What are some of the steps a company should take when developing a new product? How do they create and market a new product successfully? What is the product development process?
Read along to find out the answers to these questions and much more!
New Product Development Process
The new product development process involves many stages. A business must carry out rigorous new product planning and establish a well-organized, customer-driven new product development process to locate and expand into new product categories.
New Product Development Process: Idea Generation
Idea generation, often known as the methodical search for new product ideas, is the first step in the process of developing new products. Typically, a corporation may come up with hundreds, or even thousands, of ideas before settling on a select handful that is worthwhile.
The most important sources of new product ideas come from both inside a company and outside the company in the form of consumers, rivals, distributors, and suppliers, among others.
New Product Development Process: Idea screening
The production of a significant number of ideas is the objective of the idea-generating process. The following steps in the new product development process aim to bring that number down to a more manageable level, so companies can focus on the most potential ideas.
The step of limiting the number of ideas is called idea screening. Its purpose is to narrow down ideas into the most feasible and profitable ones.
As the latter phases of product development come with far higher expenses than the earlier stages, most companies will only want to go forward with new concepts that will result in the highest returns.
The CEOs of many firms must submit their ideas for new products in written form so that they may be evaluated by a special committee responsible for developing new products. The write-up provides an overview of the product or service; the customer value proposition is presented to the target market and the competitors.
The proposition makes some approximations about the market size, the product price, the amount of time and money required for product development, the expenses of production, and the rate of return. After that, the committee judges the suggestion according to a standard set of requirements.
New Product Development Process: Concept development and concept testing
Concept development is the step by which a company develops a concept product that can be tested and used to find out whether it has the right product-market fit.
In concept testing, new product ideas are tested with groups of people who are likely to buy them. Before developing them into tangible new goods, many businesses first put potential new product ideas through rigorous customer testing.
A simple word or visual explanation may be enough for certain types of concept testing.
New Product Development Process: Marketing Strategy Development
Creating a marketing plan and an initial marketing strategy for introducing the new product to the market is the following step in the new product development process.
Marketing strategy development refers to the plan a company makes when wanting to launch a new product.
The marketing strategy may be broken down into three distinct parts as described below:
The initial part of the report focuses on the market that is going to be targeted, the projected value proposition, sales, market share, and profit objectives for the first few years.
The second part of the description offers an outline of the product's estimated expenses for the first year in terms of price, distribution, and marketing.
The third component of the marketing strategy consists of the long-term sales goals, profit targets, and marketing mix strategy.
New Product Development Process: Business Analysis
After management has settled on its product idea and marketing approach, they can assess the proposition's commercial viability.
The purpose of conducting a business analysis is to determine whether or not the projected sales, costs, and profits for a new product align with the organization's goals.
In such a case, the company can advance the product to the stage of product development.
The business could look at the sales history of other comparable items and conduct market surveys to provide an accurate sales forecast. After that, it can predict both the lowest and maximum sales to evaluate the risk range.
After producing the sales projection, management can estimate the anticipated expenses and profits associated with the product. These costs include marketing, research and development, operations, accounting, and finance. After that, the company analyses the new product's financial attractiveness by using the numbers for sales and costs.
New Product Development Process: Product Development
Many unique product ideas exist just as a written description, an image, or a crude mock-up. If the company can establish the commercial viability of the product idea, then product development may begin.
During this stage, R&D or engineering develops the product concept. They investigate whether the product idea is realistic.
R&D will construct and test real duplicates of the product concept. R&D aims to design a prototype that pleases and excites consumers and can be manufactured quickly and affordably. Developing a prototype might take days, weeks, months, or years depending on the product and technique.
New Product Development Process: Test Marketing
If the product passes both the idea and product tests, the next phase is test marketing, which involves testing the product and its planned marketing strategy in actual market conditions.
Test marketing allows a marketer to get expertise in marketing a product before investing in a full launch. It will enable the organization to test the product and its complete marketing strategy, including targeting and positioning, advertising, distribution, price, branding and packaging, and budget levels.
The quantity of test marketing required varies depending on the new product. When releasing a new product requires significant expenditure or considerable risks, or when management is unsure about the product or its marketing strategy, a company may engage in extensive test marketing.
New Product Development Process: Commercialisation
Test marketing provides management with the data they need to decide whether to launch a new product. If the company proceeds with commercialization (introducing the new product to the market), it will incur significant expenditures.
For example, the company may need to construct or rent a manufacturing facility. Additionally, a compelling new consumer product may require millions of dollars in advertising, sales promotion, and other marketing operations in the first year.
A firm releasing a new product must first select when to launch it.
If the new product reduces current product sales, its launch may be postponed. If marketers can enhance the product further or if the economy weakens, the company may wait until the following year to launch the product. On the other hand, if rivals are ready to launch competing items, the company may strive to launch its new product sooner.
Product Development Process Steps
To sum up product development process steps, we put them in one list below:
Idea generation
Idea screening
Concept development and concept testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization
Product Development Process Examples
There are many product development examples. To begin with, let's consider Netflix.
Netflix was once a service for renting movies on DVD. The transition that Netflix made toward streaming media is an excellent example of how to develop products in tandem with changing market trends.
Netflix is now one of the most popular over-the-top (OTT) platforms available on the market. The fact that they have now shifted their focus away from licensing pre-existing material towards producing original content demonstrates a profound understanding of what consumers want from an OTT streaming firm.
Netflix has seen a need in the consumer market and built a product to fill that void in response.
Every move that Netflix takes is founded on a true understanding of its customers, whether the easy availability of DVDs in the early days of the platform or the on-demand streaming available now. They gradually raise their prices with each new upgrade to reflect the change.
Therefore, as Netflix has continued to offer value, the company has iterated the product experience, pricing strategy, and content to address the challenges its subscribers face.
Netflix can now generate more income as it continues to expand due to its product development approach being related to both its business objectives and consumer demands.
Netflix has become one of the most popular over-the-top (OTT) streaming services available on the market due to the company's ability to foresee shifting market trends and the expectations of its customers. In many respects, they have also radically altered how contemporary customers engage with various forms of media.
Stages of New Product Development Process
Although the process of developing a product varies depending on the sector, we can generally break it down into seven stages:
Ideation, market research, planning, prototype, sourcing, pricing, and commercialization.
As an example of the stages of the new product development process, let's consider how iPhone made it to the market. Before Apple started producing iPhone, there was somebody's idea (Steve Jobs) of a new mobile phone. Apple then conducted market research to determine whether the new mobile phone matched consumer needs. Apple then had to make a prototype of the initial iPhone. After the iPhone went through all the stages of new product development, it had to be commercialized, which involved setting the price and selling the iPhone to Apple customers.
Agile Product Development Process
The concepts and ideals outlined in the Agile Manifesto serve as the foundation for the agile product development processes and methodologies, referred to as "agile product development." Teams working on agile product development construct products in short iterations, allowing constant input and improvements to be made more quickly. An Agile methodology is an iterative approach to project management that emphasizes the division of projects into a greater number of smaller tasks that are easier to handle. The agile process prioritizes speed, flexibility, cross-team cooperation, and regular feedback compared to conventional methods to project management, such as the Waterfall methodology. Teams continually assess the requirements, their work, and the outcomes to provide a rapid response to any changes that may occur.
Product development process - Key takeaways
- Product development process steps include idea generation, idea screening, concept development, concept testing, marketing strategy development, business analysis, product development, test marketing, and commercialization.
- Idea generation, often known as the methodical search for new product ideas, is the first step in developing new products.
- A business analysis aims to determine whether or not the projected sales, costs, and profits for a new product align with the organization's goals.
- Teams working on Agile product development construct products in short iterations, allowing constant input and improvements to be made more quickly.
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