8 Stages of New Product Development

Process
Last Updated : 28 Dec, 2023

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.

Table of Content
New Product Development Process
1. Idea Generation
2. Idea Screening
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4. Marketing Strategy Policy Development
 5. Business Analysis
6. Product Development
7. Test Marketing
8. Product Launch
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
Accountancy Business Studies Economics Commercial Law Organisational Behaviour Human Resource
through which a company generates ideas for a new product are customers,
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companies evaluate market Policyconditions, 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
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 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
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For instance, a food company Policy 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
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 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.

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