New Product Development Process - PPTX Version 1

New Product Development
Process
1.Idea generation – The New Product
Development Process
The new product development process starts with idea
generation. Idea generation refers to the systematic search for
new-product ideas. Typically, a company generates hundreds
of ideas, maybe even thousands, to find a handful of good
ones in the end. Two sources of new ideas can be identified:
• Internal idea sources: the company finds new ideas internally.

That means R&D, but also contributions from employees.
• External idea sources: the company finds new ideas
externally. This refers to all kinds of external sources, e.g.
distributors and suppliers, but also competitors. The most
important external source are customers, because the new
product development process should focus on creating
customer value.
2.Idea screening – The New Product
Development Process
The next step in the new product development process is
idea screening. Idea screening means nothing else than
filtering the ideas to pick out good ones. In other words,
all ideas generated are screened to spot good ones and
drop poor ones as soon as possible. While the purpose of
idea generation was to create a large number of ideas,
the purpose of the succeeding stages is to reduce that
number. The reason is that product development costs
rise greatly in later stages. Therefore, the company
would like to go ahead only with those product ideas that
will turn into profitable products. Dropping the poor
ideas as soon as possible is, consequently, of crucial
importance.
3. Concept development and Testing
– The New Product Development
Process
To go on in the new product development process,
attractive ideas must be developed into a product
concept. A product concept is a detailed version of
the new-product idea stated in meaningful
consumer terms. You should distinguish:
• A product idea is an idea for a possible product
• A product concept à a detailed version of the idea
stated in meaningful consumer terms
• A product image à the way consumers perceive an
actual or potential product.
4. Marketing strategy development –
The New Product Development
Process
The next step in the new product development process is the
marketing strategy development. When a promising concept
has been developed and tested, it is time to design an initial
marketing strategy for the new product based on the product
concept for introducing this new product to the market.
The marketing strategy statement consists of three parts and

should be formulated carefully:
• A description of the target market, the planned value
proposition, and the sales, market share and profit goals for
the first few years
• An outline of the product’s planned price, distribution and
marketing budget for the first year
• The planned long-term sales, profit goals and the marketing
mix strategy.
5. Business analysis – The New
Product Development Process
Once decided upon a product concept and
marketing strategy, management can evaluate
the business attractiveness of the proposed new
product. The fifth step in the new product
development process involves a review of the
sales, costs and profit projections for the new
product to find out whether these factors satisfy
the company’s objectives. If they do, the product
can be moved on to the product development
stage.
6. Product development – The New
Product Development Process
The new product development process goes on with the actual
product development. Up to this point, for many new product
concepts, there may exist only a word description, a drawing
or perhaps a rough prototype. But if the product concept
passes the business test, it must be developed into a physical
product to ensure that the product idea can be turned into a
workable market offering. The problem is, though, that at this
stage, R&D and engineering costs cause a huge jump in
investment.
The R&D department will develop and test one or more physical
versions of the product concept. Developing a successful
prototype, however, can take days, weeks, months or even
years, depending on the product and prototype methods.
7.Test marketing – The New Product
Development Process
The last stage before commercialisation in the new
product development process is test marketing. In
this stage of the new product development process,
the product and its proposed marketing programme
are tested in realistic market settings. Therefore, test
marketing gives the marketer experience with
marketing the product before going to the great
expense of full introduction. In fact, it allows the
company to test the product and its entire marketing
programme, including targeting and positioning
strategy, advertising, distributions, packaging etc.
before the full investment is made.
8.Commercialisation
Test marketing has given management the

information needed to make the final decision:
launch or do not launch the new product. The final
stage in the new product development process is
commercialisation. Commercialisation means
nothing else than introducing a new product into the
market. At this point, the highest costs are incurred:
the company may need to build or rent a
manufacturing facility. Large amounts may be spent
on advertising, sales promotion and other marketing
efforts in the first year.
Some factors should be considered before the product is
commercialized:
• Introduction timing. For instance, if the economy is

down, it might be wise to wait until the following year to
launch the product. However, if competitors are ready to
introduce their own products, the company should push
to introduce the new product sooner.
• Introduction place. Where to launch the new product?
Should it be launched in a single location, a region, the
national market, or the international market? Normally,
companies don’t have the confidence, capital and
capacity to launch new products into full national or
international distribution from the start. Instead, they
usually develop a planned market rollout over time.

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New Product Development

• Internal idea sources: the company finds new ideas internally.

The marketing strategy statement consists of three parts and

Test marketing has given management the

• Introduction timing. For instance, if the economy is

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