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New Product Development


Improving and updating products is an ongoing task as consumer "needs and wants" continuously change. A failure to develop products could result in a reduction in sales if consumers decide to buy competitor products. Learn More about the reasons why firms should develop new products. The eight stages of new product development are captured in the diagram below.

New Product Development Diagram

Stage 1: Idea Generation

New product ideas have to come from somewhere. But where do organisations get their ideas for NPD? Sources include:

Stage 2: Idea Screening

This process involves shifting through the ideas generated above and selecting ones which are feasible and practical to develop. Pursing impractical ideas is expensive and a waste of resources.

Stage 3: Concept Development and Testing

The organisation may have come across what they believe to be a feasible idea, however, the idea needs to be taken to the target audience. What do they think about the idea? Will it offer the benefit that the organisation hopes it will? or have they overlooked certain issues? Will there be a demand for the product? Note the idea taken to the target audience is not a working prototype at this stage, it is just a concept.

Stage 4: Marketing Strategy and Development

How will the product/service idea be launched within the market? A proposed marketing strategy will be written laying out the marketing mix strategy of the product, the segmentation, targeting and positioning strategy and expected sales and profits.

Stage 5: Business Analysis

The company has a great idea, the marketing strategy seems feasible, but will the product be financially worth while in the long run? The business analysis stage looks more deeply into the Cashflow the product could generate, what the cost will be, likely market share and the expected life of the product.

Stage 6: Product Development

At this stage the prototype is produced. The prototype will undergo a serious tests, and will be presented to a selection of people made up of the the target market segment to see if changes need to be made.

Stage 7: Test Marketing

Test marketing means testing the product within a specific geographic area. The product will be launched within a particular region so the marketing mix strategy can be monitored and if needed modified before national launch.

Stage 8: Commercialisation

If test marketing is successful the product is ready for national launch. The following decisions regarding the launch need to be made


The eight stages of product development may seem like a long process but they are designed to save wasted time and resources. New product development ideas and prototypes are tested to ensure that the new product will meet target market needs and wants. There is a test launch during the test marketing stage as a full market launch is expensive. Finally the commercialisation stage is carefully planned to maximise product success, a poor launch will affect product sales and could even affect the reputation and image of the new product.

New Product Development Lesson | Related Article - Why Develop New Products?


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