7 stages of new product development process

7 stages of new product development process

The new product planning is the function of the top management personnel and specialists drawn from sales and marketing, research and development, manufacturing and finance.

This group considers and plans new and improved products in different phases, as given below:

1. Idea generation (Idea Formulation)

2. Screening of ideas (Evaluation)

3. Concept Testing

4. Business analysis

5. Product development

6. Test marketing

7. Commercialization (Market Introduction)

7 stages of new product development process
7 stages of new product development process

1. Idea Generation:

The focus in this first stage is on searching for new product ideas. Few ideas generated at this stage are good enough to be commercially successful. New product ideas come from a variety of sources. An important source of new product ideas is customers. Fundamentally, customer needs and wants seem to be the most fertile and logical place to start looking for new product ideas. This is equally important for both consumers and industrial customers.

Product planning starts with the creation of product ideas. The continuous search for new scientific knowledge provides the clues for meaningful idea formation.

Drucker suggested that the sources can broadly be divided into:

(a) Internal Source (within the company) and

(b) External Sources (outside the company)

2. Screening the Ideas: (Evaluation):

It means critical evaluation of product ideas generated. After collecting the product ideas, the next stage is screening of these ideas. The main object of screening is to abandon further consideration of those ideas which are inconsistent with the product policy of the firm. The product ideas are expected to be favourable and will give room for consumer satisfaction, profitability, a good market share, firm’s image.

All the ideas cannot be accepted, because certain product plans need huge amount of investments, for certain plans raw materials may not be available, certain plans may not be practicable. Many of the ideas are rejected on account of many reasons and thus eliminate unsuitable ideas. Only promising and profitable ideas are picked up for further investigation.

Answers are sought to questions like:

1. Does the product meet a genuine need?

2. Is it an improvement over the existing product?

3. Is it close to our current lines of business?

4. Does it a totally new line of business?

5. Will it offer customers a superior value?

6. Will the new product bring in expected ROI?

7. Does the market accept the new product?

3. Concept Testing:

After the new product idea passes the screening stage, it is subjected to ‘concept testing’. Concept testing is different from test marketing, which takes place at a later stage. What is tested at this stage is the ‘product concept’ itself-whether the prospective consumers understand the product idea, whether they are receptive towards the idea, whether they actually need such a product and whether they will try out such a product if it is made available to them.

In fact, in addition to the specific advantage of getting the consumers’ response to the product idea, this exercise incidentally helps the company to bring the product concept into clearer focus. Concept testing helps the company to choose the best among the alternative product concepts. Consumers are called upon to offer their comments on the precise written description of the product concept, viz, the attributes and expected benefits.

4. Business Analysis (Market Analysis):

This stage is of special importance in the new product development process, because several vital decisions regarding the project are taken based on the analysis done at this stage. Estimates of sales, costs and profits are important components of business analysis and forecasts of market penetration and market potential are essential.

More precise estimates of environmental and competitive changes that may influence the product’s life cycle or its replacement or repeat sales are also needed to develop and launch a product? A complete cost appraisal is necessary besides judging the profitability of the project.

Market analysis involves a projection of future demand, financial commitment and return. Financial specialists analyze the situation by applying break-even analysis, risk analysis. Business analysis will prove the economic prospects of the new product.

5. Product Development:

The idea on paper is converted into product. The product is shaped corresponding to the needs and desire of the buyers. Product development is the introduction of new products in, the present markets. New or improved products are offered by the firm to the market so as to give better satisfaction to the present customers. Laboratory tests technical evaluations are made strictly.

6. Test Marketing:

By test marketing, we mean, what is likely to happen, by trial and error method when a product is introduced commercially into the market. These tests are planned and conducted in selected geographical areas, by marketing the new products. The reactions of consumers are watched.

It facilitates to uncover the product fault, if any, which might have escaped the attention in the development stage. By this, future difficulties and problems are removed. This type of pre-testing is essential for a product before it is mass produced and marketed. Sometimes, at this stage, management may take decision to accept or reject the idea of marketing products.

Designing the programme for test marketing involves making a number of decisions:

1. Where and in how many markets should test be carried out?

2. What should be the duration of test marketing?

3. What to test?

4. What criteria should be used to determine success or otherwise?

7. Commercialization (Market Introduction):

This is the final stage of product planning. At this stage, production starts, marketing programme begins to operate and products flow to the market for sale. It has to compete with the existing products to secure maximum share in the market-sales and profits. When a product is born, it enters into the markets; and like human beings, has a life span-product life cycle.

In launching a new product, the company must make four decisions:

1. When should the product to be launched?

a. Right time.

2. Where should it be launched?

i. a single locality

ii. a region or

iii. national market.

3. Which groups should be targeted?

a. Existing customers.

4. How should it be launched?

i. Develop an action plan for introducing the new product into the rollout markets.

Consider the following before launching a new product:

1. Effective market research

2. Ensure product quality

3. Differentiation of product

4. Identification of consumer needs

5. Effective promotion

6. Proper distribution system

7. Correct pricing strategy

8. Knowledge of local needs

9. Choose correct time

10. Strength of sales force.

Factors that hinder the new product development:

1. Shortage of ideas

2. Shorter PLC

3. Higher expenditure

4. Fragmented markets

5. Inappropriate incentives 

6. High gestation period

7. Non-cooperation of staff

Sachin Thorat

Sachin is a B-TECH graduate in Mechanical Engineering from a reputed Engineering college. Currently, he is working in the sheet metal industry as a designer. Additionally, he has interested in Product Design, Animation, and Project design. He also likes to write articles related to the mechanical engineering field and tries to motivate other mechanical engineering students by his innovative project ideas, design, models and videos.

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