8 Stages of New Product Development Process

What is New Product Development?

There are two ways through which a firm can obtain new products; viz., acquisition and new product development. The acquisition involves buying a company, patent, or license to produce a product for someone else. However, New Product Development is a process in which a new product is brought to the market. New Product here means original products, product improvements, product modifications, and new brands that the firm develops through its own research and development efforts. Although the process of new product development can be time-consuming as it undergoes several changes, it is meant to ensure that the product is as good as it can be before it reaches the consumers and meets their demands in the best way possible. 

New Product Development Process

When a company develops a new product, it cannot just hope that the product will be a success in the market. It is essential for the company to understand its customers, markets, and competitors before developing a product to deliver superior value to customers. For this, the company must carry out a strong new product development process. The eight major steps of the new product development process are as follows:

1. Idea Generation

Idea generation refers to brainstorming new product ideas or strategies to innovate an existing product. The different internal and external sources through which a company generates ideas for a new product are customers, distributors, suppliers, competitors, etc. Before creating any product, companies evaluate market conditions, perform studies, understand the users’ wants and needs, and then suggest possible solutions. SWOT analysis is a very effective technique to discover the weak aspects of the product as well as to explore where significant opportunities exist. A SWOT Analysis is a framework to evaluate the organisation’s Strengths, Weaknesses, Opportunities, and Threats. At last, this stage aims to generate as many ideas as possible which are feasible and deliver value to consumers. The need for high-quality photography among consumers, for instance, can inspire a mobile phone maker to develop the idea of a smartphone with a novel camera system.

2. Idea Screening

The second stage is called Idea Screening. This stage involves screening and reviewing all of the ideas generated in the first step and selecting only those with the best probability of success. Many factors are kept in mind while deciding which ideas to accept and which to reject. These factors include projected advantages to consumers, necessary product innovations, technical viability, and feasibility for marketing. The stage of idea screening is best performed within the company. Experts from several teams also assist the company in assessing the requirement of resources, the need for technology, and the marketability of the proposal. For instance, an automobile manufacturer may evaluate potential concepts for electric vehicles before manufacturing electric cars while considering factors, like the availability of batteries, their affordability, and how well they would appeal to consumers.

3. Concept Development and Testing

After all the ideas pass through the stage of idea screening, these ideas are evolved into concepts. A product concept is a detailed version of the product idea and contains a precise explanation of the idea. It should highlight the target audience, the pricing for the product, and the characteristics and advantages of the product that could be valuable for the customers. Generating various product concepts assist the companies in determining how attractive each concept is to buyers and selecting the one that will bring them the most value. Once the concepts are generated, they are tested within a select group of consumers. Concept testing is a great technique for validating product ideas with users before committing time and resources to develop them. For instance, any business producing sportswear products might create a concept for a light running shoe and seek opinions from athletes concerning the product’s comfort, toughness, and design.

A product idea, product concept, and product image are different from each other. A product idea is an idea for a possible product a company can see itself offering to the customers. A product concept is a detailed version of the product idea and contains a precise explanation of the idea. However, a product image is the way customers perceive a potential or an actual product. 

4. Marketing Strategy Development

Once a concept is selected and well-validated, it is essential to develop a preliminary marketing strategy to launch the product to the market based on the product concept and assess the worth of the product from a business point of view. The marketing strategy helps in deciding pricing, positioning, and promoting the product. A marketing strategy statement includes three parts:

• The first part of the statement describes the target market, the firm’s planned value proposition, and its sales, market share and profit goals for the first few years. 
• The second part of the statement includes the product’s planned price, its distribution, and marketing budget for the first year.
• The last part of the statement consists of the planned long-run sales, marketing mix strategy, and profit goals.

Once the marketing strategy has been developed, product management can assess the economic desirability of the product.

5. Business Analysis

Once the marketing strategy has been developed it is important to assess the worth of the product from a business point of view. An assessment of the sales projections, estimated expenses, and anticipated profits are included in the business analysis. And, If they meet the goals of the company, the product can proceed to the product development stage. For instance, a food company would assess the profitability of a new snack by looking at the expenses associated with ingredient sourcing, production, packaging, and distribution.

6. Product Development

The next stage is Product Development. In this stage, the R&D or engineering department converts a product concept into a physical product. This step involves a huge jump in investment as it shows whether or not the product idea can be turned into a workable product. The R&D Department tries to design a prototype to satisfy customer needs and excite them in buying the product, and can also be produced quickly and within budget. For this, the department runs tests on one or more physical versions of the product concept. Development of a successful prototype may take time (days, weeks, months, or even years). The companies can do product testing on their own or can outsource testing from a third party/firm which specialises in testing. For instance, a tech business might create test versions of a new smartwatch, evaluate how well it works, and then make design changes that can satisfy the customer’s needs.

7. Test Marketing

The next step is Test Marketing. Test Marketing refers to the process of testing the product and marketing program in realistic market settings. With this step, the marketer can have the experience of marketing the product in the market at a small scale before spending huge money on its full introduction. Simply put, test marketing lets the organisation test its product and its marketing program including targeting, positioning strategy, distribution, advertising, branding, pricing, packaging, and budget levels. 

The cost of performing test marketing can be high, and as it takes time, it can give The need for test marketing and the level of test marketing varies with the product. When the cost of developing and introducing the product is low, or when the management is confident about the product’s success, the company may do no or little test marketing. However, when the introduction of a new product requires a big investment, risks are high, or when the management is not confident about the product and its marketing program, it may do a lot of test marketing. For instance. a cosmetics company might launch a new skincare product in a particular area and collect information on consumer reaction, usage trends, and sales.

8. Product Launch

At the final stage, companies are now prepared to launch the new product onto the market. For a successful launch, a company must ensure that the product, marketing, sales, and support teams are well-placed and should keep good track of its performance. Companies must frequently monitor and evaluate the success of the product launch and make modifications if it fails to accomplish the expected goals. For instance, a software provider might monitor sales, client feedback, and user satisfaction polls to assess the effectiveness of a recently introduced productivity tool.