New product development (NPD) refers to the formal process of developing new products. New product development (NPV) can be seen as an additional stage of the product life cycle which takes place before the introduction stage of the product life cycle.

The new product development (NPD) process can consist of the following phases:

Idea generation – This stage consists of a search for ideas on potential new products from various internal and external sources. Such sources can include looking at which products are offered by competitors, which patents can be utilized, running focus groups with potential customers, recommendations of enterprise’s personnel, trade shows, ideas generated from marketing research and requests or suggestions from customers.

Brainstorming is one of the common tools used for idea generation from creative thinkers. Such individuals may be identified internally within organizations. However, in some cases, external individuals such as experts in the field may be invited to participate in the brainstorming session. Brainstorming usually leads to one idea being the trigger for another idea and so forth. This way, a large pool of diverse and often “outside the box” ideas can be generated during the session.

Idea evaluation – Once a good pool of ideas is developed, the critical evaluation of ideas should be undertaken to determine its potential and prospective profitability. This will allow elimination of unsound and unprofitable ideas. If a large pool of ideas was generated during the idea generation phase than screening of ideas may be done in rounds with successive elimination of ideas by using more and more sophisticated techniques until only the list of most promising ideas is generated.

Development and testing of the concept occurs in this stage which involves further screening of the most promising ideas. Focus groups are often used to obtain feedback from potential customers to estimate customers’ tastes, potential demand, frequency of purchases and pricing.

Then a business analysis is conducted to evaluate the two or three most promising ideas. Business analysis consists of market research to further screen ideas with regard to financial considerations. Estimations of forecasted demand, production costs, marketing costs, sales and profitability are undertaken.

Development of the product – This phase includes actual design and development of the products. This phase may involve developing the actual prototype of the product, development of the marketing plan and packaging for the new product. At this stage focus groups are often used to obtain feedback from the potential customers. If results from the feedback are unsatisfactory, then adjustments can be made to the marketing mix to ensure more encouraging market acceptance of the product.

Testing of the product – After the product is successfully developed, it should be tested. Besides testing the new product to ensure it is functional, some testing should also be undertaken to research the probable reaction of the market. Sometimes a product is launched on the small scale, for example only in one city, before it is launched on a larger scale such as nationally or internationally.

Commercialization – This stage coincides with introductory stage of the product life cycle and includes the actual introduction of the product to the market on a large scale.

After the five steps of the New product development (NPD) process is completed and the product is successfully commercialized, companies need to monitor the products performance and adjust it to potential changes in the market such as changes in consumer tastes, new and more advanced alternatives introduced to the market which may make product obsolete, technological developments which allow for significant enhancements of the product’s functionality, new domestic and foreign competitors and domestic and global economic conditions.

Sometimes the new product development (NPD) process is presented in 7 steps where the idea evaluation phase is split into 3 steps namely screening, development and testing of the concept and business analysis which we grouped under one heading of idea evaluation.

Developing a total product offering

After product is developed, other components of the total product offering should be developed before the product will be ready to be introduced to the market. Other components of the total product offering may include branding, packaging, labelling and warranty.

Branding

According to the American Marketing Association (AMA), a brand is a “name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers”. Therefore, branding is a way that allows for products or services of an enterprise to be identified by customers.

Brand identity consists of the brand name, brand image and brand mark.