New Product Development
New Product Development
New product development (NPD) is the process of creating and launching a new product or service, or relaunching an existing service or product. It is a structured process with the objective of turning an idea into reality.
The NPD process is made up of a series of simple steps. By working through each step, entrepreneurs or executives may be better positioned to pursue the right idea, do the right research and create a product development pipeline that can be replicated.
By clearly defining and adhering to the steps, the NPD process can result in a focused and flexible approach that can be adapted for different types of products and services. These are the key steps in the NPD process:
All products and services first start as ideas. A variety of techniques can be used to generate ideas for the new product or service. Tools, such as the SWOT (strengths, weaknesses, opportunities and threats) analysis, can be used to map out what is happening in the market and identify opportunities. Other tools for idea generation include brainstorming, competitor analysis, and customer and staff suggestions.
Filtering and screening ideas
The next step is to narrow down the ideas generated. At this stage, weak ideas are weeded out so that resources can be devoted to ideas with the most potential. To do this, each idea should be evaluated using criteria such as customer need, potential market size, cost of development, existing competitors, or how the product fits with the company’s objectives. The aim is to identify two or three viable ideas.
It is important that the new product concept is shared swiftly with a cross-section of the customer base. Potential customers can be asked to rank each of the product ideas and posed questions such as: Do they see a need for the product? Would they buy it? How much would they pay for it? What do they like or dislike about it? Following this, the concepts can be further refined and the best idea taken to the next stage.
This stage is all about the commercial and business foundations of the idea – what it would take to manufacture the product or operate the service. At this point, assumptions may have to be made about the number of customers; how much they would be willing to pay; production costs and overheads; and marketing and sales costs. The breakeven point and reaction of competitors should also be considered. Spreadsheets and financial modelling can be used to show how the product or service would sell over the first year and if the product or service would be profitable.
If the product concept has fared well with customers and makes commercial sense, the next step would be to nail down its specifications and identify the processes needed to manufacture and deliver it. The supply chain, including sourcing materials, manufacturing methods and required infrastructure, should also be considered.
A prototype or a limited production model with the exact design and specifications is created at this stage. Now would be the time to reach out to potential customers for their feedback and further refine the product or service. The product prototypes, packaging examples, marketing materials and service details – such as websites – should then be put into test groups.
Test marketing introduces the prototype using the proposed marketing plan as a whole entity rather than just individual elements. This process is required to validate the whole concept and is used to further refine all elements, from the product to marketing.
Marketing and pricing
The marketing messages and advertising across channels are established at this point. Any introductory pricing or discounts to encourage early take-up by customers are also formulated. Performance goals for marketing such as weekly and monthly marketing targets and customer engagement are put in place.
A detailed framework is needed for this stage to run smoothly and have maximum impact. It should include decisions surrounding when and where to launch the product in order to target the primary consumer group. Finally, a review of the market performance is needed to assess the success of the product or service.
British Library Business & IP Centre. (2021). “Defining a New Product Development Process”. https://www.bl.uk/business-and-ip-centre/articles/how-to-define-a-new-product-development-process
Duval, James. (July 22, 2013). “Eight Simple Steps for New Product Development”. https://www.business2community.com/product-management/eight-simple-steps-for-new-product-development-0560298
British Business Bank. “Understanding the Product Development Process”. Accessed June 22, 2021. https://www.startuploans.co.uk/business-advice/understanding-the-product-development-process/