The process of new product development

Every company must develop new products. New product development shapes the company’s future. Improved or replacement products must be created to maintain or build sales. Customers want new products and competitors will do their best to supply them. Companies that fail to develop new products are putting themselves at great risk.

New product development requires senior management to define business domains, product categories and specific criteria. Senior management must decide how much to budget for new product development. New product development undergoes eight stages: (i) Idea generation (ii) Idea screening (iii) Concept development and Testing (iv) Marketing strategy development (v) Business analysis (vi) Product development (vii) Market Testing (viii) Commercialisation.


I) Idea Generation: The new product development process starts with the search of ideas. New product ideas can come from interacting with various groups and from using creative generating techniques.

Ideas for new products can come from customers, scientists, competitors, employees, channel members and top management.

Several creative techniques can be used for generating ideas for new products. These techniques include:

  1. Attribute listing: List the attributes of an object and then modify each attribute.

  2. Forced listing: List several ideas and consider each one in relation to each other one.

II) Idea Screening: A company should motivate its employees through rewards to reward to submit their new ideas. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three groups: Promising ideas, marginal ideas and rejects. The promising ideas then move into a full scale screening process. The purpose of screening is to drop poor ideas as early as possible. The rational is that product development cost rise substantially with each successive development stage.


III) Attractive Development and Testing: Attractive ideas must be refined into testable product concepts. A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in meaningful consumer terms. Each concept represents a category concept that defines the product’s competition.

Next, the product concept has to be turned into brand concept.

Concept testing involves presenting the product concept to appropriate target customers and getting their reactions. The concept can be presented physically or symbolically. The more the tested, concept resembles the final product or experience, the more dependable concepting testing is.


IV) Marketing Strategy: Following a successful concept test, the new product manager will develop a primarily marketing strategy plan for introducing the new product into the market. The plan consists of three parts. The first part describes the target market size, structure and behaviour, the planned product positioning : and the sales market share and profit goals sought in the first few years.

The second part outlines the planned price, distribution strategy are marketing budget for the first year.

The third part of the marketing- strategy plan describe the long run sales and profit goals and marketing mix strategy over time.


V) Business Analysis: After management develops the product concept and marketing strategy, it can evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost and profit projections to determine whether they satisfy company objectives.

Total estimated sales are the sum of estimated first time sales, replacement sales and repeat sales. Sales estimation method depends upon whether the product is one-time purchase (such as engagement ring etc), an infrequently purchased product, or a frequently purchased product. For one-time purchased products, sales rise at the beginning, peak and later approach zero as the number of potential buyers is exhausted. Infrequently purchased products such as automobiles, toasters and industrial equipment – exhibit replacement cycles dictated by physical wearing, out or by obsolescence associated with changing styles, features and performance. Sales forecasting for this product category scale seperately.

In case of frequently purchased goods such as consumer and industrial non- durables, the number of first time buyers initially increases and then deceases as fewer buyers are left. Repeat purchases occur soon, providing that the product satisfies some buyers. The sales curve eventually falls t a plateau representing a level of steady repeat-purchase volume, by this time, the product is no longer a new product.

Cost are estimated by the R&D manufacturing, marketing and finance companies use various financial measures to evaluate the merit of a new product proposal. The simplest is break-even-analysis, in which management estimates how many units of the product the company would have to sell to break-even with the given price and cost structure. Or the estimate may be in terms of how many years it will take to break even. If the management believes sales could easily reach the break-even number, it is likely to move the project into product development.

VI) Product Development: at this stage the company will determine whether the product can be translated into a technically and commercially feasible product. The job is to translate customer requirement into a working prototype. When the prototypes are ready, they must be put through rig rows functional tests and customer tests. The product is tested to see how it performs in different applications. Consumer testing can take several forms, from bringing consumers into a laboratory to giving them samples to use in their homes.

VII) Market Testing: After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packing, and put into a market test. The new product B introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using and repurchasing the product.

The amount of market testing to influenced by the investment cost and risk on one hand, at the time pressure and research cost on the other. High investment-high risk products, where the changes of failure to high, must be market tested; the cost of market tests will be insignificant percentage of the total project cost, high-risk products-those that create new product categories, or have novel features- warrant more market testing than modified products.

The amount of market testing may be severely reduced if the company is under great time pressure because competitors are about to launch their brands. The company may therefore prefer to face the risk of a product failure to the risk of losing distribution or market penetration on a highly successful product.

VIII) Commercialisation: If the company goes ahead with commercialization, it will face its largest cost to date. The company will have to contract for manufacture or build or rent a full scale manufacturing facility. Plant size will be critical promotion.

The company must decide whether to launch the new product in a single locality, a region, several region, the national market or the international market. The company size is an important factor here. Small companies will select an attractive city to put on a blitz campaign. They will enter other cities one at a time. Large companies will introduce their product into a whole region and then move to a next region. Companies with national market, such as auto companies will launch their new models in the national market. Most companies design new products to sell primarily in the domestic market. If the product does well, the company considers exporting to foreign countries, redesigning if necessary.