New Product Development Process
To stay successful amid maturing products, companies must acquire new ones through a carefully executed new product development process. However, the challenge lies in the fact that the odds heavily favor success. Out of thousands of products entering the process, only a handful make it to the market. Therefore, understanding consumers, markets, and competitors is crucial to developing products that deliver superior value.
Let’s delve into the eight major steps in the new product development process, as outlined by Philip Kotler.
1. Idea Generation:
The process starts with idea generation, systematically searching for new product ideas. Companies generate thousands of ideas, both internally through R&D and employee contributions and externally from distributors, suppliers, and even competitors. The most important external source is customers, since the focus should be on creating customer value.
2. Idea Screening:
The next step involves idea screening, where the least promising ideas are filtered out. The purpose of idea generation was to create a large number of ideas, and now the goal is to reduce that number to focus on the most promising ones. This step is crucial to eliminate poor ideas early in the process.
3. Concept Development and Testing:
At this stage, attractive ideas are developed into product concepts, detailed versions of the new product idea stated in meaningful consumer terms. Concepts are then tested with target consumer groups to assess consumer appeal and choose the most viable one. Concept development includes creating a detailed version of the idea, while concept testing involves evaluating it with target consumers.
4. Marketing Strategy Development:
After a promising concept has been developed and tested, it’s time to design an initial marketing strategy for the new product. This includes a description of the target market, the planned value proposition, and the sales, market share, and profit goals for the first few years. Additionally, the planned pricing, distribution, and marketing budget for the first year are outlined.
5. Business Analysis:
The fifth step involves a thorough review of sales, costs, and profit projections to determine if the new product aligns with the company’s objectives. Sales estimates are based on similar product sales history and market surveys, and all cost figures are analyzed to assess the financial attractiveness of the new product.
6. Product Development:
Once the business analysis is complete and the concept passes the test, the actual product development begins. R&D develops one or more physical versions of the product concept, which may include prototypes. In many cases, actual consumers are involved in product testing, providing valuable feedback for further refinement.
7. Test Marketing:
The penultimate stage is test marketing, where the product and its proposed marketing program are tested in realistic market settings. This step allows companies to gather insights before making a full-scale investment. The amount of test marketing varies depending on the product’s nature and potential risks.
8. Commercialization:
The final stage is commercialization, introducing the new product to the market. This involves significant investments in manufacturing facilities, advertising, sales promotion, and other marketing efforts. Factors like the economic environment and competitors’ actions play a role in deciding when and where to launch the product.
Each step in the new product development process is critical, with the primary focus on creating superior customer value. The risks and costs are high, and only a few products successfully navigate through each stage of the process.