New Product Development Process

New Product Development Process

Companies must acquire new ones via a properly planned new product development process in order to maintain their success in the face of goods that are maturing. But they have a problem: even if they need to create new items, the chances of success are very slim. Only a small number of the thousands of goods that enter the process make it to market. To create goods that provide customers more value, it is thus essential to understand consumers, markets, and rivals. In other words, identifying and developing new goods requires a methodical, customer-driven new product development approach. The eight key phases in the creation of a new product will be covered.

The New Product Development Process are

1. Idea Generation

The new product development process starts with idea generation. Idea generation refers to the systematic search for new-product ideas. Typically, a company generates hundreds of ideas, maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas can be identified:

• Internal idea sources: The Company finds new ideas internally. That means R&D, but also contributions from employees.
• External idea sources: The Company finds new ideas externally. This refers to all kinds of external sources, e.g. distributors and suppliers, but also competitors. The most important external source are customers, because the new product development process should focus on creating customer value.

2. Idea Screening

Idea screening is the next stage in the creation of a new product. Simply said, concept screening is the process of sorting ideas to identify the best ones. In other words, all ideas are tested to identify the best ones and eliminate the worst ones as quickly as possible. The subsequent steps are meant to minimise the amount of ideas that were generated, while the goal of idea creation was to generate a huge number of ideas. The expense of product development increases significantly as it moves forward. As a result, the business would prefer to pursue just those product concepts that would result in successful items. Therefore, it is very important to discard bad ideas as quickly as feasible.

3. Concept Development and Testing

To go on in the new product development process, attractive ideas must be developed into a product concept. A product concept is a detailed version of the new-product idea stated in meaningful consumer terms. You should distinguish

• A product concept is a detailed version of the idea stated in meaningful consumer terms
• A product image is the way consumers perceive an actual or potential product.

Let’s investigate the two parts of this stage in more detail.

Concept Development: Imagine a car manufacturer that has developed an all-electric car. The idea has passed the idea screening and must now be developed into a concept. The marketer’s task is to develop this new product into alternative product concepts. Then, the company can find out how attractive each concept is to customers and choose the best one. Possible product concepts for this electric car could be:

• Concept 1: An affordably priced mid-size car designed as a second family car to be used around town for visiting friends and doing shopping.
• Concept 2: A mid-priced sporty compact car appealing to young singles and couples.
• Concept 3: A high-end midsize utility vehicle appealing to those who like the space SUVs provide but also want an economical car.

As you can see, these concepts need to be quite precise in order to be meaningful. In the next sub-stage, each concept is tested.

Concept Testing: New product concepts, such as those given above, need to be tested with groups of target consumers. The concepts can be presented to consumers either symbolically or physically. The question is always: does the particular concept have strong consumer appeal? For some concept tests, a word or picture description might be sufficient. However, to increase the reliability of the test, a more concrete and physical presentation of the product concept may be needed. After exposing the concept to the group of target consumers, they will be asked to answer questions in order to find out the consumer appeal and customer value of each concept.

The next step in the new product development process is the marketing strategy development. When a promising concept has been developed and tested, it is time to design an initial marketing strategy for the new product based on the product concept for introducing this new product to the market.

The marketing strategy statement consists of three parts and should be formulated carefully:

• A description of the target market, the planned value proposition, and the sales, market share and profit goals for the first few years
• An outline of the product’s planned price, distribution and marketing budget for the first year
• The planned long-term sales, profit goals and the marketing mix strategy.

5. Business Analysis

After a product idea and marketing plan have been chosen, management may assess the new product’s potential for commercial success. Reviewing the new product’s sales, cost, and profit estimates in order to determine if they meet the company’s goals is the fifth phase in the new product development process. If they do, the product may go to the next phase of development.

The business might look at the past sales figures of comparable items and carry out market research to predict sales. Then, in order to determine the range of risk, it should be able to predict the lowest and maximum sales. The company may calculate the anticipated expenses and profits for a product, including marketing, R&D, operations, etc., when the sales forecast is created. Eventually, the combined sales and cost data may be utilised to evaluate the new product’s financial attractiveness.

6. Product Development

The new product development process goes on with the actual product development. Up to this point, for many new product concepts, there may exist only a word description, a drawing or perhaps a rough prototype. But if the product concept passes the business test, it must be developed into a physical product to ensure that the product idea can be turned into a workable market offering. The problem is, though, that at this stage, R&D and engineering costs cause a huge jump in investment.

Also, products often undergo tests to make sure they perform safely and effectively. This can be done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing. Consumers can evaluate prototypes and work with pre-release products. Their experiences may be very useful in the product development stage.

7. Test Marketing

The last stage before commercialization in the new product development process is test marketing. In this stage of the new product development process, the product and its proposed marketing programme are tested in realistic market settings. Therefore, test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. In fact, it allows the company to test the product and its entire marketing programme, including targeting and positioning strategy, advertising, distributions, packaging etc. before the full investment is made.

The amount of test marketing necessary varies with each new product. Especially when introducing a new product requiring a large investment, when the risks are high, or when the firm is not sure of the product or its marketing programme, a lot of test marketing may be carried out.

8. Commercialization

Test marketing has given management the information needed to make the final decision: launch or do not launch the new product. The final stage in the new product development process is commercialization. Commercialization means nothing else than introducing a new product into the market. At this point, the highest costs are incurred: the company may need to build or rent a manufacturing facility. Large amounts may be spent on advertising, sales promotion and other marketing efforts in the first year.

Some factors should be considered before the product is commercialized:

• Introduction timing. For instance, if the economy is down, it might be wise to wait until the following year to launch the product. However, if competitors are ready to introduce their own products, the company should push to introduce the new product sooner.
• Introduction place. Where to launch the new product? Should it be launched in a single location, a region, the national market, or the international market? Normally, companies don’t have the confidence, capital and capacity to launch new products into full national or international distribution from the start. Instead, they usually develop a planned market rollout over time.

In all of these steps of the new product development process, the most important focus is on creating superior customer value. Only then, the product can become a success in the market. Only very few products actually get the chance to become a success. The risks and costs are simply too high to allow every product to pass every stage of the new product development process.