retail company entering into retail market can lead to failure due to over-estimation of their production, marketing or financial capabilities.
- Development Stage: This is very important stage. This is mainly done on laboratory scale and all the parameters are confirmed on laboratory scale. It is also tested to check whether
- Bad reactions are suppressed.
- Not much by-products or unwanted products formed.
- Whether product changes state from solid to liquid or from liquid to gas at a particular temperature.
- The temperature and humidity conditions for storage.
- Effect of bacteria, moulds, yeast on the product.
- Testing in the Factory: The in-house testing shows the suitability of the product. It runs concurrently with the product development. The product being developed should be checked in its various stages to determine acceptability.
- Consumer sampling tests: Valuable information can be obtained at a relatively low cost by checking with a small population of the product's potential success. It also indicates changes required in it. The selection is designed to include 1/3rd of people with low income, 1/3rd with medium income and 1/3rd with high income, so that a broad spectrum is selected. The sample is given to them and told that researchers will ask for feed back after some time and most people are ready to give feed back if the product is given to them free of cost.
- Market testing: This is done on a scale larger than consumer sampling test, but it is done in a smaller town. Based on the feed back, corrections or improvements are made in product and then it is tested in three or four larger towns which are separated from each other and are in different geographical areas. If it succeeds and if repeat orders are obtained then it is introduced on national level. However, it is bypassed if similar product already exists.
- Testing shelf life of packing: Good and attractive packing is very important for the success of the product. In future, consumers will ask for better and convenient packing. There should not be any deterioration or loss of product in storage due to high or low temperature. The packing used for the product should be good enough till it is used by the consumer. Volatile products might tend to deteriorate the packing or may explode.
- Commercialization: It is the final step. Company may decide to sell it in bulk or in retail or both. The bulk and retail markets are entirely different. For bulk sales more contacts and salesmanship is required. The packing for the two will be different. For retail sales a chain of retailers must be formed and they should first be convinced about the product.
There can be many other problems.
- Inflation can cause upsets in price.
- Government regulations and policies
- Narrowly segmented markets
- Newer and better technologies
- Population shifts
- Increasing size and sophistication of domestic and foreign markets.
New Process for Existing Products: This is very important. Most of the Patented processes can not be used for the product. Using alternative raw materials and processes can overcome this problem. To do this Literature Survey needs to be done.
- From the existing libraries of existing technical institutions, data can be obtained for products from Handbooks, Encyclopedia, Publications, Chemical Abstracts. Most of these are now available on-line.
- There can be a number of processes based on different raw materials. These have to analyzed for availability of raw materials, and critical equipment.