Note on New product Development and its process

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New Product Development (NPD)

Due to the rapid changes in taste, competition, and technology, existing products are not sufficient to sustain growth or to maintain profitability for the organizations. Company needs a flow of new products for keeping their portfolio fresh, their consumers interested and their sales growing. New Product Development (NPD) is one o f the major key for the organization to maintain its flow and sustain in the market.

There are four categories of new product and they are given below:

Major innovations.

Product improvements.

Product additions.

Repositioned products.

Major innovations present radically new user benefits for the customers, often through the development of technologies. Compact discs (CD), Microwave Ovens, Home video recorder, mobile telephones are all examples of new products that are created. One major problem in this category of product is that potential buyer may be skeptical about its usefulness and reliability. The firm must be able to tackle the problem of convincing consumers, they actually need the product, especially if they have existed quite happily without it. Despite marketing problems and the risks associated with this category, the organization’s pioneering success can enhance its goodwill among customers, potential investors, shareholders, and employees.

Product improvements are innovations within present markets which are aimed at taking market share from the competitors rather than building extensive new primary demand. This technique is popular among manufacturer of the detergent, who frequently use the adage of ‘new, improved formula’ to retain the existing customers and lure those of competitors. It is also used in the crisps snacks market, e.g. Quaker Oats introduced corn snacks and Snack-a-Jacks rice ‘with 10 percent less fat’ and ‘suitable for coeliacs’ (an allergic condition associated with wheat and related products).

Product additions cover imitative products which are usually based on the competitor’s approach and technology. Product additions might offer new product features to the market, but offer less new benefits to customers. This approach is popular among smaller firms that prefer to enter the market with cheaper imitations after their larger competitors have invested the resources and time with the initial launch. Sony discovered this to its cost when it invested considerable resources into the research, development and launch of the Walkman, only to be faced with stiff competition from a wide range of imitative products. Newcomers who tendto enter the market with product improvements or product addition must overcome the difficulty of gaining distribution in an established market which is dominated by competitors who will use marketing counter-measures in order to prevent the successful entry of a new product.

Repositioned products are usually thought of as product adaptations rather than the new products. Instead of offering features which are tangibly different, they establish a new image for the product through a change of promotional emphasis. The manufacturer of Lucozadeused uses this technique when it changed the image of Lucozade as a drink for convalescents to energy-boosting drink for sports enthusiasts.

New Product Development (NPD) Process

1.Idea Generation
2.Idea screening
3.Concept testing
4.Business analysis
5.Product development
6.Test marketing
8.Monitoring and evaluation

NPD process
NPD process




Idea Generation

A company must be able to generate various ideas in order to find a few good ones. Sources which can supply the flow of ideas include customers, employees, competitors, distributors, suppliers and others. Most of the new ideas originate from employees. While ideas can come from all parts of the company, those employees who are involved in making the products and selling them to customers, like as Research & Development (R&D), Production and marketing staff are more valuable, as they are knowledgeable of the technology and the needs of the market. Some large companies like 3M, Toyota and M&S have tapped this potential to great effect. For example, Toyota receives over 2m ideas a year from different employees and also claims to implement about 85 percent of them. In order to use this source of information to maximum potential, senior management should generate a culture in which employees are motivated to put forward ideas. Many firms do this by setting targets for each department, e.g. seven ideas per employee, and provide rewards for ideas that are implemented. There are various creativity techniques which have been developed by psychologists and marketing researchers to help groups and individuals to generate creative ideas. Among the more popular methods are brainstorming, morphological analysis and forced relationships.

Idea screening

Idea Screening is simply the process of comparing and contrasting new product-related ideas to select the most promising ones for the company. At some point, it is required to reduce the number of ideas. Not all the ideas are relevant for your organization. To be able to screen the good from bad, all ideas need to be evaluated on the basis of some criteria, like the strategic fit, technical difficulties, and market opportunities.

The second stage involves scanning ideas in order to eliminate those ideas which are unlikely to prove successful or appropriate. Potential success depends on the three factors: namely, the idea’s compatibility with the organization’s corporate strategy, the potential demand for the product and the organization’ capability to exploit the product opportunity. Many organizations use a semi-formal weighting method in order to establish the relative importance of screening criteria. 

Concept Testing

Ideas which make it pass the screening stage need to be tested out on their potential market. This can only be achieved if the products features and benefits could be explained to potential customers. It is essential to distinguish between a product idea and its positioning concept. The product idea is the new physical good or functional service which is being considered by the organizations. 

Business Analysis

The fourth stage of NPD requires the product concept to be specified in greater detail so that production, marketing and finance projections can be made. A marketing assessment will be the starting point. This will include:

-Description of target markets.
-Forecast of sales volume.
-Indication of product positioning.
-Judgement of likely competitor reactions.
-Calculation of potential sales losses from existing products as customers switched to the new product (known as cannibalization).
-Specification of the new product features, including quality levels.
-Assessment of achievable price levels.
-The distribution strategy.
-Statement of promotional requirements.

Product Development

In this stage, the engineering or Research and Development department develops the product concept into a physical product. So far the product has only existed in the form of a word description, a drawing or a crude mock-up. A large amount of investment is required in order to ascertain whether the idea could be turned into a workable product. The length of this stage varies on the basis of the degree of innovation required and the complexity of the product. The process will be more straightforward if the known technology is used for the product. For example, a firm launching a new shape of potato crisp will face more problems in creating a successful brand image and maintaining the consistent quality than in developing the production process. This stage needs close co-operation between the different functional areas of the organization. The development experts will lead the design of the product; manufacturing will seek to achieve low-cost production; marketing and distribution will aim to achieve the correct marketing mix, sales and logistics. Tests with potential consumers may evaluate functional performance, safety, efficiency and apparent benefit. For consumer goods, pack tests must check ease of use, performance and product image. Research should be conducted in order to test advertising effectiveness as well as consumer attitudes towards projected pricing levels.

Test Marketing

This test marketing stage provides information on the prospect of the target market buying the product, trade response to the product and product performance compared with the competition. This information enables the organization to modify the product where necessary.It must correspond, as far as possible, to a scaled-down version of an intended national market, in terms of media availability, distribution structure, competitor activity and the target market profile.However, there are certain disadvantages with test markets. They may take up to three years to complete, at the end of which the firm may lose large sums of money if it is unsuccessful. Test markets provide marketers and competitors with a chance to study the new product and even to launch a retaliatory product before the new product is launched . For example, prior to its launch in the UK, Carnation Coffee-Mate, a coffee whitener, was test-marketed over a period of six years. This gave the competitors firm , Cadbury,ample warning and also the opportunity to develop and introduce its own product. Competitors can cause further disruptions in the test market by reducing their prices in test cities, enhancing their promotion and buying the product being tested. They are likely to use their best sales forces, which may bias sales results, making them poor predictors of likely total market sales.



Assuming that no significant changes are essential for the product, once the test-marketing results have been analysed, the product is ready to be launched into the market. There are two alternatives:

– An immediate national launch can be applied if the firm has sufficient resources. This allows the advertising campaign to achieve optimum impact and could prevent competitors from disrupting the launch with rival products or publicity campaigns. The risk of a national campaign is that some company experience teething problems, in case if they have failed to invest sufficient time and resources in ensuring that their production, quality and supply systems are running at maximum efficiency.

– A rolling launch is the another alternative to the national launch. Few organization has the confidence, capital and capacity to launch new products into full national or international level. This technique is popular among small organization that prefer to select an attractive city and conduct a campaign to enter the market. They may then enter other cities one at a time.



After the product is being launched it is necessary to evaluate the process of the launch and the performance of the product after the launch. When reviewing the process the organization will have to address questions such as:

Was the correct person involved in the launch?

Was sufficient time and resources were allocated to the launch?

Was the marketing research information adequate for the launch?

The answer to these questions will help the company improve future NPD initiatives. Before the product launch takes place the organization will set performance standards such as sales targets, market share relative to competition and promotion objectives. By setting such standard, the company could measure the actual product performance. Any mismatch between the two needs should be analysed in order to determine whether it was caused by poor decision making, lack of information or unforeseen market conditions.





  • Due to the rapid changes in taste, competition, and technology, existing products are not sufficient to sustain growth or to maintain profitability for the organizations.
  • New Product Development (NPD) is one of the major keys to the organization to maintain its flow and sustain in the market.
  • A company must able to generate various ideas in order to find a few good ones.
  • Idea Screening is simply the process of comparing and contrasting new product-related ideas to select the most promising ones for the company.



Very Short Questions



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