TECHNOLOGY ENTREPRENEURSHIP
(ENT600)
UNIT 6 :
NEW PRODUCT DEVELOPMENT
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 1
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.
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2
THE IMPORTANCE OF NEW PRODUCT
DEVELOPMENT
1. For Survival
– Introduction of new product provides a platform for the
company to compete
– Companies that are able to develop and introduce new
and improved products will have a distinct advantage to
compete
– Competition has become more intense as technological
products become more complex and the technological
product life-cycle getting shorter
– Companies face threat of losing market share when
competitors come up with their new products
– Thus company have to come up with new products to
ensure survival
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3
Cont….
The Importance of New Product Development
2. 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
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4
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) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 5
Classifications of New Products
Two Classification of New Products:
1. Completely New Product
2. Improvements on Existing Products
1. 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 the
marketplace
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 6
2. 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
and functional enhancements
• Cost Reductions
– Offer no new benefits to the consumer other than possibly
reduced price
– Provides enormous added-value to the firm (financial
rewards too)
• Repositioning
– New applications to existing products
– More to do with consumer perception rather than technical
development
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 7
TYPES OF PRODUCT DEVELOPMENT PROGRAM
Potential Revenue Revenue Potential
Type of
Time to Introduce Contribution to Contribution to Margin Example
Development
Economy Company Impact
New to the Highest Market Cellular
Longest Highest Phone-Startr
World Potential Development ek
Hyundai
New Product Market Azeera,
Long High Potential High Toyota
Lines Development
Aplhard
Medium Chilli Sauce,
Add to Existing Medium Line Complete Medium Garlic Sauce,
Potential Thai Sauce
Improve or Medium Civic
Short Market Share Medium FaceLift,
Revise Potential Hybrid
Cost Medium
Shorter Raise Margin Medium -
Reductions Potential
Brand
Medium Cereal, High
Repositioning Shortest Market Share Medium Fibre, Lower
Potential
Cancer Risk
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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Product and New Product Development
• A product is an item or service that serves the needs
of customers
• A product has many dimensions, which includes:
• Features
• Quality Specifications
• Packaging
• Price
• Brand Name
• Technology
• Theoretically, it is possible to label a product as new
when any changes or modifications are made to any
of the product dimensions
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9
Product Dimensions
Packaging
Price
Quality Brand Name
Specifications PRODUCT
Technolog
Features
y
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).
• 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).
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 11
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)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12
Product Development Process
1. RESEARCH AND DEVELOPMENT
2. PRODUCT DESIGN
3. CONCEPT TESTING
4. BUILD PROTOTYPE
5. TEST MARKETING
COMMERCIALIZATION
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13
Product Development Process:
1. Research and Development
• New product is often characterized by very high rate
of failures
• This may be due to very limited historical or
preliminary data
• Therefore, research and development is a critical
step in the new product development
• Research and development (R&D) refers to
organized efforts that are directed towards
discovering new knowledge, product or process
• Usually, innovation is involve in the R&D for new
product
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 14
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 new technology that is going
to be introduced
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 15
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
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 16
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) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 17
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) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 18
Product Development Process:
3. Concept Testing
• Concept testing is the initial test for most new
product designed
• It involves the process of using quantitative
and qualitative methods to evaluate
consumer response to a product idea prior to
the introduction of product to the market
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 19
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) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 20
Purpose of Concept Testing
• The main purpose of concept testing are:
– To choose the most promising alternative from a
set of alternatives
– To get an initial notion of the commercial
prospects of a concept
– To find out who is most interested in the concept
– To indicate what direction further development
work should take
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 21
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
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 22
Example: Concept Testing for the emPower
Electric Scooter (shown below)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 23
Example: Concept Testing for the emPower
Electric Scooter
• The purpose of concept test:
– To identify what market to be in?
• Sample population
– College students who live 2-5 km from
campus
– Commercial transportation
• Survey format:
– Face-to face interview
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
Example: Concept Testing for the emPower
Electric 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
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
Example: Concept Testing for the
emPower Electric Scooter
Example of Verbal Description
• The product is a lightweight electric scooter that can
be easily folded and taken with you inside a building
or on a public transportation
• The scooter weighs about 15 kilos. It travels at speed
of up to 20 km/hr and can go about 20 km on a single
charge
• The scooter can be recharged in about 2 hours from a
standard electric outlet.
• The scooter is easy to ride and has a simple controls
– just an accelerator and a brake
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 26
Example: Concept Testing for the emPower
Electric Scooter (Sketch)
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
Example: Concept Testing for the emPower
Electric Scooter (Rendering)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 28
Example: Concept Testing for the emPower
Electric Scooter (Storyboard)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29
Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 30
Example: Concept Testing for the emPower
Electric 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
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
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 from
home?
– How do you currently get around campus?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 32
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
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 33
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 I would I might or I would I would
definitely not probably not might not probably definitely
purchase the purchase purchase purchase purchase
scooter the scooter the scooter the scooter the scooter
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 34
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 improving
the product concept?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
• Part 5: Interpreting the Results
– From the data set gathered during the
interview, forecast the potential of the product
for commercialization
– Make estimate in terms of:
• Size of the market
• Selling price
• Sales forecast
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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Product Development Process:
4. Build Prototype
• A prototype is the first physical depiction model of the
new product or service
• It is usually in a rough or tentative mode
• This model has the essential features of the proposed
product or services but the model is open to
modification
• Prototypes can be used to elicit comments from
designers and users to learn more about the product
• One of the objectives of having prototype is it permits
usability testing
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 37
Usability of Products
• Usability is a measure of a user’s experience
when interacting with a product
• Five factors determining usability:
– Ease of learning
– Efficiency of use
– Memorability
– Error frequency and severity
– Satisfaction
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 38
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
necessary steps?
• 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) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 39
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
of population to assess the market’s reaction
• The purpose of carrying out test marketing is
to predict sales and profits from a major
product launch
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 40
Commercialization
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 41
TUTORIAL
a) Discuss why new product development is important for the survival of a
business. (6 marks)
b) When developing prototype for a new product, explain why it is important
to first do concept testing. (8 marks)
c) Give any three (3) changes in the dimensions of a product for it to be
considered as a new product. Give an example for each. (6 marks)
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
a) Discuss why new product development is important for the survival of
a business. (6 marks)
Answer
▪ Introduction of new product provides platform for the company to
compete
▪ Companies that are able to develop and introduce new and
improved products will have a distinct advantage to compete
▪ Competition has become more intense as technological products
become more complex and the technological product life-cyle gets
shorter
▪ Companies face threat of losing market share when competitors
come up with new products
(Any logical reasons, 2 marks each x 3 points) = 6 marks
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
b) When developing prototype for a new product, explain why it is important
to first do concept testing. (8 marks)
Answer
▪ To choose the most promising alternative from a set of
alternatives
▪ To get an initial notion of the commercial prospects of a concept
▪ To find out who is most interested in the concept
▪ To indicate what direction further development work should take
(2 marks each x 4 points) = 8 marks
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
b) Give any three (3) changes in the dimensions of a product for it to be
considered as a new product. Give an example for each.
(6 marks)
Answer
• Changing the PERFOMANCE 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 motorcar
• 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)
(Any 3 acceptable changes with an example, 2 marks each x 3 points) = 6marks
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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