A product is anything that can be offered to a market that might satisfy a want or need. Products include physical objects, services, events, persons, places, organizations, ideas, or mixes of these entities.

A market is a place where buyers and sellers meet by any mean of communication for the purpose of a business transaction.

A product may fall into two major categories that are tangible and intengible.

Something is considered a good if it is a tangible item.  That is, it is something that is felt, tasted, heard, smelled or seen.  For example, bicycles, cellphones, and books are all examples of tangible goods.

A service is a non-material or intangible product - such as professional consultancy, waitressing, teaching, or an entertainment experience.

Something falls into the category of an idea if the marketer attempts to convince the customer to alter their behavior or their perception in some way. Marketing ideas are often promoted by non-profit groups or governments in order to get targeted groups to avoid or change certain behavior. e.g. when public service announcements directed toward such activity as youth smoking, automobile safety, and illegal drug use.

Product Development is any profitable change in a routine process that can be made visible, and can be useful to enhance the process in a meaningful way.

Developing a product is very important for a company in dynamic environment and it involves a high level of marketing intelligence and engineering.

There are two ways for developing a product.

Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product.

Developing New Products
By its nature marketing requires new ideas. Unlike some organizational functions, where basic processes follow a fairly consistent routine (e.g., accounting), successful marketers are constantly making adjustments to their marketing efforts. New ideas are essential for responding to changing demand by the target market and by pressure exerted by competitors. These changes are manifested in decisions in all marketing areas including the development of new products.

In addition to being responsive to changing customer tastes and competitive forces, there are many other reasons why new product development is vital. These include:

Categories of New Products
New products can fall into one of several categories. These categories are defined by the type of market the product is entering (i.e., newly created, existing but not previously targeted, existing and targeted ) and the level of product innovation (i.e., radically new, new, upgrade).

How New Products Are Obtained
Marketers have several options for obtaining new products. First, products can be developed within an organization’s own research operations. For some companies, such as service firms, this may simply mean the marketer designs new service options to sell to target markets. For instance, a marketer for a mortgage company may design new mortgage packages that offer borrowers different rates or payment options. At the other extreme companies may support an extensive research and development effort where engineers, scientists or others are engaged in new product discovery.

A second way to obtain products is to acquire them from external sources. This can occur in several ways including:

New Product Development Process
Because introducing new products on a consistent basis is important to the future success of many organizations, marketers in charge of product decisions often follow set procedures for bringing products to market. In the scientific area that may mean the establishment of ongoing laboratory research programs for discovering new products (e.g., medicines) while less scientific companies may pull together resources for product development on a less structured timetable.

We discuss a 7-step process comprising the key elements of new product development. While some companies may not follow a deliberate step-by-step approach, the steps are useful in showing the information input and decision making that must be done in order to successfully develop new products. The process also shows the importance market research plays in developing products.

We should note that while the 7-step process works for most industries, it is less effective in developing radically new products. The main reason lies in the inability of the target market to provide sufficient feedback on advanced product concepts since they often find it difficult to understand radically different ideas. So while many of these steps are used to research breakthrough ideas, the marketer should exercise caution when interpreting the results.

The first step of new product development requires gathering ideas to be evaluated as potential product options. For many companies idea generation is an ongoing process with contributions from inside and outside the organization. Many market research techniques are used to encourage ideas including: running focus groups with consumers, channel members, and the company’s sales force; encouraging customer comments and suggestions via toll-free telephone numbers and website forms; and gaining insight on competitive product developments through secondary data sources. One important research technique used to generate ideas is brainstorming where open-minded, creative thinkers from inside and outside the company gather and share ideas. The dynamic nature of group members floating ideas, where one idea often sparks another idea, can yield a wide range of possible products that can be further pursued.

In Step 2 the ideas generated in Step 1 are critically evaluated by company personnel to isolate the most attractive options. Depending on the number of ideas, screening may be done in rounds with the first round involving company executives judging the feasibility of ideas while successive rounds may utilize more advanced research techniques. As the ideas are whittled down to a few attractive options, rough estimates are made of an idea’s potential in terms of sales, production costs, profit potential, and competitors’ response if the product is introduced. Acceptable ideas move on to the next step.

With a few ideas in hand the marketer now attempts to obtain initial feedback from customers, distributors and its own employees. Generally, focus groups are convened where the ideas are presented to a group, often in the form of concept board presentations (i.e., storyboards) and not in actual working form. For instance, customers may be shown a concept board displaying drawings of a product idea or even an advertisement featuring the product. In some cases focus groups are exposed to a mock-up of the ideas, which is a physical but generally non-functional version of product idea. During focus groups with customers the marketer seeks information that may include: likes and dislike of the concept; level of interest in purchasing the product; frequency of purchase (used to help forecast demand); and price points to determine how much customers are willing to spend to acquire the product.

Develop the marketing and engineering details

At this point in the new product development process the marketer has reduced a potentially large number of ideas down to one or two options. Now in Step 4 the process becomes very dependent on market research as efforts are made to analyze the viability of the product ideas. (Note, in many cases the product has not been produced and still remains only an idea.) The key objective at this stage is to obtain useful forecasts of market size (e.g., overall demand), operational costs (e.g., production costs) and financial projections (e.g., sales and profits). Additionally, the organization must determine if the product will fit within the company’s overall mission and strategy. Much effort is directed at both internal research, such as discussions with production and purchasing personnel, and external marketing research, such as customer and distributor surveys, secondary research, and competitor analysis.

Ideas passing through business analysis are given serious consideration for development. Companies direct their research and development teams to construct an initial design or prototype of the idea. Marketers also begin to construct a marketing plan for the product. Once the prototype is ready the marketer seeks customer input. However, unlike the concept testing stage where customers were only exposed to the idea, in this step the customer gets to experience the real product as well as other aspects of the marketing mix, such as advertising, pricing, and distribution options (e.g., retail store, direct from company, etc.). Favorable customer reaction helps solidify the marketer’s decision to introduce the product and also provides other valuable information such as estimated purchase rates and understanding how the product will be used by the customer. Reaction that is less favorable may suggest the need for adjustments to elements of the marketing mix. Once these are made the marketer may again have the customer test the product. In addition to gaining customer feedback, this step is used to gauge the feasibility of large-scale, cost effective production for manufactured products.

Products surviving to Step 6 are ready to be tested as real products. In some cases the marketer accepts what was learned from concept testing and skips over market testing to launch the idea as a fully marketed product. But other companies may seek more input from a larger group before moving to commercialization. The most common type of market testing makes the product available to a selective small segment of the target market (e.g., one city), which is exposed to the full marketing effort as they would be to any product they could purchase. In some cases, especially with consumer products sold at retail stores, the marketer must work hard to get the product into the test market by convincing distributors to agree to purchase and place the product on their store shelves. In more controlled test markets distributors may be paid a fee if they agree to place the product on their shelves to allow for testing. Another form of market testing found with consumer products is even more controlled with customers recruited to a “laboratory” store where they are given shopping instructions. Product interest can then be measured based on customer’s shopping response. Finally, there are several high-tech approaches to market testing including virtual reality and computer simulations. With virtual reality testing customers are exposed to a computer-projected environment, such as a store, and are asked to locate and select products. With computer simulations customers may not be directly involved at all. Instead certain variables are entered into a sophisticated computer program and estimates of a target market’s response are calculated.

If market testing displays promising results the product is ready to be introduced to a wider market. Some firms introduce or roll-out the product in waves with parts of the market receiving the product on different schedules. This allows the company to ramp up production in a more controlled way and to fine tune the marketing mix as the product is distributed to new areas.

Managing Existing Products
Marketing strategies developed for initial product introduction almost certainly need to be revised as the product settles into the market. While commercialization may be the last step in the new product development process it is just the beginning of managing the product. Adjusting the product’s marketing strategy is required for many reasons including:

To stay on top of all possible threats the marketer must monitor all aspects of the marketing mix and make changes as needed. Such efforts require the marketer to develop and refine the product’s marketing plan on a regular basis. In fact, as we will discuss in a later section of this tutorial, marketing strategies change as a product moves through time leading to the concept called the Product Life Cycle (PLC). We will see that marketers make numerous revisions to their strategy as product move through different stage of the PLC.

In this dynamic business environment, companies are striving to make their products a different entity from their competitors. It has become very important now since the customer has more knowledge about various products these days. Also the customers have become more conscious about what they are buying and from where they are buying. It is sometimes very difficult to serve them according to what they want but still companies try to make them satisfy by providing supreme customer values. There is a new need emerges almost every day. But it is some how not possible for the marketers to find those needs and satisfy them, though some of the multinationals are continuously involved in marketing researches now and then. So it is much convenient for the organizations to mould or develop their products in a way that they can satisfy the maximum number of needs from a single served product. It highlights the need of continuous development in the existing products.

While developing an existing product according to the requirement of the customers, following steps should be understood very clearly:

Product definition is a critical starting point in the development of any product. Product definition should include the following things.

A company doesn't blindly respond to customer needs and opportunities. A business strategy, which defines customers and markets to be served, competitors, and competitive strengths, provides a framework from which to evaluate potential opportunities. The result of this evaluation of opportunities is expressed in a product plan.

The product plan helps resolve issues related the markets, the types of products and the opportunities that the company will invest in and the resources required to support product development. More specifically, the product plan is used to:

Few companies have a formal product planning process, let alone a rigorous process. While a product plan is generally prepared on an annual basis, it should be reviewed and updated at least quarterly, if not monthly. Market conditions will change, new product opportunities will be identified, and new product technology will emerge ­ all causing a potential impact to the product plan. These opportunities need to be evaluated and the product plan changed if needed. This change may result in re-prioritizing development projects or making a decision to hire additional development personnel to undertake a new development opportunity.

Once a product plan is established which defines the target market and customers, the next step is to plan how to capture these customer's needs for each development project. This includes determining how to identify target customers, which customers to contact in order to capture there needs, what mechanisms to use to collect their needs, and a schedule and estimate of resources to capture the voice of the customer (project plan for product definition phase).

As opportunities are identified, appropriate techniques are used to capture the voice of the customer. The techniques used will depend on the nature of the customer relationship as illustrated below.

There is no one monolithic voice of the customer. Customer voices are diverse. In consumer markets, there are a variety of different needs. Even within one buying unit, there are multiple customer voices (e.g., children versus parents). This applies to industrial and government markets as well. There are even multiple customer voices within a single organization: the voice of the procuring organization, the voice of the user, and the voice of the supporting or maintenance organization. These diverse voices must be considered, reconciled and balanced to develop a truly successful product.

Traditionally, Marketing has had responsibility for defining customer needs and product requirements. This has tended to isolate Engineering and other development personnel from the customer and from gaining a first hand understanding of customer needs. As a result, customer's real needs can become somewhat abstract to other development personnel.

Product development personnel need to be directly involved in understanding customer needs. This may involve visiting or meeting with customers, observing customers using or maintaining products, participating in focus groups or rotating development personnel through marketing, sales, or customer support functions. This direct involvement provides a better understanding of customer needs, the customer environment, and product use; develops greater empathy on the part of product development personnel, minimizes hidden knowledge, overcomes technical arrogance, and provides a better perspective for development decisions. These practices have resulted in fundamental insights such as engineers of highly technical products recognizing the importance to customers of ease of use and durability rather than the latest technology.

Where a company has a direct relationship with a very small number of customers, it is desirable to have a customer representative(s) on the product development team. Alternately, mechanisms such as focus groups should be used where there are a larger number of customers to insure on-going feedback over the development cycle. Current customers as well as potential customers should be considered and included. This customer involvement is useful for initially defining requirements, answering questions and providing input during development, and critiquing a design or prototype.

During customer discussions, it is essential to identify the basic customer needs. Frequently, customers will try to express their needs in terms of HOW the need can be satisfied and not in terms of WHAT the need is. This limits consideration of development alternatives. Development and marketing personnel should ask WHY until they truly understand what the root need is. Breakdown general requirements into more specific requirements by probing what is needed. Challenge, question and clarify requirements until they make sense. Document situations and circumstances to illustrate a customer need. Address priorities related to each need. Not all customer needs are equally important. Use ranking and paired comparisons to aid to prioritizing customer needs. Fundamentally, the objective is to understand how satisfying a particular need influences the purchase decision.

In addition to obtaining an understanding of customer needs, it is also important to obtain the customer's perspective on the competition relative to the proposed product. This may require follow-up contact once the concept for the product is determined or even a prototype is developed. The question to resolve is: How do competitive products rank against our current or proposed product or prototype?

Once customer needs are gathered, they then have to be organized. The mass of interview notes, requirements documents, market research, and customer data needs to be distilled into a handful of statements that express key customer needs. Affinity diagramming is a useful tool to assist with this effort. Brief statements, which capture key customer needs, are transcribed onto cards. A data dictionary, which describes these statements of need, is prepared to avoid any misinterpretation. These cards are organized into logical groupings or related needs. This will make it easier to identify any redundancy and serves, as a basis for organizing the customer needs.

In addition to "stated" or "spoken" customer needs, "unstated" or "unspoken" needs or opportunities should be identified. Needs that are assumed by customers and, therefore not verbalized, can be identified through preparation of a function tree. Excitement opportunities (new capabilities or unspoken needs that will cause customer excitement) are identified through the voice of the engineer, marketing, or customer support representative. Observing customers use or maintain products and recognizing opportunities for improvement can also identify these.

The customer needs then have to be translated into a set of product requirements (more technical expressions of customer needs) that can be acted upon by Engineering. Quality function deployment (QFD) is an excellent methodology to support this objective while considering the competitive situation. QFD is a structured planning and decision-making methodology for capturing customer needs and translating those requirements into product requirements, part characteristics, process plans and quality/production plans through a series of matrices.

These product requirements are often expressed in the form of a product specification, functional specification, or marketing requirements specification. The degree of formality in expressing these requirements will vary depending on the complexity of the product, the size of the development project, and the organization structure and its communication requirements. With a less complex item, the QFD product-planning matrix is usually sufficient. With a more complex item, a larger development project, and critical interfaces between multiple teams responsible for individual subsystems, the need for a formal specification increases. In addition to performance requirements and technical characteristics, a comprehensive specification would also address ease of use; ergonomics; styling and aesthetics; robustness, reliability and servicing; the product operating environment or conditions of use; life cycle costs; and packaging.

Several issues can arise with a product specification that can delay time-to-market: an incomplete, ambiguous, or conflicting specification and/or development proceeding prior to completion of a specification. In these situations, development often proceeds with assumptions made about requirements that may or may not be valid. If the assumptions are not valid, the product may be off-target or there may be further product definition and redesign iterations. When specification ambiguity or conflicts are recognized before design proceeds, there are further product definition iterations that require additional time before development proceeds. This is the lesser of the two evils. It is more appropriate to take additional time than risk a product that misses the mark in meeting customer needs.

However, to the degree that all team members are involved with capturing the voice of the customer and with translating those needs into technical characteristics or requirements with QFD, it is less likely that the resulting specifications will be incomplete, ambiguous, or conflicting. Team members will more readily recognize these situations and recognize the additional information that must be obtained or the issues that must be resolved much earlier. Further, if there is a well-defined development process with this team-based environment, it is less likely that development will proceed until specifications are completed.

Once requirements for a product are defined, they must be managed and kept stable. When requirements are a moving target, the redesign iterations severely impact time-to-market. To minimize the impact on time-to-market and more rigorously manage requirements or specifications, establish realistic requirements at the start and make needed trade-off. Avoid a tendency to proceed with the design before requirements are completely defined. Document requirements to communicate and develop a consistent understanding. Avoid creeping elegance and carefully consider the need to change requirements after development has started.

The classic approach to product development involves significant effort-defining requirements up front followed by customer evaluation and feedback of prototypes to refine the requirements and design. An alternative approach of "evolutionary product development" has emerged, largely based on the results of some Japanese companies. This approach involves regular, on-going assessment of customer needs and customer feedback, shorter development cycles with a more limited set of new requirements or capabilities, and planned evolutionary upgrades or improvements based on customer feedback.