New Product Development Process

Many products fail and in order to keep expanding company sales, we must have new products. The product ‘concept’ requires testing before one goes into product designing and it is very necessary to have an adequate strategy for developing new products and introducing them.

To create successful new products, a company must understand its consumers, markets, and competitors and develop products that deliver superior value to customers. It must carry out strong new-product planning and set up a systematic, customer-driven new product development process for finding and growing new products

Below Diagram gives the stages in new product development.

Product Development

Idea Generation

The first step obviously is to get ideas with regard to possible new products it is a systematic search for new product ideas. As marketing is aimed at satisfaction of consumer needs, an alert marketer can get some ideas from the customers for possible new products by keeping his eyes and ear open and more particularly the mind to perceive even needs which are so far unexpressed.

Company salesmen are in an excellent position to help. This is because they are in constant touch with the market, that is, both consumers and competitors. Watching competitors and what they introduce can also be useful for new ideas.

The Interesting method here is what is known as brain storming. This is basically done to have a flow of ideas-good and bad. A number of people, say executives of the organization, are called together and asked a question for new ideas or ideas for new products. They are asked to mention it without evaluation. None is criticized. The answers are recorded on a tape recorder so that the flow is not interrupted. Thereafter, the answers generated are evaluated as will be explained in the next stage.

The most important source of new-product ideas are customers themselves. The company can analyze customer questions and complaints to find new products that better solve consumer problems. Or it can invite customers to share suggestions and ideas.

Idea Screening

The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding stages is to reduce that number. We have now to screen and evaluate them to reduce their number to what is likely to be useful. This is known as the `evaluation’ or `screening’ of ideas stage in this process.

Poor ideas must be dropped immediately as unnecessary cost has to be incurred to process them further. The ideas must be consistent with the company’s philosophy; objectives and strategies and be in terms of the resources available in the organization.

Many companies require their executives to write up new-product ideas in a standard format that can be reviewed by a new-product committee. The write-up describes the product or the service, the proposed customer value proposition, the target market, and the competition. It makes some rough estimates of market size, product price, development time and costs, manufacturing costs, and rate of return. The committee then evaluates the idea against a set of general criteria. Some of these criteria could be:

  1. Possible Profitability
  2. Good Market Potential (Market size)
  3. Availability of Production Facility
  4. Availability of Raw Materials for such a product, if selected
  5. Availability of Finance
  6. Availability of Managerial Ability
  7. Uniqueness of Product

Concept Development and Testing

If a product idea is rather revolutionary, the concept itself must be tested. One needs to make sure that even if the concept is accepted, a failure can take place in other areas resulting in the ultimate failure of the product itself.

An attractive idea must be developed into a product concept. It is important to distinguish between a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. 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.

Concept testing calls for testing new-product concepts with groups of target consumers. The concepts may be presented to consumers symbolically or physically.

Market Strategy Development

The next step is marketing strategy development, designing an initial marketing strategy for introducing this car to the market. The marketing strategy statement consists of three parts.

  1. The first part describes the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years.
  2. The second part of the marketing strategy statement outlines the product’s planned price, distribution, and marketing budget for the first year
  3. The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy

Business Analysis

Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives. If they do, the product can move to the product development stage.

To estimate sales, the company might look at the sales history of similar products and conduct market surveys. It can then estimate minimum and maximum sales to assess the range of risk. After preparing the sales forecast, management can estimate the expected costs and profits for the product, including marketing, R&D, operations, accounting, and finance costs. The company then uses the sales and costs figures to analyze the new product’s financial attractiveness.

Product Development

For many new-product concepts, a product may exist only as a word description, a drawing, or perhaps a crude mock-up. If the product concept passes the business test, it moves into product development. Here, R&D or engineering develops the product concept into a physical product. The product development step, however, now calls for a huge jump in investment. It will show whether the product idea can be turned into a workable product.

Often, products undergo rigorous tests to make sure that they perform safely and effectively, or that consumers will find value in them. Companies can do their own product testing or outsource testing to other firms that specialize in testing

Test Marketing

If the product passes both the concept test and the product test, the next step is test marketing, the stage at which the product and its proposed marketing program are introduced into realistic market settings. Apart from mechanical performance, customer acceptance is essential. In fact, the following can be stated as requirements for the new product, after it is designed:

  • Satisfactory performance
  • Customer acceptance
  • Economical production
  • Adequate distribution
  • Adequate servicing arrangements where required, and
  • Effective packaging and branding.

The amount of test marketing needed varies with each new product. Test marketing costs can be high, and it takes time that may allow competitors to gain advantages. When the costs of developing and introducing the product are low, or when management is already confident about the new product, the company may do little or no test marketing. In fact, test marketing by consumer-goods firms has been declining in recent years. Companies often do not test-market simple line extensions or copies of successful competitor products.

A market test should, therefore, be conducted before launching the new product. This will help us find out whether the product can be launched successfully on a commercial scale or not.


Test marketing gives management the information needed to make a final decision about whether to launch the new product. If the company goes ahead with commercialization— introducing the new product into the market—it will face high costs. The company may need to build or rent a manufacturing facility. And, in the case of a major new consumer product, it may spend hundreds of millions of dollars for advertising, sales promotion, and other marketing efforts in the first year

The introduction of a new product is not an easy decision. It has to be weighed very carefully in terms of possible markets, the costs involved and the potential profits.


One response

  1. Brand impressions new product development process steps are a key component in an advertising campaign. Great brands are developed by great imagination.

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