CHAPTER 5: PRODUCT DEVELOPMENT

5.1 INTRODUCTION
In Entrepreneur’s business, product development is the term used to describe the complete
process of bringing a new product in the market and it's an on-going practice in which the
entire business is looking for opportunities as new products provide growth promise to
businesses that allow them to strengthen their market position. Intense global competition,
short product and technology lifecycles, unpredictable consumer buying patterns and
possible market stagnation makes new product development a critical activity in most
businesses.

5.2 The Concept of Product

Organization's success is dependent on customer satisfaction and delight. Customer
satisfaction is achieved through the development of product 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.

5.3 Product 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 development process is part of the overall new-venture creation
process.

Stages of new product development process

1. New Idea Generation

The new product development process starts with search for ideas. Companies have to
encourage any new idea coming. 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.

2. Idea Screening

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

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three groups- Promising Ideas, Marginal Ideas, and Rejects: Each promising idea should
be researched by committee member.

3. 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.

4. 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:

I. Market size, structure, behaviour

II. Planned price, distribution strategy, and marketing budget of the 1st year
III. Long run sales and profit goals, marketing mix strategy.
5. 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.

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The company can use other financial measure to evaluate the merit of a new product
proposal.

6. 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,

7. 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.

8. 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

i. First Entry. Under this category, the firm usually enjoys the "first mover advantage"
of locking up key distributors & gaining reputation.
ii. 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.
iii. The 3rd strategy- Parallel Entry- can be also chosen by the company to get in the
market.

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  Take the advantage of opting for the latest technology and production process
and operate at higher volume of operation.
 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.

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:

o They would be early adapters;

o They would be heavy users;
o They would be Opinion leaders; and
o 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

5.4 Intellectual Property Protection/Product Protection

5.4.1 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.

Intellectual property is a legal definition of ideas, inventions, artistic works and other
commercially viable products created out of one's own mental processes.

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. This exclusive property right can be granted for a
number of years depending on the countries laws and type of property. Patents are

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property rights that can be sold and transferred, willed as well as licensed and at times
used as collateral.

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.

Trademark is distinctive names, marks, symbols or motto identified with a company’s

product or service and registered by government offices. Unlike the patent, a trademark can
last indefinitely, as long as the mark continues to perform its indicated function.
Trademarks unlike patents are periodically renewed unless invalidated by cancellations,
abandonment, or other technical registration/renewal issues.

Benefits of a Registered Trademark

 It provides notice to everyone that you have exclusive rights to the use of the mark.
 It entitles you to sue in federal court for trademark infringement, which can result in
recovery of profits, damages, and costs.
 It establishes incontestable rights regarding the commercial use of the mark.
 It establishes the right to deposit registration with customs to prevent importation of
goods with a similar mark.
 It entitles you to use the notice of registration (®).
 It provides a basis for filing trademark application in foreign countries.

Copyright is a right given to prevent others from printing, copying, or publishing any
original works of authorship. It protects original works of authorship including literary,
dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer
software, and architecture. They pertain to intellectual property. Usually copyrights are valid
for the life of the inventor plus a few decades.

Individual assignment: - The Intellectual Property System in Ethiopia

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Bantie W. et,al. (2019). Entrepreneurship, Ministry of Science and Higher Education

(MoSHE), Addis Ababa, Ethiopia