What are the 9 stages in the new product development process?

Learning Outcomes

• Explain the stages of the new-product development process

There are probably as many varieties of new-product development systems as there are types of companies, but most of them share the same basic steps or stages—they are just executed in different ways. Below, we have divided the process into eight stages, grouped into three phases.  Many of the activities are performed repeatedly throughout the process, but they become more concrete as the product idea is refined and additional data are gathered. For example, at each stage of the process, the product team is asking, “Is this a viable product concept?” but the answers change as the product is refined and more market perspectives can be added to the evaluation.

Stage 1: Generating New Product Ideas

Generating new product ideas is a creative task that requires a particular way of thinking. Coming up with ideas is easy, but generating good ideas is another story. Companies use a range of internal and external sources to identify new product ideas. A SWOT analysis might suggest strengths in existing products that could be the basis for new products or market opportunities. Research might identify market and customer trends. A competitive analysis might expose a hole in the company’s product portfolio. Customer focus groups or the sales team might identify unmet customer needs. Many amazing products are also the result of lucky mistakes—product experiments that don’t meet the intended goal but have an unintended and interesting application. For example, 3M scientist Dr. Spencer Silver invented Post-It Notes in a failed experiment to create a super-strong adhesive.

The key to the idea generation stage is to explore possibilities, knowing that most will not result in products that go to market.

Stage 2: Screening Product Ideas

The second stage of the product development process is idea screening. This is the first of many screening points. At this early stage much is not known about the product and its market opportunity. Still, product ideas that do not meet the organization’s overall objectives should be rejected at this stage. If a poor product idea is allowed to pass the screening stage, it wastes effort and money in later stages until it is abandoned. Even more serious is the possibility of screening out a worthwhile idea and missing a significant market opportunity. For this reason, this early screening stage allows many ideas to move forward that may not eventually go to market.

At this early stage, product ideas may simply be screened through some sort of internal rating process. Employees might rate the product ideas according to a set of criteria, for example; those with low scores are dropped and only the highest ranked products move forward.

Stage 3: Concept Development and Testing

Today, it is increasingly common for companies to run some small concept test in a real marketing setting. The product concept is a synthesis or a description of a product idea that reflects the core element of the proposed product. Marketing tries to have the most accurate and detailed product concept possible in order to get accurate reactions from target buyers. Those reactions can then be used to inform the final product, the marketing mix, and the business analysis.

New tools leveraging technology for product development are available that support the rapid development of prototypes which can be tested with potential buyers. When concept testing can include an actual product prototype, the early test results are much more reliable. Concept testing helps companies avoid investing in bad ideas and at the same time helps them catch and keep outstanding product ideas. 

Stage 4: Business Case Analysis

Before companies make a significant investment in a product’s development, they need to be sure that it will bring a sufficient return.

The company seeks to answer such questions as the following:

1. What is the market opportunity for this product?
2. What are the costs to bring the product to market?
3. What are the costs through the stages of the product life cycle?
4. Where does the product fit in the product portfolio and how will it impact existing product sales?
5. How does this product impact the brand?
6. How does this product impact other corporate objectives such as social responsibility?

The marketing budget and costs are one element of the business analysis, but the full scope of the analysis includes all revenues, costs, and other business impacts of the product.

Stage 5: Technical and Marketing Development

A product that has passed the screening and business analysis stages is ready for technical and marketing development. Technical development processes vary greatly according to the type of product. For a product with a complex manufacturing process, there is a lab phase to create specifications and an equally complex phase to develop the manufacturing process. For a service offering, there may be new processes requiring new employee skills or the delivery of new equipment. These are only two of many possible examples, but in every case the company must define both what the product is and how it will be delivered to many buyers.

While the technical development is under way, the marketing department is testing the early product with target customers to find the best possible marketing mix. Ideally, marketing uses product prototypes or early production models to understand and capture customer responses and to identify how best to present the product to the market. Through this process, product marketing must prepare a complete marketing plan—one that starts with a statement of objectives and ends with a coherent picture of product distribution, promotion, and pricing integrated into a plan of marketing action.

Stage 6: Test Marketing and Validation

Test marketing is the final stage before commercialization; the objective is to test all the variables in the marketing plan including elements of the product. Test marketing represents an actual launching of the total marketing program, done on a limited basis.

Initial product testing and test marketing are not the same. Product testing is totally initiated by the producer: he or she selects the sample of people, provides the consumer with the test product, and offers the consumer some sort of incentive to participate.

Test marketing, on the other hand, is distinguished by the fact that the test group represents the full market, the consumer must make a purchase decision and pay for the product, and the test product must compete with the existing products in the actual marketing environment. For these and other reasons, a market test is an accurate simulation of the broader market and serves as a method for reducing risk. It should enhance the new product’s probability of success and allow for final adjustment in the marketing mix before the product is introduced on a large scale.

Stage 7: Launch

Finally, the product arrives at the commercial launch stage. The marketing mix comes together to introduce the product to the market. This stage marks the beginning of the product life cycle.

Stage 8: Evaluation

The launch does not in any way signal the end of the marketing role for the product. To the contrary, after launch the marketer finally has real market data about how the product performs in the wild, outside the test environment. These market data initiate a new cycle of idea generation about improvements and adjustments that can be made to all elements of the marketing mix.

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To increase your chance of success, start with the following nine steps to take your idea from conception to launch.

1. Discover an Innovative Product (with a Purpose)

New product innovation begins with a problem. What needs are currently unmet in the industry? 

The ensuing idea born from that need can be an invention, or more often, an innovation.

To determine your industry’s greatest needs, consider market research. First examine the most common complaints, questions, and shortcomings of existing products. After aggregating this information and having internal conversations, interview target clients for a new, personalized perspective on their pain points and what existing solutions they’re already using.

From idea inception, your marketing team needs to get you answers to the following questions: 

• Does it solve a need that is important to customers?
• How much are customers willing to pay for a solution?
• Who is the target audience? Is there enough potential volume to justify your investment in design and manufacturing?
• What competitors exist (if any), and how will you make your idea different or better

2. Brainstorm What’s Possible, Then Refine

With the problem clearly defined, what does a unique solution look like? Conduct extensive competitive analysis and intensely assess how a new product or product innovation tops those currently available to the market.

Consider the following, which are fundamental to any product innovation:

• Performance characteristics
• Engineering requirements
• Industry or government regulations
• User safety
• Sustainability
• Cost targets and price points
• Manufacturability
• Comparison to existing solutions

3. Qualify the Refined Idea with Others

Introduce the product innovation to others to test its potential viability and impact. The best way to accomplish this is to produce your minimum viable product. Then start internally with fellow engineers, department heads, and technical or field experts. Eventually you must involve the target customers you already have a relationship with. Don’t forget dealers and distributors if appropriate. 

Throughout the process, polish both the idea and the pitch. Both are fundamental in gaining approval from internal decision makers, and ultimately, buyers. Document the anecdotes from your refining process; this will help with the marketing later on.

4. Design and Engineer a Product Prototype

Prototyping reduces uncertainty and decreases risk at launch. By first discovering customer needs, developing solutions individually, brainstorming with a group, and even bouncing ideas off of others, your concept should be ready for prototyping.

What is the best medium or material for the final product? Which elements are critical to the final product, and what peripheral characteristics are less necessary? Does it have the necessary durability to withstand the elements it will face – vibration, salt, pressure, etc.?

5. Build and Refine a Prototype for Internal Testing

This is where the hands-on work happens. For demonstration purposes, a handmade or 3D-printed physical model may suffice. Other products may require a CAD design or even a working prototype.

Refine the prototype to the point where it is functional and can be tested in-house. Imitate the projected production process as much as possible to catch design flaws or areas to improve the end-user’s experience.

6. External Testing and Refinement (Beta Test) 

As you enter into the launch phase, issue the new product to trusted customers and partners for beta testing. Ask beta testers to submit feedback to ensure the team is including any needed upgrades to the design during the final manufacturing process. 

This model should function as closely to the desired end product as possible. Manufacturing will use this tested prototype as a guide to create working models.

While it may seem overly costly to create workable prototypes, beta testing significantly decreases costs. Rather than producing hundreds or thousands of final products with major flaws, problems can be identified prior to mass production to help your team iterate quickly and cost effectively.

7. Perfect the Design, Then Prepare for Production 

Beta testing results should help you refine a product and determine how to efficiently produce it. Once ready, prepare for production.

Though the potential buyer and end user should be kept in mind throughout the entire innovation process, marketing must become involved and work conjointly with manufacturing to perfect working models that will resonate with the target buyer.

Once the teams agree the product effectively meets potential customer needs, marketing will identify the market and sales forecasts to align production with anticipated final forecasts. 

During this manufacturing planning phase, all aspects of production must be ironed out, including manufacturing suppliers and partners, supply chain, distribution methods, packaging, and staffing.

8. Prep for Production, Anticipate Problems and Related Solutions

Before launching the product to market, consider it from all angles. Tighten up the details, anticipate problems, formulate solutions, and make adjustments beforehand where possible. Give ample attention to the following areas:

• How you’ll set-up and manage all aspects of production.
• What manufacturing partners (if any) you’ve selected to help during production or to drive post-launch success.
• How you’ll work the product into your supply chain after launch.
• How you’ll package the product, both literally from a branding standpoint and figuratively from a marketing and sales perspective.
• What methods you’ll use for distribution.

Finally, have adequate inventory of all sizes and configurations in stock and, if appropriate, on the shelves of distributors or dealers. Don’t make the classic mistake of prematurely launching a product with only a few sizes available.

At this stage, marketing should devise campaigns meant to build product awareness, generate leads and create demand. All product literature, sales collateral, distributor and customer service training, lead generation materials (trade shows, direct marketing, advertising, etc.) must be organized and produced prior to product launch. Be sure to involve your sales team and channel partners in the creation of these materials so they embrace and use them. Inadequate preparation of the sales channels is one of the key causes of a failed product launch.

One of the most exciting, conversation building moments for a company is a product launch. Authentic enthusiasm in the months after a product has been launched is nearly impossible to create.

9. Keep Post-Launch Activities In Mind

Marketing, selling, and customer service is not only the job of customer-facing jobs. When product questions come from the client, all teams (e.g. marketing, sales, customer service, engineering) must unite to provide answers and increase customer satisfaction.

Manufacturing and engineering, in particular, may need to be available to fix issues or respond to concerns from early adopters. 

Depending on your business, the development and launch of a new product may take years. Remove the ego and admit areas for improvement. Is there a consistent question or complaint coming from buyers? How will you improve or evolve the current product to brainstorm next-generation development? Consider how these questions can be addressed in the next iteration of the product.