Industrial Product Development

Industrial product is defined as a complex  set of economic, technical, legal, and personal relationship between the buyer  and the seller. A product is a combination of basic, enhanced, and augmented  properties. Basic properties are included in the generic product, with  fundamental benefits sought by customers. Generic products are made  differentiable by adding tangible enhanced properties such as product features,  styling and quality. The augmented properties include intangible benefits such  as technical assistance, available of spare parts, maintenance and repair services,  warranties, training, timely delivery, and attractive commercial terms. The  product package as expected by the prospective customers should be well  understood by the industrial marketer.

Industrial product development is the process  by which the product ideas are generated, assessed, directed and converted into  products. There are seven stages in the process of industrial product development.

  1. Idea Generation:  The Industrial marketer should be consciously search for  new product idea and to their sources both inside and outside the company.  Internally the new product ideas may come from sales staff that is close to  customers, R&D experts, from top management. An external source of ideas  includes channel members such as distributors or customers. An industrial  marketer can get good ideas by using techniques like brainstorming and attribute  listing. In attribute listing technique, important attributes of existing products  are listed. Ideas are invited from a group of employees to search for an  improved product by modifying each attribute. An industrial firm should  encourage the employees to present innovative and creative ideas by offering  recognition or rewards to the employees submitting the best ideas.
  2. Idea Screening:  In order to select the product ideas which are likely to  succeed, screening of new product ideas will be undertaken. Specified criterion  and procedure should be set for screening new product ideas. Major  considerations in the screening of a new product idea includes expected profit  potential, the competitive situation, the general  adoptability  of the company to  the new product and the volume of investment that would be necessary for the  implementation of the new product idea. Marketing consideration includes the  size of the market, marketing methods etc. It is also necessary to judge the  technical viability of the product idea. Production considerations such as  facilities required, cost of production, and availability of materials are also to be  considered apart from several legal considerations.
  3. Concept Development & Testing:  After the screening of the new product  idea it should be developed into a product concept. A product concept is a  detailed version of the product idea that is expressed in a meaningful terms. It is  the usual practice to develop different versions of product concept and each  product concept is assessed by getting response from the customers. The  product concept that has the strongest reaction from the customers is selected.
    • Concept Testing:  The new product concepts are tested in a prospective  customer organization. The concept can be presented by developing physical  product or three dimensional models. The physical presentation of the product  will increase the reliability of the concept testing. The three dimensional model  techniques create computer generated three dimensional plastic proto-types  which takes very short time to get ready. The decision makers in the  prospective customer organization are contacted and interviewed with various  questions on their experience of using such products. The answers so obtained  will enable the company to decide on the strengths of the new product.
  4. Business Analysis:  In the business analysis, an estimated projection of the  sales, costs and profitability of the proposed new product will be developed. It  is an elaborate analysis which is expressed in terms of investment required for  the installation of the plant and equipment, investment in working capital, market  potential, sales forecast, customer and competitive analysis, cost of product  development, cost of manufacturing and marketing the product; likely price levels,  profitability and return on investment etc. People who have proposed the new  product idea should not be assigned with the task of business analysis because of  excessive optimism or vested interest by such persons. People with reasonably  fair experience and skills in strategic planning, marketing, finance, and  engineering could be given the task of business analysis. The new product  concept will more on to the next stage, i.e. product development, only if the  projected sales and profits fulfill the company’s long term objectives or goals.
  5. Product Development:  Product development is a process of creating desired  product by the technicians. The R&D department develops one or more  prototypes of the product concepts. The ability to produce the product with in  the estimated cost will be confirmed or negated by the development of the  prototype.
  6. Market Testing:Market testing is done by using different methods.  The method to be adopted for testing depends on the cost and size of the  product, the degree of confidentiality to be maintained during market testing and  the preparedness to introduce the product with in a short period. Commonly used market testing methods are:
    1. Alpha and Beta Testing: When a product is tested internally with in the  organization which as characteristic of high price with new technologies such  testing is called Alpha testing. The product testing is conducted to assess the  operating cost and performance standards. If the results of Alpha testing is  satisfactory the company will go for the next stage of Beta testing at the  potential users’ organization. It is the duty of the marketing team to identify the  user firms who would allow confidential testing of the new product at their  factories. The performance of the product in the users firm, any problems  confronted when the product is under use should be checked and addressed  properly with the marketing and technical team, also they should interact with  the user firm’s technical team.
    2. Trade Shows: One commonly used method of market testing is  introduction of the new product at trade shows where usually large number of  prospective customers is exposed to the new product. The reactions of the  customers, their purchase intentions can be assessed in such trade shows; also  the orders placed by the potential customers will be taken care. The limitation  of testing the new product in trade shows is that it also gets exposed to the  competitors. The company will have very short span of time to introduce the  product.
    3. Dealer Show Rooms: The distributors or dealers show rooms or display  rooms can be considered as best spots for product testing, if the new industrial  product is sold through such channel. The customer’s attitudes, preference and  actual sales can be recorded under this method as this method uses the normal  selling situation. The company should ready to execute the orders with in the  reasonable time.
    4. Test Marketing: In normal marketing situations the test marketing method  is used to test the product in a limited geographical area. This method is used by  many industrial marketers through their sales force. Along with sales training  required material such as price list, product catalogue etc., are given to the sales  personnel. When the product is launched on full scale basis, the market  information received from test marketing will help the company in taking  effective decisions.  After market testing, the company management takes a decision to go ahead  with the next stage i.e. commercialization.
  7. Commercialization: An industrial product is launched when it is introduced  to a target market. The commercialization process involves execution of the  various activities developed in an action plan as a part of the marketing plan.  The activities such as customer service, maintaining adequate stocks at the  company warehouses and or with dealers/distributors, introductory  advertisement, price lists, product catalogues, training of sales force etc. would  be taken up at this stage. Sophisticated network techniques such as PERT and  CPM can be used by industrial marketers to ensure proper coordination and  timely completion of all the activities concerning the launching of new industrial  product.

Credit: Industrial Marketing-MGU

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.