NEW PRODUCT DEVELOPMENT

There are six distinct steps in new product development.
The first step is the generation of new product
ideas. Such ideas can come from any number of
sources (e.g., salesperson, employees, competitors,
governments, marketing research firms, customers).
As in the case of Japan, already one out of
five Japanese is age 65 or older, and the trend
has adversely affected baby food. From the peak of
$252 million in 1999, sales of baby foods fell to
$235 million in 2001. Searching for new sources of
revenue, Japanese food companies were intrigued to
learn that the same characteristics which make baby
food appealing to babies (soft, small morsels, low
salt, easy preparation) also attracted old people.
Thus food makers have come out with ready-to-eat
treats: soft-boiled fish, bite-size shrimp meatballs,
chop suey with tofu, and dozens of others. These
“Fun Meals” or “Food for Ages 0–100” only hint at
the target demographic group without embarrassing
older consumers.2
The second step involves the screening of ideas. Ideas
must be acknowledged and reviewed to determine
their feasibility. To determine suitability, a new
product concept may simply be presented to potential
users, or an advertisement based on the product
may be drawn and shown to focus groups to elicit
candid reactions.As a rule, corporations usually have
predetermined goals that a new product must meet.
Kao Corporation, a major Japanese manufacturer of
consumer goods, is guided by the following five
principles of product development: (1) a new product
should be truly useful to society, not only now
but also in the future, (2) it should make use of Kao’s
own creative technology or skill, (3) it should be
superior to the new products of competitors, both
from the standpoint of cost and performance, (4) it
should be able to stand exhaustive product tests at all
stages before it is commercialized, and (5) it should

be capable of delivering its own message at every
level of distribution.3
The third step is business analysis, which is necessary
to estimate product features, cost, demand, and
profit. Xerox has small so-called product synthesis
teams to test and weed out unsuitable ideas. Several
competing teams of designers produce a prototype,
and the winning model that meets preset goals then
goes to the “product development” team.
The fourth step is product development, which
involves lab and technical tests as well as manufacturing
pilot models in small quantities. At this
stage, the product is likely to be handmade or produced
by existing machinery rather than by any new
specialized equipment. Ideally, engineers should
receive direct feedback from customers and dealers.
Goldstar Co., by letting its engineers out of the laboratories
and into the market to see what Korean
customers want, got an idea to make a refrigerator
that can keep kimchi (fermented pickled cabbage or
radishes which are Korea’s national dish) fresh and
odorless for a long time. The refrigerator was an
instant hit and enabled Goldstar to regain the top
position which it lost to Samsung in South Korea in
the late 1980s.4

The fifth step involves test marketing to determine
potential marketing problems and the optimal marketing
mix. Anheuser Busch pulled Budweiser out
of Germany after a six-month Berlin market test in
1981. Its Busch brand was another disappointment
in France, where this type of beer did not yet correspond
to French tastes.
Finally, assuming that things go well, the
company is ready for full-scale commercialization by
actually going through with full-scale production
and marketing.
It should be pointed out that not all of these
six steps in new product development will be
applicable to all products and countries. Test marketing,
for example, may be irrelevant in countries
where most major media are more national than
local. If the television medium has a nationwide
coverage, it is not practical to limit a marketing
campaign to one city or province for test marketing
purposes.
In any case, so many new products are tested and
marketed each year. In Japan, because consumers
constantly demand fresh, new products, some 700
to 800 drinks are launched annually.To keep pace,
Coca-Cola has built a product development center
which allows it to cut launch time for new drinks
from ninety days to a month, enabling it to release
fifty new beverages a year.
Unfortunately, it is easier for a new product to
fail than to succeed. Naturally, so many things can
go wrong. Therefore, it is just as crucial for a
company to know when to retreat as when to launch
a product. Coca-Cola’s Ambasa Whitewater, a lacticbased
drink, was removed from the market after
eighteen months when sales started to decline.