New Product Development Process Additional Slides

New Product Development Process
• A new product means original products, product

improvements and modification and new brand that
a firm develops through his own efforts and research.
• There are seven stages involved in the NPD
processes:
• (1) Idea Generation
• (2) Idea Screening
• (3) Concept Development & Concept Testing
• (4) Business Analysis
• (5) Product Development & Product Testing
• (6) Market Testing:
• (7) Commercialisation
Idea Generation
• For example, Pharmaceutical companies may require
about 8000 starting ideas for a successful new
product. Ideas for new products can be obtained
from customers (employing user innovation), the
company's R&D department, competitors, focus
groups, employees, salespeople, corporate spies,
trade shows, or through a policy of Open Innovation.
• 2) Idea Screening:
• When the company collect ideas from different
resources the stage come to screen the entire ideas.
The screening purpose is to drop poor ideas, as soon
it is possible.
• Most companies require new product ideas to be
described on the standard form that can be reviewed
by the standard committee.
 This description states product idea the target
market size, product price, development time and
cost, manufacturing cost and rate of return.
 Under a set of certainty the executive committee
reviews the idea.
 The screeners must ask at least three questions: Will
the customer in the target market benefit from the
product?, Is it technically feasible to manufacture the
product?, Will the product be profitable when
manufactured and delivered to the customer at the
target price?
(3) Concept Development and Testing:
• Develop the marketing and engineering details and
test the concept by asking a sample of prospective
customers what they think of the idea.
(4) Business Analysis:
• After management develops the product concept
and marketing strategy, it can evaluate the proposal’s
business attractiveness.
• Management needs to prepare sales, costs, and
profit projections to determine business objectives.
• To estimate sales, the company might look at sales
history and conduct surveys of market opinion. It
can then estimate minimum and maximum sales to
assess the range of sale.
• After preparing the expected cost and profit for

the product, including marketing R&D
manufacturing accounting, and finance cost .
Estimate likely selling price based upon
competition and customer feedback, estimate
sales volume based upon size of market and
estimate profitability and breakeven point.
(5) Product Development and Testing:
 If the production concept passes the business test,
it moves to R&D or engineering to be developed
into a physical production. This stage is also called
large jump investment.
 The R&D department will develop one or more

physical versions of the product concept. It will be
hopeful to design a prototype that will satisfy
consumers, and can be produced quickly over at
budgeted cost. It may take a week, a month, or a
year. The prototype must have required functional
features, and also convey the intended
psychological characteristics.
(6) Market Testing:
 The satisfaction of the management with

functional and physical performance the
product is ready to dress up with a brand
name and packing and put into market test.
 The cost of marketing test may be enormous,

and take time that may allow competitors to
gain advantages. If management is confident
about new product, then company may do
little or not test marketing.
Company usually select three ways for using

test marketing
Standard Marketing. A company finds a small

number of representative test cities and conduct
marketing campaign and uses different ways
(consumers & distributors surveys etc) to find
the performance of new product.
Controlled Marketing.
• Under this method a research firm manages a
panel of stores that will carry new products
for fee.
• The research firm deliver the product to
specific stores and controls shelf position.
• Sales result can be measured through
electronic scanner at checkout.
Simulated Cost Marketing.
• In this marketing a research firm shows ads
and promotion form a variety of products
including new product promotion. Company
gives some amount to customers and invites
them at selected stores.
• The researchers observe how many
consumers buy new product. Then they ask
the reason of buy or not new product. The
company keeps in touch with customers
through phone and other resources and asks
them about the use and qualities of new
product.
7) Commercialization :
It is the next stage when the company introduce

new product into market. Company will face its
largest costs. In this stage the company must
arrange full scale manufacturing facility. The
company may spend in millions on advertising, sales
promotion of new product in the first year.

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New Product Development Process

• A new product means original products, product

• After preparing the expected cost and profit for

 The R&D department will develop one or more

 The satisfaction of the management with

 The cost of marketing test may be enormous,

Company usually select three ways for using

Standard Marketing. A company finds a small

It is the next stage when the company introduce

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