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[Music] the importance of commercial funnel and the new product development process or npd lesser name the aim of this video is to help you to explain the importance of commercial funnel and the application of new product development processing for commercialization of innovation this topic is under the learning outcome 3 or lo3 discuss the process required to commercialize innovation learning objectives by the end of this video it is expected that you will be able to the meaning of commercialization funnels and their importance to organizations the process involved in the development of new products the meaning of commercialization funnels and their importance to organizations the commercialization funnel describes the process of generating ideas turning the ideas into tangible products services or processes that are introduced into the market it examines production distribution marketing sales and customer support the success of any new product in the market is a function of effective passage through the commercialization funnel the process should involve idea capturing connecting the ideas to competence and resources converting ideas verification of functionality slash prototypes and implementation which includes marketing and post sales innovation funnel describes the process through which products services or processes are moved from the idea generation stage through to the development of tangible products and feasible processes with which organizations become more efficient and there are better value provided to the stakeholders however the commercialization funnel is a developmental framework which improves on the innovation funnel to incorporate marketing into the developmental process the process involved in the development of new products to stay successful in the face of maturing products companies have to obtain new ones by a carefully executed new product development process however it is of crucial importance to understand consumers markets and competitors in order to develop products that deliver superior value to customers in other words there is no way around a systematic customer-driven new product development process for finding and growing new products therefore we will go into the eight major steps in the new product development process number one of new product development process idea generation the new product development process starts with idea generation idea generation refers to the systematic search for new product ideas typically a company generates hundreds of ideas maybe even thousands to find a handful of good ones in the end two sources of new ideas can be identified a internal idea sources the company finds new ideas internally that means r and d but also contributions from employees b external idea sources the company finds new ideas externally this refers to all kinds of external sources for example distributors and suppliers but also competitors the most important external source are customers because the new product development process should focus on creating customer value number two of new product development process idea screening the next step in the new product development process is idea screening idea screening means nothing else than filtering the ideas to pick out good ones in other words all ideas generated are screened to spot good ones and drop points as soon as possible while the purpose of idea generation was to create a large number of ideas the purpose of the succeeding stages is to reduce that number the reason is that product development costs rise greatly in later stages therefore the company would like to go ahead only with those product ideas that will turn into profitable products dropping the poor ideas as soon as possible is consequently of crucial importance number three of new product development process concept development and testing to go on in the new product development process attractive ideas must be developed into a product concept a product concept is a detailed version of the new product idea stated in meaningful consumer terms you should distinguish between a product idea that is an idea for a possible product and a product concept that is a detailed version of the idea stated in meaningful consumer terms for example imagine a car manufacturer that has developed an all-electric car the idea has passed the idea screening and must now be developed into a concept the marketer's task is to develop this new product into alternative product concepts then the company can find out how attractive each concept is to customers and choose the best one on the other hand possible product concepts for this electric car could be concept 1 an affordably priced mid-sized car designed as a second family car to be used around town for visiting friends and doing shopping concept 2 a mid-priced sporty compact car appealing to young singles and couples concept 3 a high-end mid-size utility vehicle appealing to those who like the space suvs provide but also want an economical car as you can see these concepts need to be quite precise in order to be meaningful however each concept needs to be tested hence the new product concepts such as those given above need to be tested with groups of target consumers the concepts can be presented to consumers either symbolically or physically the question is always does the particular concept have strong consumer appeal for some concept tests a word or picture description might be sufficient however to increase the reliability of the test a more concrete and physical presentation of the product concept may be needed after exposing the concept to the group of target consumers they will be asked to answer questions in order to find out the consumer appeal and customer value of each concept number 4 of new product development process marketing strategy development the next step in the new product development process is the marketing strategy development when a promising concept has been developed and tested it is time to design an initial marketing strategy for the new product based on the product concept for introducing this new product to the market the marketing strategy statement consists of three parts and should be formulated carefully 1. a description of the target market the planned value proposition and the sales market share and profit goals for the first few years 2. an outline of the products planned price distribution and marketing budget for the first year 3. a planned long-term sale profit goals and the marketing mix strategy number five of new product development process business analysis once decided upon a product concept and marketing strategy management can evaluate the business attractiveness of the proposed new product the fifth step in the new product development process involves a review of the sales costs and profit projections for the new product to find out whether these factors satisfy the company's objectives if they do the product can be moved on to the product development stage in order to estimate sales the company could look at the sales history of similar products and conduct market surveys then it should be able to estimate minimum and maximum sales to assess the range of risk when the sales forecast is prepared the firm can estimate the expected costs and profits for a product including marketing r and d operations and etc all the sales and costs figures together can eventually be used to analyze the new products financial attractiveness [Music] number six of new product development process product development the new product development process goes on with the actual product development up to this point for many new product concepts there may exist only a word description a drawing or perhaps a rough prototype but if the product concept passes the business test it must be developed into a physical product to ensure that the product idea can be turned into a workable market offering the problem is though that at this stage r and d and engineering costs cause a huge jump in investment the r and d department will develop and test one or more physical versions of the product concept developing a successful prototype however can take days weeks months or even years depending on the product and prototype methods also products often undergo tests to make sure they perform safely and effectively this can be done by the firm itself or outsourced in many cases marketers involve actual customers in product testing consumers can evaluate prototypes and work with pre-release products their experiences may be very useful in the product development stage number seven of new product development process test marketing the last stage before commercialization in the new product development process is test marketing in this stage of the new product development process the product and its proposed marketing program are tested in realistic market settings therefore test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction in fact it allows the company to test the product and its entire marketing program including targeting and positioning strategy advertising distributions packaging and etc before the full investment is made the amount of test marketing necessary varies with each new product especially when introducing a new product requiring a large investment when the risks are high or when the firm is not sure of the product or its marketing program a lot of test marketing may be carried out number eight of new product development process commercialization test marketing has given management the information needed to make the final decision to launch or not to launch the new product the final stage in the new product development process is commercialization commercialization means nothing else than introducing a new product into the market at this point the highest costs are incurred and the company may need to build or rent a manufacturing facility large amounts may be spent on advertising sales promotion and other marketing efforts in the first year some factors that should be considered before the product is commercialized one introduction timing for instance if the economy is down it might be wise to wait until the following year to launch the product however if competitors are ready to introduce their own products the company should push to introduce the new product sooner to introduction place where to launch the new product should it be launched in a single location a region the national market or the international market normally companies don't have the confidence capital and capacity to launch new products into full national or international distribution from the start instead they usually develop a planned market role out over time summary in all of these steps of the new product development process the most important focus is on creating superior customer value only then can the product become a success in the market only very few products actually get the chance to become a success the risks and costs are simply too high to allow every product to pass every stage of the new product development process you