New product development 321
far. The output of this stage will be a develop-
ment plan with budget and an initial marketing
plan.
Product development and testing
This is the stage where prototypes are phys-
ically made. Several tasks are related to this
development. First, the finished product will be
assessed regarding its level of functional per-
formance. This is sometimes known as ‘alpha
testing’. Until now, the product has only existed
in theoretical form or mock-up. It is only when
component parts are brought together in a
functional form that the validity of the theoret-
ical product can be definitively established.
Second, it is the first physical step in the
manufacturing chain. It is not until the proto-
type is developed that alterations to the specifi-
cation or to manufacturing configurations can
be designed and put into place. Third, the
product has to be tested with potential custom-
ers to assess the overall impression of the test
product.
The topic of concept testing has been much
aided by the development of the Internet, for a
number of reasons. The cost of ‘building’ and
‘testing’ prototypes virtually is, of course, a
fraction of that required by physical prototypes.
This is turn means that the market research
costs are lower, or that more concepts can be
tested by potential customers than is the case
with physical products, resulting in a final
design which is more attuned to the voice of the
customer. In addition, more end customers can
be sampled more efficiently via the Internet,
although the risk of population deterioration is
increased, as is the likelihood of bias, since not
all potential customers selected will be willing
to ‘test’ the product virtually. A paper by Dahan
and Srinivasan (2000) reported that ‘virtual
parallel prototyping and testing on the Internet
provides a close match to the results generated
in person using costlier physical prototypes.. .’
(p. 108).
Some categories of product are more
amenable to customer testing than others.
Capital equipment, for example, is difficult to
have assessed by potential customers in the
same way as a chocolate bar can be taste-tested,
or a dishwasher evaluated by an in-house trial.
One evolving technique in industrial market-
ing, however, is called ‘beta testing’, practised
informally by many industrial product devel-
opers. The Best Practices research showed that
beta site testing was used to a significantly
greater degree by the better performing com-
panies (Griffin, 1997).Test marketing
The penultimate phase in the development
cycle, test marketing, consists of small-scale
tests with customers. Until now, the idea, the
concept and the product have been ‘tested’ or
‘evaluated’ in a somewhat artificial context.
Although several of these evaluations may well
have compared the new product to competitive
offerings, other elements of the marketing mix
have not been tested, nor the likely marketing
reaction by competitors. At this stage the
appeal of the product is tested amidst the mix
of activities comprising the market launch:
salesmanship, advertising, sales promotion,
distributor incentives and public relations.
Test marketing is not always feasible, or
desirable. Management must decide whether
the industrial costs of test marketing can be
justified by the additional information that will
be gathered. Furthermore, not all products are
suitable for a small-scale test launch: passenger
cars, for example, have market testing com-
pleted before the launch, while other products,
once launched on a small scale, cannot be
withdrawn, as with personal insurance. Finally,
the delay involved in getting a new product to
market may be advantageous to the competi-
tion, who can use the opportunity to be ‘first-
to-market’. Competitors may also wait until a
company’s test market results are known and
use the information to help their own launch, or
can distort the test results using their own
tactics. Problems such as these have encour-
aged the development and use of computer-