New Product Development

Marketing is to satisfy the customer’s needs profitably. The customer’s lifestyle is changing. Her preferences are changing. So, her needs are changing. Along with that, technology and competitor’s offerings are also changing. A company cannot survive with one product forever, because eventually, its demand will reduce. Secondly, the company may think of extending its own reach by offering products to some additional customer segments, to which it has not targeted so far. Due to all this, it is necessary that a company continuously adds, improves and updates its product or service offerings. Hence, new product development (NPD) has to be an organized process inside a company which makes some products or provides some services. Remember, the company may be adding to its existing range of products or it may be developing an altogether new product for a different target customer segment. For all the cases, where a new product is to be introduced by the company NPD process must be followed. The eight stages of new product development (NPD) process are described below.

Stage 1: Idea Generation

• The first step towards NPD is generating fresh product ideas. A continuous stream of new product ideas must keep flowing in.
• We should have a systematic method of searching for new product ideas.
• The company must keep tracking various sources from where new product or service ideas can come. Some possible sources for such ideas are:
  • Feedback from customers
  • Competitors
  • Dealers, distributors or other channel partners
  • Industry publications and web sites
  • Our employees
  • Vendors
  • Industry trade shows and exhibitions
  • Organized market research
  • Brainstorming for imagination of future possible trends
• The company must choose some of the above or add some other sources from where ideas may come.
• The purpose of idea generation is to generate a large number of ideas.
• We should have an organized method of capturing all the ideas which ccould be considered for NPD.

Stage 2: Idea Screening

• Not all ideas can result into full-fledged products.
• Each idea must be qualified, tested and examined.
• The more promising ideas are selected for further evaluation and investigation and the poor ones are dropped.
• Finally, the ideas which appear to be feasible and practical are shortlisted.
• The company must get rid of impractical ideas and should not waste resources on them.
• The purpose of idea screening is to reduce the number of ideas.

Stage 3: Concept Development and Testing

• This is applicable if the product is completely new, catering to a new customer segment.
• The screened idea may sound good, but it should be developed and refined little more and tested with the target customer segment.
• At this stage, the idea is developed into a product concept to be presented.
• A product concept is a detailed version of the idea stated in the meaningful consumer terms.
• The concept step sets basic direction and boundaries for the entire development process by clarifying the type of product, the problem the product solves and the financial and technical goals to be achieved by the product.
• Its demand is estimated.

Stage 4: Marketing Strategy and Development

• If it is an addition to an old product list, the same marketing strategy may continue to apply with little or no modifications, only the price of the new product needs to be finalized.
• For newer products, all the 4Ps (Product, Price, Place and Promotion), the target segment, the positioning etc. are finalized.
• Expected sales and profitability are also calculated at this stage.

Stage 5: Business Analysis

• This, too, applies only to newer products.
• The company has a great idea, the marketing strategy seems feasible, but will adding the product be financially worthwhile?
• The business attractiveness of the proposal is evaluated at this stage.
• It takes into consideration the production and marketing cost and cash flow impact of the product.
• It will also try to determine the projected market share and expected lifespan of the product.
• The effort is to ensure that whichever product is added, it should sell well and add significantly to the company’s top line as well as bottom line.
• Sometimes, some dead products enter the company’s product portfolio and eat away the profit generated by the other products. They are a drain on the company’s finances.
• The number of such draining products must be minimized.
• Only those products which appear to be viable from business point of view must be given green signal from here onwards.

Stage 6: Product Development

• At this stage, the product development now enters in physical action mode.
• Here, a prototype or sample is produced.
• The prototype or sample is tested seriously and shown to some members of the target customer segment to confirm whether it is acceptable or it needs some change.
• If changes are required, the process of prototype making and testing continues till a final prototype is approved by the target user group.

Stage 7: Test Marketing

• This stage applies to newer products.
• The new product is marketed within a specific geographic area to test its performance in the realistic marketing conditions.
• The marketing strategy is tested here and the results are monitored.
• If any changes are required, they are incorporated before the final, full-fledged launch across all geographies is executed.
• This phase must be as short as possible, because if it takes longer, competition may smell some of the progress and start or speed up its own development.
• It saves money of full blown marketing, if the product needs some modifications before the final launch.
• This reduces the risk of making bigger, expensive marketing mistakes.

Stage 8: Commercialization

• If test marketing is successful, the product is taken up for the full-fledged launch.
• The time table of the rollout, the method and phases of the launch are determined.
• This phase must be carefully planned to maximize the product success and returns from it.
• The launch of the newer product must be in line with the reputation of the company and the brand.
• The company must ensure that the extensions of the existing products reach the entire channel partner network as soon as possible.

Conclusion

• These NPD stages are not theoretical, but must be followed practically to avoid wasting time and resources.
• A lot of money is wasted in failed products. Some of it can be saved if the above NPD process is properly followed.
• In any company, at any moment of time, there can be many products under development, at various stages of NPD mentioned above.
• The business leaders must regularly review the status of various NPD projects.

---

(Expert advice to GROW your business wherever you are, whenever you want.

SMEBusinessGuide.com… https://goo.gl/E3pfoQ)

---

WHAT YOU CAN READ NEXT