Chapter-Four

Product/Service Development

By: Yeshiwas Fentahun (MA), Lecturer

@ Department of Management ,College
of Business and Economics, Injibara
University
 Concept of Product/Service

• Organization's success is dependent on

customer satisfaction and delight.
• Customer satisfaction is achieved through the
development of product and service, which
have all attributes required by the customer.
• A success product or services do not only have
an attractive package design but should be
also able to provide robust performance.
• Thus, product design must be practical
enough for production and powerful enough to
provide a competitive advantage.
 Continued …
• The essence of product design is to satisfy customer and
maximizes the value for the customer at minimum cost. T
• he merchandise or service should also be able to meet
primary needs and desire of the customer. This may not
require development of new merchandise, but an
enhancement to existing merchandise or service.
• Most companies apparently are introducing a wide variety
of smaller, more efficient, and more intelligent products,
coupled with a leaner, more efficient approach to
operation.
• The goal is to create products and services by identifying
an emerging trend and to match that trend with the right
technology and understanding of the purchasing dynamics.
• A successful startup depends on its distinctive and
compelling proposition. This is how merchandise or
services stand out from the competition and are
compelling to the young company‘s customers.
 Product/Service Development
Process
• Product development is the process through
which companies react to market signals,
respond to changes in customer demand,
adopt new technologies, foray into new areas,
and ensure continuous growth.
• It is a core process in achieving strategic
objectives, renewal of the company business
model and deterring competition from
displacing the company from its market
position.
• Product/service development process is part of
the overall new-venture creation process.
 Continued…
oThe various stages of new product
development process
• New Idea Generation
• The new product development process starts
with search for ideas. Companies have to
encourage any new idea coming.
• The key to successful domestic and
international entrepreneurship is to develop an
idea that has a market for the new
product/service idea conceived.
• Some of the more fruitful sources of ideas for
entrepreneurs include consumers, existing
products and services, distribution channels, the
federal government, and research and
development.
 Continued ….

• Idea Screening
• In the 2nd stage, the purpose is to lessen the
number of ideas to few vital/valuable ideas.
• The ideas should be written down and
reviewed each week by an idea committee
who should sort the ideas into three groups-
Promising Ideas, Marginal Ideas, and
Rejects: Each promising idea should be
researched by committee member.
 Continued …
• Concept Development and Testing
• Attractive ideas must be refined into fast able
product concepts since people do not purchase
ideas but they buy concepts.
• Any product idea can be turned into several product
concepts. The questions asked probably include:-
• Who will use the product?
• What benefits should the product provide?
• When will people consume the produced?
• Concept Testing: - calls for testing product
concepts with an appropriate group of target
consumers/customers, and then getting the
consumers’ reactions.
• At this stage, the concepts can be in words or
picture description.
 Continued …

• Marketing Strategy Development

• After testing the new product the concerned
body must develop a preliminary marketing
strategy plan for introducing the new product
into the market.
• The marketing strategy will undergo further
refinement in subsequent stages.
• The marketing strategy plan consists of three
parts:
• (1) Market size, structure, behavior;
• ( 2) Planned price, distribution strategy, and
marketing budget of the 1st year; and
• (3) Long run sales and profit goals,
 Continued ….
• Business Analysis
• After management develops product concept and
marketing strategy, it can evaluate the proposals’
business attractiveness. Management needs to
prepare sales, cost and profit projections to
determine whether they satisfy the company's
objective or not.
• Estimated Total Sales: - Management needs to
estimate whether sales will be high enough to yield
satisfactory profit.
• Estimating Cost and Profits: - After sales forecast
the management should estimate the expected cost
and profit at various levels of sales volume.
• The company can use other financial measure to
evaluate the merit of a new product proposal. The
simplest is breakeven analysis.
 Continued…
• Product Development
• If product concept passes the business test, it moves to R&D
or engineering to be developed to one or more physical
version of the product concept.
• Its goal is to find a proto type that the consumers/customers
see as embodying the key attribute described in the product
concept statement,
• Scientists must not only design the products’ required
functional characteristics but also know how to communicate
its psychological aspects through physical cues and how will
the consumer/customer react to different colors, sizes, weight
& other physical cues.
• When the prototypes are ready, they must be put through
regroups functions and consumer/customer tests.
• Functional tests are conducted under laboratory & field
conditions to make sure that the product performs safely and
effectively (Durability, Speed, Cost, etc) Consumer testing can
take variety of forms, from bringing consumers/customers into
laboratory to giving them samples to use in their homes.
 Continued …
• Market Testing
• After management is satisfied with the products’
functional and psychological performance, the product
is ready to be dressed up with the brand name.
• The goals are to test the new product is more
authentic consumer/customer settings and to learn
how large the market is and how
consumers/customers and dealers react to handling,
using and repurchasing the actual product.
• Most companies know that market testing can yield
valuable information about buyers, dealers, marketing
program effectiveness, market potential & other
matters.
• Test Marketing yields several benefits include more
reliable forecast of future sale, and pretesting of alternative of
future sale.
 Continued…

• Commercialization
• When (Timing):- In commercializing, market entry
timing is critical.
• If the company hears about a competitor nearing the
end of its development work, it will face three
choices.
• The 1st choice is First Entry.: Under this category,
the firm usually enjoys the "first mover advantage"
of locking up key distributors & gaining reputation.
• The 2nd choice goes with Late Entry Strategy-
which has three advantages include:-
• The competition will have borne the cost of
educating the market;
• The competing product may reveal fault that the
late entrant can avoid; and
• The company can learn the size of the market.
 Continued ...
• The 3rd strategy- Parallel Entry- can be also
chosen by the company to get in the market.
• The strategy to work, a prospective businessman
can take the advantage of opting for the latest
technology and production process and operate at
higher volume of operation.
• This leads to reduced production cost and production
of quality goods and services.
• A new businessman can thus provide improved
quality goods and services at lower cost and further
tap the market with an innovative marketing
approach.
• Where (Geographical Strategy):- The company must
decide whether to launch the new product in a single
locality, a region/several regions, in the
national/international market.
 Continued ...
• To Whom (Target-Market-Prospect):- Within the
rollout markets, the company must target its
distribution and promotion to the best prospect
group.
• Prime prospects for a new consumer/customer’s
product would ideally have the following
characteristics:
• They would be early adapters;
• They would be heavy users;
• They would be Opinion leaders; and
• Could be reached at low cost.
• How (Introductory Markets Strategy):- To sequence
and coordinate many actives involved in launching
a new product may/can use network-planning
techniques such as Critical Path Scheduling
(CPS).
 Continued …
o Legal and Regulatory Frameworks for
Entrepreneurs
• Since there are many options that an entrepreneur can
choose in setting up an organization, it will be necessary
to understand all the advantages and disadvantages of
each regarding such issues as liability, taxes, continuity,
transferability of interest, costs of setting up, and
attractiveness for raising capital.
• Legal advice for these agreements is necessary to ensure
that the most appropriate decisions have been made.
• One of the challenges the novice entrepreneur will face as
she goes into business understands the regulatory
environment which is made up of numerous laws and
regulations.
• To operate as a legal businessperson and protect the
business from unnecessary suits and liabilities, the
entrepreneur needs to understand the various laws that
govern his/her business. Following are the key legal issues
 Intellectual Property Protection/Product/Service Protection

o What is Intellectual Property?

• Intellectual Property which includes patents,
trademarks, copyrights, and trade secrets
represents important assets to the
entrepreneur and should be understood even
before engaging the services of an attorney.
• Too often entrepreneurs, because of their lack
of understanding of intellectual property,
ignore important steps that they should have
taken to protect these assets.
 Continued …
oIntellectual property is a legal definition
of ideas, inventions, artistic works and
other commercially viable products
created out of one's own mental
processes.
oIn the same sense that real estate titles
establish ownership of tangible items,
intellectual property is protected by such
legal means as patents, copyrights, and
trademark registrations.
 Continued …
• Patents
• A patent is a contract between an inventor and the
government in which the government, in exchange
for disclosure of the invention, grants the inventor
the exclusive right to enjoy the benefits resulting'
from the possession of the patent.
• A patent provides the owner with exclusive rights
to hold, transfer, and license the production and
sale of a product/process.
• Utility Patent: A utility patent protects any new
invention or functional improvements on existing
inventions.
• Design Patent: This patent protects the appearance
of an object and covers new, original, ornamental,
and unobvious designs for articles of manufacture.
 Continued …
• What Can Be Patented Then?
• Processes: Methods of production, research,
testing, analysis, technologies with new
applications.
• Machines: Products, instruments, physical
objects.
• Manufactures: Combinations of physical
matter not naturally found.
• Composition of matter: Chemical
compounds, medicines, etc.
 Continued …
• Trademarks
• A trademark may be a word, symbol, design, or
some combination of such, or it could be a
slogan or even a particular sound that
identifies the source or sponsorship of certain
goods or services.
• These are distinctive names, marks, symbols or
motto identified with a company’s product or
service and registered by government offices
 Continued …

• Copyrights
• Copyright is a right given to prevent others
from printing, copying, or publishing any
original works of authorship.
• Copyrights provide exclusive rights to creative
individuals for the protection of literary or
artistic productions.
• It protects original works of authorship
including literary, dramatic, musical, and
artistic works, such as poetry, novels,
movies, songs, computer software, and
architecture.
 The end
of CHAPTER