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New Product Development Process
The primary processes of new product development include idea generation, idea screening, concept development, concept testing, marketing strategy, and commercialization.
New product development: Idea generation
Idea generation, often known as the systematic search for new product ideas, is the first step in developing new products. The most important sources of new product ideas come from inside and outside the company in the form of consumers, rivals, distributors, suppliers, etc.
New product development: Idea screening
The production of a significant number of ideas is the objective of the idea-generating process. Oftentimes there may be too many ideas generated. Some ideas will have to be prioritized, others not. Thus idea screening comes in handy.
The step of limiting the number of ideas is called idea screening, and its purpose is to identify and eliminate poor ideas as quickly as possible.
Because the subsequent phases of product development come with much higher expenses, the corporation only wishes to go forward with those new concepts that will result in lucrative finished products.
New product development: Concept development and concept testing
After the company has come up with ideas and chosen the right one, it must develop a product concept.
A product concept refers to a version of the new product idea, stated in consumer terms.
After the company has developed the concept, it must test it before increasing production and aiming for a larger market.
Concept testing refers to testing a new product with a small group of target consumers, gathering feedback, and determining whether the product has consumer appeal.
Before developing them into tangible new goods, many businesses first put potential new product ideas through rigorous customer testing. A word or visual description may be adequate for specific idea examinations. However, marketers may improve the dependability of the concept test by presenting the concept in a more solid and tactile manner.
New product development: Marketing Strategy
The next step includes developing a marketing plan and an initial marketing strategy for releasing the new product into the market.
The marketing strategy is divided into three sections as follows:
The first section describes the target market, the anticipated value proposition, sales, market share, and profit targets for the first few years.
The second section of the description provides an overview of the product's anticipated pricing, distribution, and marketing expenditures for the first year.
The long-term sales objectives, profit targets, and marketing mix strategy are part of the third section of the marketing strategy.
Product development
The next step in the process is product development.
Product development refers to turning the product concept into a physical product.
This is the part where the R&D team and other relevant teams come together to develop the product's physical form.
New product development: Test marketing
The following phase, test marketing, is the stage during which the product and its intended marketing program are examined in actual market conditions.
If the product is successful in both the idea and product tests, it is ready for the test marketing stage. Test marketing aims to familiarise the marketer with the process of selling a product before the marketer goes through the enormous expenditure of a complete introduction.
It allows the organization to evaluate the product and its complete marketing program, including advertising, distribution, pricing, branding and packaging, target markets and positioning strategies, and budget levels.
New product development: Commercialisation
Commercialization is the final phase of new product development. Information management needs to make a final choice on whether or not to launch the new product obtained via test marketing. If the business decides to go through with commercialization, which means releasing the new product into the market, it will be required to bear significant expenditures.
For instance, the business would need to either construct a new production facility or lease an existing one. Additionally, in the case of a brand new consumer product, the company may spend hundreds of millions of dollars in the first year on combined advertising, sales promotion, and other marketing initiatives.
Stages of New Product Development Overview
As a recap, the stages of new product development are as follows:
- Idea generation
- Idea screening
- Concept development and testing
- Marketing strategy development
- Business analysis
- Product development
- Test marketing
- Commercialization
Idea Generation in New Product Development
Idea generation in new product development is the first phase of producing new products. This step is also often called the systematic search for new product ideas. Consumers, competitors, distributors, and suppliers are essential sources of new product ideas. Marketers may find the most important sources of new product ideas inside and outside their organization. There are four primary sources of idea generation:
Internal sources. The firm can uncover new ideas via the process of formal research and development by using internal sources. Many companies invest vast amounts of money into research and development, which helps them learn more about new product needs and develop them accordingly.
External sources. Businesses can get valuable ideas for new products from any one of a variety of external sources. Distributors and suppliers, for instance, could have some suggestions to give. Because of their proximity to the market, distributors are uniquely positioned to relay information on consumer concerns and product opportunities. The firm may learn about new ideas, methods, and materials from its suppliers, which it can then incorporate into the development of new products.
Competitors. The company's rivals are also a very significant source. Businesses should keep an eye on their rivals' communications campaigns and marketing strategies to learn more about their upcoming products.
Crowdsourcing. Many businesses are now developing what is known as crowdsourcing or open innovation, a new method that gets customer feedback and then uses that information to drive innovation.
Advantages and Disadvantages of New Product Development
There are many advantages and disadvantages of new product development.
The main advantages of new product development include:
Seizing opportunities - As the preferences and interests of customers change over time, new product development may assist businesses in capitalizing on possibilities to market to these evolving tastes and interests.
Keeping pace - In a world where most customers cannot keep up with the rapid introduction of game-changing innovations, a product line that remains unchanged over time may seem worn out and stale to consumers. With new product development, a company may stay relevant in today's ever-evolving market.
The main disadvantages of new product development include:
Risk - Instead of venturing into uncharted ground, companies may stay with a market they already know. When launching new products to the market, there is a great deal of unpredictability involved, from working out the characteristics of untested manufacturing procedures to presenting clients with options they may or may not desire.
Cost - New product development may be pricey. Companies need to come up with the idea generation process, develop the concept design, and then make the physical aspect of the product. Additionally, companies should spend significant money on test marketing. All these aspects ad costs.
New Product Development Examples
Some examples of new product developments are as follows.
Netflix was once a service for renting movies on DVD. Netflix's transition toward streaming media is an excellent example of product development. Netflix is now one of the most popular over-the-top (OTT) platforms available on the market.
Netflix shifted its focus from licensing pre-existing material to producing original content, demonstrating a profound comprehension of what consumers want from an OTT streaming firm.
When we examine the past of Netflix, we find that a consistent pattern emerges, and that theme is their objective of making the consumer experience as frictionless as possible.
Netflix has seen a need in the consumer market and built a product to fill that void in response.
Netflix continuously develops its product in line with customer needs, whether it is the easy availability of DVDs in the early days of the account profiles or on-demand streaming available now.
The transformation of traditional landlines into wireless handsets enables convenient mobility and uninterrupted access to communication at all times. A company that makes such services possible must go through all the product development stages, such as idea screening, test marketing, and finding the right target market to sell the service.
New Product Development - Key takeaways
The primary processes of new product development include idea generation, idea screening, concept development, concept testing, marketing strategy, and commercialization.
Idea generation is the first step in developing new products.
The step of limiting the number of ideas is called idea screening.
A product concept refers to a version of the new product idea, stated in consumer terms.
Product development refers to turning the product concept into a physical product.
Test marketing is the stage at which the product and its intended marketing program are examined in actual market conditions.
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Frequently Asked Questions about New Product Development
What is the importance of idea generation in a new product development?
The importance of idea generation is that it enables a business to expand beyond their current way of thinking.
Why should companies develop and introduce new products?
Companies should develop and introduce new products to stay ahead of the competition.
What is the first stage of the new-product development process?
The first stage of the new-product development process is idea generation.
What are the 7 stages in the product development process?
The seven stages of the product development process are as follows:
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing
What is the last stage in the new-product development process?
The last stage in the new-product development process is commercialisation.
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