CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS

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Entrepreneurship MGT602

Lesson 17

CREATIVITY AND THE BUSINESS IDEA

LEARNING OBJECTIVES

1. To discuss the aspects of the product planning and development process

2. To discuss aspects of e-commerce and starting an e-commerce business

PRODUCT PLANNING AND DEVELOPMENT PROCESS

Once idea emerges from idea sources or creative problem solving, they need further development and

refinement in to final product or service to be offered. This refining process- the product planning and

development process is divided in to five major stages. Idea stage, concept stage, product development

stage, test marketing stage and commercializing; it result in the product life cycle.

Establishing evaluation criteria

At each stage of product planning and development process, criteria for evaluation need to be established.

These criteria should be broad, yet quantitative enough to screen the product carefully in the particular

stage of development. Criteria should be developed to evaluate the new product in terms of market

opportunity, competition the marketing system, financial factors and production factors. A market

opportunity and adequate market demand must exist. Current competing producers, prices, and policies

should be evaluated in their impact on market share.

The new product should be compatible with existing management capabilities. The product should be able

to be supported by and contribute to the company's financial structure. The compatibility of new product's

production requirements with existing plant, machinery, and personnel should be determined.

Entrepreneurs should formally evaluate an idea throughout its evolution.

Idea Stage

Promising new product ideas should be identified and impractical ones eliminated in the idea stage allowing

maximum use of company's resources. In the systematic market evaluation checklist method, each new

product idea is expressed in terms of its chief values, merits, and benefits. This technique can be used to

determine which new products should be pursued.

The company should also determine the need for the new product and its value to the company. Need

determination should focus on the type of need, its timing, the users involved, the importance of marketing

variables, and the overall market structure and characteristics. In determining the product's value to the

firm, financial scheduling should be evaluated.

Concept Stage

In the concept stage the refined idea is tested to determine consumer acceptance without manufacturing it.

One method of testing is the conversational interview in which respondents are exposed to statements that

reflect attributes of the product. Features, price, and promotion should be evaluated in comparison to

major competitors to indicate deficiencies or benefits. The relative advantages of the new product versus

competitors should be determined.

Product Development Stage

In this stage, consumer reaction is determined, often through a consumer panel. The panel can be given

samples of the product and competitors' products to determine consumer preference. Participants keep

the record of their use of product and comment on its virtues and deficiencies.

The panel of consumers is also given a sample of product and one or more competitive product

simultaneously. One test product may already be on the market, whereas the other test product is new.

Test Marketing Stage

Although the results of product development stage provide the basis of the final marketing plan, the

market test can be done to increase the certainty of successful commercialization. The last step in the

evaluation process, the test marketing stage, provides actual sales results which indicate the acceptance level

Entrepreneurship MGT602

of consumers. Positive test results indicate the degree of probability of a successful product launch and

company formation.

E-COMMERCE AND BUSINESS START-UP AND GROWTH

The Internet

The Internet started in the 1970s with a U.S. Defense Department program named ARPA. In the early

1990s the concept of World Wide Web pages was developed. The Internet is a channel for the creation of

profitable companies. Electronic business (e-business) is any process that a business organization conducts

over a computer-mediated network.

Electronic commerce (e-commerce) is any transaction completed over a computer-mediated network that

involves the transfer of ownership or rights to use goods or services. Factors that facilitate the growth of e-

commerce are:

The widespread use of personal computers.

The adoption of intranets in companies.

The acceptance of the Internet as a business communications platform.

Starting an E-Commerce Company

The Internet is especially important for small and medium-sized companies as it lets them minimize

marketing costs while reaching broader markets. An entrepreneur starting an Internet commerce venture

needs to address many of the same strategic and tactical questions as other companies plus some specific

online issues. One decision is whether to run the Internet operations within the company or outsource

these operations. If handled in-house, expensive equipment and software have to be maintained. There are

numerous possibilities for outsourcing the Internet business. The two major components of Internet

commerce are front-end and back-end operations.

Front-end operations are encompassed in the website's functionality, such as search

capabilities, shopping cart, and secure payment.

Back-end operations involve integrating customer orders with distribution channels and

manufacturing capabilities.

Website

A website is an online connection between the company and its customers and can be developed in-house

or outsourced. There are several important features of every website.

Each website should have search capabilities.

Other functions include shopping cart, secure server connection, credit card payment,

and customer feedback features.

Orders and other sensitive customer information should be transferred only through

secure servers.

An Internet company should also obtain a merchant account, which will allow the

acceptance of major credit cards.

A successful website has three characteristics: speed, speed, and speed. Short download time should be the

primary concern of website developers. A website should be easy to use, customized for specific market

target groups, and compatible with different browsers. If the company is targeting international markets,

then translation and cultural adaptation need to be considered. Probably the most difficult aspect of setting

up an online business is advertising and promoting the web pages. A company can advertise its website

through search engines, banner ads, e-mail, and classifieds. Banner ads can be targeted to the exact

audience of the firm. The entrepreneur should collect e-mail addresses from customers for targeted e-mail

campaigns.

The Internet offers many low-cost or free services for small businesses, including Internet access, unlimited

e-mail accounts, online calendar, instant messaging, and online conference rooms.

Tracking Customer Information

Electronic databases support personal marketing targeted at individual clients. The online company can

capture customers' information in many ways. The U.S. government has generally maintained a policy of

noninvolvement with Internet regulation, but the Federal Trade Commission has also pressed for new laws

to protect minors.

Relationships and Endorsements by Other Companies

The company needs to establish strong connections with other companies in the supply chain to create an

end-to-end value stream. The entrepreneur should protect its innovations and its relationship with other

Entrepreneurship MGT602

companies. Another type of relationship is endorsements by prominent Internet companies and

associations. Participation in merchant networks can bring needed credibility.

Doing E-Commerce as an Entrepreneurial Company

The decision to go online should be made on a case-by-case basis. The products should be able to be

delivered economically and conveniently. The product has to be interesting for a large number of people.

Online operations have to bring significant cost reductions compared with brick-and-mortar operations.

The company must have the ability to economically draw customers to its website. Conflict between

traditional and online marketing channels can lead to a hostile, competing position of once partnering

companies.

KEY TERMS

Product development stage

In this stage, the new product is further developed into a prototype and tested

Product life cycle

This cycle is generally divided into four major stages: product introduction, market growth, market

maturity, and sales decline

Product planning and development process

Generally divided into five major stages: idea stage, concept stage, product development stage, test

marketing stage, test marketing stage, and commercialization stage

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