Image Alt Text

8 Stages of New Product Development Process

Try QuickBooks Invoicing & Accounting Software – 30 Days Free Trial.

‘Innovate or Die’ is a rule creative minds swear by when it comes to the game of business. You break the rule and you are out of business with time.

Just the way Kodak did, if you go back in time in 1970s. Steve Sasson, an engineer with Kodak, invented the digital camera. The company couldn’t take advantage despite being the first mover. This was simply because it feared that the disruptive digital technology might push the film into decline phase of product life cycle before time.

Hence, Kodak was forced to file for bankruptcy in 2012. This was because the company missed the digital trend although it once ruled the world of photography.

What needs to be understood here is that new product development is the life blood of every organization. Every product will go through various stages of its lifecycle, from birth to decline. Since the demise of a product is inevitable, companies must be good at developing new products in order to grow and stay competitive.

But having said that, product development ain’t an easy thing. It’s risky and expensive. According to a Harvard Business School professor, 30,000 new products are introduced each year and 95% fail. Why do so many new products fail? Well, there are a number of reasons behind the failure. These could include higher development costs, poorly designed product, overestimation of market size etc.

The failure of Samsung Galaxy Note 7 is one of the recent examples of improper product development. The burning batteries cost the consumer electronic giant $14.3 billion in losses in 2016.

Therefore, you must set up a proper customer driven new product development process in order to develop and grow new products.

Here are eight major steps you must follow to undertake a new product development.

1. Get an Idea

This is the backbone of your new product development process. If you have a great idea, chances of failure reduce manifold. But the big question is, how to get ideas for your next product?

Well, companies have developed proper programs to develop new product ideas. Take for example Google. It has a policy called ‘the 20 percent time’. All the big league Google products that you can think of – Google mail, search engine, AdSense, Youtube are all the outcome of this 20 percent time rule. According to this rule, Google allows all its employees to give 20% of their working hours to side projects.

Another great place to start finding ideas for your new product are your customers. Listen to customer complaints and analyse their pain areas for turning customer complaints into next big idea. You need to understand that if your product idea isn’t solving a need, it isn’t going to become big.

However, in case of technical products, your customers too might not know what they want. In fact, giving them what they want might just not be enough. Customers want something that stretches their need and is better than what they had thought.

2. Screen your New Product Ideas

Where idea generation stage is all about adding to your pool of ideas, idea screening is all about reducing the number of ideas. In this stage, you filter good ideas from the bad ones and go ahead with only the ones that you think can really create value for your customers, give you a competitive advantage and generate higher returns.

You may wonder why having a proper screening of your new product ideas is necessary? This is simply because product development involves cost which increases with each product development stage. Hence, going ahead with a large number of ideas might not be feasible.

You can start off with documenting all your new product ideas describing

  • the product or the service
  • target market you wish to cater
  • existing players
  • a rough estimate of the market size
  • product or service cost
  • time and cost of development
  • cost of manufacturing
  • rate of return

After describing the product ideas in detail, you can choose the criteria for filtering the best ideas from the list. Criteria could include

  • target market need
  • customer expectations
  • affordability considering the available resources and the expected
  • research and development costs
  • Technical feasibility of the idea
  • Expected return on investment
  • products of your existing customers

3. Develop and Test Your Product Concept

Product Concept Development

Now that you have the profitable product idea that you want to go ahead with, the next step is to develop the product concepts and test the same. So what comes under product concept? Product concepts are in depth narratives of your product ideas that describe the functional value and usability of your products and the customer demographics to whom these would be targeted.

These concept statements are basically your vision of the product – what you want to achieve in terms of product together with your design team. These include the product functionalities, potential problems it can solve and also takes into consideration the customers to whom the product/service would be sold.

Introducing Roasted Beans Coffee Maker

Say Roasted Beans has developed an affordable coffee maker that produces multiple coffee flavors with low acidity and bitterness simply with a twist. It’s fast brewing process can create an amazing cup of coffee in less than 30 seconds.

It’s durable and can last for years, even if you use it multiple times each day. It’s got an amazing finish, is extremely easy to use and clean. Not only that, it’s lightweight, compact design and storage compartment allows you take it along with you anywhere.

Further, Roast Beans’ coffee maker produces a super clean coffee concentrate with zero sediment in the bottom of your cup. It comes with accessories such as 100 filter papers and a coffee mug. All equipped, this instant coffee maker is priced at Rs. 3500.

Now, as a marketer, your task is to create multiple product concepts of the above product idea and test the same with the customers. Further, choose the one that best resonates with your customers.

Product Concept 1: An affordably priced, versatile coffee maker that produces smooth, clean coffee that suits almost all coffee lovers tastes.

Product Concept 2: A reasonably priced, compact coffee maker that allows for multiple brews for those who want to take their coffee on travels

Product Concept 3: A coffee maker with accessories for true coffee lovers who want their favorite brew to be done the best way instantly with zero sediment in the cup.

Product Concept 4: An affordable coffee maker for those who love to have their coffee instantly but resent excessive cleaning.

Product Concept Testing

Now that you have different product concepts, it’s time to test these with a group of your target customers. You can present these different product concepts to them and see which one has the highest appeal.

After the customers are exposed to the product concepts, they can be asked certain questions. These questions would help you to zero down on the product concept that works the best with your customers.

  • How is the whole idea of such a coffee maker?
  • Do you believe in the claims about the functionality of the coffee maker?
  • In what aspects is the coffee maker better than others in the market?
  • What are the set of improvements that you suggest?
  • What would be a good price for the coffee maker?
  • Would you buy such a coffee maker?

4. Product Concept Testing

Say the product concept testing phase gave you clarity that Product Concept 3 gets the maximum resonation.

Let’s see once again what the Product Concept 3 says. It says, ‘A coffee maker with accessories for true coffee lovers who want their favorite brew to be done the best way instantly with zero sediment in the cup’.

You can further elaborate on this and include other information such as price, accessories and other features that define the coffee maker. Based on this elaborate product concept, you can now devise an initial marketing strategy that will help you to know how to get your product into the market.

So what should your marketing strategy include?

Well, here are some of the major things that should form part of your marketing strategy:

  1. Target Audience
  2. Differentiation
  3. Market Positioning
  4. Targeted Sales, profit and market share for the initial years
  5. Estimated Price for the first year
  6. Marketing Budget for the first year
  7. Long term estimated sales, market share and return figures

Let’s see how Roasted Beans’ market strategy would look like.

Target Market

The target market for Roasted Beans coffee maker includes

  • high income, Generation Y ( born between 1977 – 2000) in the age group of 25 – 40 years and
  • people of Generation Y in the age group of 18 – 24 years who belong to rich families. These are true coffee fans seeking their favorite brew done the best way and that too instantly.


The coffee maker’s twist brewing technique makes for an overwhelming smooth and clean coffee in less than 30 seconds.

Market Positioning

A compact, versatile coffee maker for coffee lovers who seek their favorite brew the best way – smooth and clean – and instantly.

Targeted Sales, Profit and Market Share for the Initial Years

Roasted Beans plans to sell 20,000 coffee makers in the first year at a loss not more than Rs. 10,00,000. However, it plans to sell 25000 cars in the second year at a profit of Rs. 3.75 Crores.

Estimated Price for the First Year

The company plans to sell the coffee maker at Rs. 3,500 in year 1.

Marketing Budget for the First Year

Roasted Beans has a marketing budget of Rs. 70,00,000 which would include expenditure on print and TV advertisement. It plans to spend another Rs. 20,00,000 on research and development to find out as to who is buying the coffee maker.

Long Term Estimated Sales, Market Share and Return Figuresh3>

The company wants to grab a market share of 4% in the long run. Also, the company intends to earn an ROI of 20% in the long run.

5. Overall Business Analysis

Once you have the product concept and the market strategy ready, the next step is to make sales, costs and profit projections or forecasts. This should be undertaken to understand how attractive the project is.

For making sales projections, you can consider the sales figures of players making similar products in the market. This helps you to understand how many product pieces you need to sell to break-even or generate profits. It also helps you to know that if the company is not able to sell as many as the break even units, what is the maximum in terms of losses that it can incur. After making the sales projections, you can see the estimate the cost which could include research and development, manufacturing, finance, marketing etc. Thus, considering the estimated sales and costs, you can understand how financially sound your project is so that you can go ahead with its production.

6. Product Development

Until now, the product has been on paper either in the form of a detailed description or some drawings. In this stage, you actually turn your product idea into a reality. Here you develop prototypes, which are different versions of your product idea.

Developing and testing different physical versions of your product gives you an understanding as to what version would excite the customers the most. Coming out with a product prototype can take days, weeks, months and even years depending on the type of product.

After having the prototype, you need to put it through a testing phase to check for its durability, safety and effectiveness. You can either choose to have a testing set up in house. Or you can simply outsource the same if in – house testing is something that’s not feasible.

7. Test Marketing

After your product idea passes the product concept and prototype phase, the next step is to test market the same. This is the phase where you bring your product prototype and marketing program into the real life market set up.

How does getting the prototype and its marketing plan into realistic market setting help? Well, as a marketer you get the experience of marketing the product before spending huge amount on its full and final launch.

It lets you test the product and its complete marketing plan – from its target market, positioning, marketing budget to pricing, branding, advertising and distribution. However, test marketing can be a costly affair. There are times when organizations are confident about the product they are planning to launch. In those cases, companies prefer to skip the test marketing phase.

8. Product Launch

This is the stage where you finally introduce the product into the market. Now, launching the product may involve huge amount of investment in advertising, promotion and other marketing efforts. Also, while launching the product, you need to consider following two things:

  • when to launch the product and
  • where to launch the product

Let’s consider the Roasted Beans Coffee Maker here. If the company comes to know in the test marketing phase that it further needs to make improvements in its coffee maker, it can postpone the launch of its coffee maker.

Similarly, at the time of launch, Roasted Beans needs to decide the regions, states or countries where it has to launch its coffee maker.

Needless to say, new product development needs proper product planning to roll out a new product successfully. Therefore, follow this process to launch your upcoming product.

8 Stages of New Product Development Process