Principles of Marketing

Assignment on
New Product Development Process

New product development is a process of bringing a new product to the

market. It can be defined as the development of original products, product
improvements, product modifications, and new brands through the firm’s
own product development efforts.

Every product seems to go through a life cycle and eventually the products
get mature and fade away. So, a company needs new products to replace
the older ones. It is important for both customers and the marketers.

A firm can obtain new products in two ways. They are-

1. Through acquisition; by buying a whole new company, a patent or
a license to produce someone else’s product.
2. Through the firm’s own new product development efforts.

So, it is necessary to develop new products for a company’s prosperity.

If a company wants to develop a new product,it has to go through the new
product development process.

This process involves eight steps.They are given below -

1. Idea generation
2. Idea Screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization

These are the process which help to produce a new product and affects the
company as well as the consumers

Idea Generation
The first step of new product development process is idea generation. It is
the process of systematic search for the new product ideas.
For developing new product successfully,a company's employees have to
sit down in a group or individually and brainstorm. Through the thinking
process, one can come up with new ways of serving people in a better
way.

The major sources of new product ideas include:

1. Internal Idea Sources: Research and development(R&D)
2. External Idea Sources: Customers,
Competitors
Distributors
Suppliers
Internal idea sources :
Internal idea sources include research and development(R&D). Besides, it
inspires a company to pick the brains of its own people from executives to
salesperson to scientists, engineers and manufacturing staff.

External idea sources:

External sources involve customers, competitors, distributors and suppliers.
Customers are the most important source of ideas or producing a better
product. Competitors are another important source. If a company gets the
clues about competitors’ product and can figure out their weak points, the
company can produce a better product. Distributors and suppliers are close
to the market. So, they can pass information about the consumers’
problems and new product possibilities.
By the help of these sources, a company can go a long way coming up with
new ideas.

So it is necessary to give emphasis on both the internal and external

sources of ideas to get innovative ideas for producing a new product.On
this step a company gets so many ideas for preceding towards the next
step of new product development process.
 Idea Screening

After generation of ideas, the next step of new product development is

idea screening.

Idea screening is the process which helps to spot good ideas and drop poor
ones as soon as possible.

When a company goes through the idea generation step, it creates a large
number of ideas in which all ideas are not that much effective or profit
gaining. So, the company must have to reduce the poor ideas so that it can
easily go through the process of new product development. So, the idea
screening process reduce the number of ideas holding the best ones only.
This process ultimately reduces the effort of employees as they don't have
to work with lots of ideas on later steps. It saves time, workload and helps
to get rid of unproductive ideas.
After getting only effective and profitable ideas on idea screening step,
company gets to the next step of new product development process.
 Concept Development and Testing

On this step an attractive idea must be developed into a product concept.

A product concept is a detailed version of the idea stated in meaningful
consumer terms.
Concept development involves coming up with a detailed description of an
idea, explained from the perspective of the customers.
When a company interact with the customers, it can get to know about the
customer's perspectives. Knowing the perspectives of the customers,
company can describe their idea in detail. This detailed form of idea
includes the customer's thinking, their likings, their point of view.
Thus, a company develops the concept of a product.

After development of the concept of a product, concept testing comes on

account.
Concept testing indicates testing new product concepts with a group of
target consumers to find out if the concepts have strong consumer appeal.
The concept may be presented to consumers symbolically or physically.
Many firms routinely test new product concepts with consumers before
attempting to turn them into actual new products.
Business tries to know what the customer feels of the concept.That's why
concept testing occurs. By testing the concept, a company gets to know
whether the customer's response is in a positive manner or not.

So, on this way a concept is developed from an idea nd after development

it gets through testing. After concept development and testing, the process
proceeds further.
 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.

So, marketing strategy development indicates designing an initial

marketing strategy for a new product based on the concept.

For designing a marketing strategy 4Ps come into account. It indicates

product, price, place, promotion. These are noticed while designing a
marketing strategy which will work profitably. Moreover, STPs also involved
in this strategy. It refers to segmentation, targeting and positioning.
Considering these parts, a company designs a better marketing strategy.

The marketing strategy statement consists of three parts.

1. A description of the target market, the planned value proposition,

and the sales, market share and profit goals for the first few
years.
2. An outline of the product’s planned price, distribution and
marketing budget for the first year.
3. The planned long-term sales, profit goals and the marketing mix
strategy.

By developing a marketing strategy, a company widen the way of

successful marketing of the new product. It helps to plan about the overall
marketing. After developing marketing strategy the process goes on the
next step.
 Business Analysis

A new product idea that survives from the screening stage of new product
development process requires a more sophisticated and detailed business
analysis.
A good business analysis refers to the review of the sales, costs, and profit
projections for a new product to find out whether they satisfy the
company’s objectives. By satisfying company’s objectives the product can
move to the product development stage.

For business analysis, a company has to estimate product price, identify

product’s market potential, forecast sales volume. Identify break-even
point, and determine minimum sale price.

Estimating Product Price: A company reviews their market and

competitor research and customers’ feedback to determine the selling price
of the product, and the profit they are likely to make.
Identifying Product’s Market Potential: A company identifies their
product’s market potential by reviewing market research and sale
performance of existing products and by using recent sales figures and
industry sales figures.
Forecasting Sales Volume: Anticipating, based on research into
customer needs, the size of existing customer base and market a company
forecasts their sales volume.
Identifying Break-even Point: A company identifies their break-even
point by estimating the profitability of the product, and determines the
amount of product they need to sell to cover their fixed costs (such as rent,
electricity and wages.
Determining Minimum Sale Price: A company determines lowest sale
price of the product by projecting returns based on their anticipated
discounted product price.

Thus the business is analysed. After this analysing step the new product
goes on next step.
 Product Development

The product development process comes after business analysis process. If

the product concept passes the business test, it moves into product
development. Once all the strategies are approved, the product concept is
transformed into an actual tangible product. This development stage of
New Product Development results in building up of a prototype or a limited
production model. All the branding and other strategies decided previously
are tested and applied in this stage.

Research and development (R&D) department develops and test one or

more physical versions of the product concept. R&D tries to a prototype
that will satisfy and excite consumers and that can be produced quickly
and at budgeted costs.

Sometimes, products have to go through various processes to make sure

that they perform safely and effectively, or that consumers find value in
them.

Often, company involves actual customers in product development and

testing.
 Test Marketing

After product development process, comes the test marketing process. It is

the stage of new product development in which the product and its
proposed marketing program are tested in realistic market setting. Test
marketing gives the company experience with marketing the product
before going to the great expense of full introduction. It lets the company
test the product and its entire marketing program- targeting and
positioning strategy, advertising distribution, pricing, branding and
packaging, and budget levels.

The amount of test marketing needed varies with each new product. When
introducing a new product requires a big investment, when the risks are
high, or when management is not sure of the product or its marketing
program, a company may do a lot of test marketing.

However, test marketing costs can be high, and testing takes times that
may allow market opportunities to slip by or competitors to gain
advantages. A company may do little or no test marketing when the costs
of developing and introducing a new product are low, or when
management is already confident about the new product.

Test marketing process is required to validate the whole concept and is

used for further refinement of all elements, from product to marketing
message.
 Commercialization

Commercialization is the last step of the new product development process.

It is the process or cycle of introducing a new product or production
method into the market. The actual launch of a new product is the
final stage of new product development, and the one where the most
money will have to be spent for advertising, sales promotion, and other
marketing efforts.

Test marketing gives management the information needed to make a final

decision about whether to launch the new product. If the company goes
ahead with commercialization, introducing the new product into the market
It will face high costs.

A company launching a new product must first decide on introduction

timing. If the new product will get into the sales of other company
products, the introduction may be delayed. If the product can be improved
further, or if the economy is down, the company may wait until the
following year to launch it.

Altogether, it can be defined as the main part of product development

process. Because if the new product is not commercialized, it won't gain
any profit, won't be a familiar figure to the market. So this step is very
important for producing a new product.
This is the final step of the process. Going through this step, the new
product development process completes.
So, it can be said that, every step of the new product development process
holds different importance for the product. This process starts with
generating ideas and comes to an end with commercializing the product.
By the eight steps, the product gets contained to perform in the market. So
it is the effective process to introduce a new product to the market.