New Product Development (NPD)

Definition

New-product development (NPD) is the overall process for developing a new product, although the exact stages in this process may vary by company. According to Kotler and Keller, the major steps include the following: [1]

  1. Idea generation – Product ideas are sought from various sources (e.g., R&D, market research, customers).This stage is often called concept generation because the new product is only a concept at this time. [2][3]
  2. Idea screening – Calls for judgments that predict the organization’s ability to make the item and its ability to market the item successfully, culminating in directions to guide technical personnel in their concept developmental efforts. Considerations include strengths versus weaknesses, the company’s mission, market trends, and the product‘s potential return on investment. It often involves use of scoring models, checklists, or personal judgments and is based on information from experience and marketing research. [2][3]
  3. Concept development and testing – The concept is “the underlying idea of a product or “the idea upon which advertising is based.” Concept development (also concept testing or concept evaluation) refers to: [2][3]
    1. The stage in which ideas for new products are developed and evaluated to determine whether an idea is worth further investment. Initially, consumer research for the product idea may be evaluated on the basis of words, pictures, or models if the product does not yet exist in physical form.
    2. A qualitative or quantitative examination of consumer reactions to a proposed advertising idea. The testing of a commercial or advertisement in rough form that measures the viability of the idea or message which will underlie the resulting executions.
  4. Marketing strategy development – Process in which a three-part marketing strategy plan is developed: [1]
    1. Define product position, including target market size, structure, and purchasing behavior. Identify initial sales goals in terms of market share and profits.
    2. Specify year-one price and distribution strategy, and marketing budget.
    3. Describe ongoing marketing mix strategy and future sales and profits.
  5. Business analysis – Management prepares sales, operating cost, and profit projections to determine whether a new product satisfies company objectives. [1]
  6. Product development – The stage involving engineering and design of the physical product (see also R & D). [3]
  7. Market testing – The product (with brand name  and packaging) and marketing program are introduced into more realistic market settings. [1]
  8. Product commercialization – All the activities involved in introducing the product into the marketplace (commercialization),[1] including manufacturing and distribution, as well as promotion. [2]

These stages are roughly sequential, but may in some cases occur simultaneously. Occasionally the term’s meaning is restricted to that part of the process done by technical (e.g., research and development) departments.

New-product development concerns activity within an organization, in contrast to the acquisition of finished new products from outside. [2][3]

References

  1. Kotler, Philip, and Kevin Lane Keller, Marketing Management 12th edition, Pearson/Prentice Hall, 2006, pp 654-655.
  2. American Marketing Association, AMA Dictionary.
  3. Govoni, N.A. Dictionary of Marketing Communications, Sage Publications (2004).

 

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