Risks involved in New Product Development

• Dr.K.THIRUGNANASAMBANTHAN. ASST.PROFESSOR, DEPARTMENT OF MBA, SANKARA COLLEGE OF SCIENCE AND COMMERCE

New product development involves large amount risk like any business.  The main reasons for it is the technology is changing in a rapid pace.  If it is not launched at the correct time many competitor’s products can conquer the market.   There are also market-based threats such as commercial sustainability, consumer acceptance, competitors, and the product introduction window timing.  Most of the new products fail to fulfill the expectations of the consumers and those products ultimately fails.  Some of the products which are launched quickly into the market fails because they did not satisfy the customer’s needs.  The marketing managers in this case will be trying to push the product to the customers rather than addressing the needs of the customers and trying to pull the customer towards the product.  There are administrative risks like   fund availability, sponsorship, availability of staff and handling of production.  Other risks are the quality of the product, price of the product, features of the product in comparison with the competitor’s product. If the product is poor compared with that of the competitors, then it will be a failure.  Even though if the above features are good and if the company does not have good distribution system then the product will be a failure.

The calculation with related to the size of the market is another risk, if there is any miscalculation and the size of the market is not big enough to validate the investments made for new product development, then it will be difficult for the firm to recover.  If the positioning is not proper, then the product will be a failure.  If the pricing is not correct the product will not be accepted by the customers. The dependence of raw materials from a single supplier can also be hurdle in new product development, if the supplier is not able to supply the raw materials at the needed time, the production will be in stand still.  These are the risks involved in development of a new product.