Stages of new product development, and the most critical stage

Stages in the new product development process

New product development covers everything new a firm brings out on its own: a product never made before, an improved or changed version of an existing one, or a new brand. Because most new ideas fail, firms follow an orderly process.

1. Idea generation. The systematic search for new ideas: from research and development, employees, sales staff, customers, dealers, suppliers, competitors and online communities. Many ideas are needed to find a few good ones.
2. Idea screening. Ideas are evaluated against the firm's objectives, resources and markets, and poor ones are dropped. Criteria include market size, fit with the firm's strengths, technical feasibility, cost and likely profit.
3. Concept development and testing. An attractive idea is developed into alternative product concepts, detailed versions stated in consumer terms, which are tested with target consumers for appeal, understanding and buying intention.
4. Marketing strategy development. An initial plan is set: target market, positioning, sales, share and profit goals, planned price, distribution and marketing budget, and long-run goals.
5. Business analysis. Projected sales, costs and profits are reviewed to check whether the product meets the firm's objectives.
6. Product development. The concept is turned into a working prototype, which is tested for function, safety and consumer acceptance. Investment rises sharply here.
7. Test marketing. The product and its marketing programme are tried out in realistic but limited market settings to learn about buyers' and dealers' responses before full launch.
8. Commercialisation. The product is introduced to the full market, with decisions on timing, geographic roll-out, target groups and the launch programme.

The most critical stage, and why

Every stage matters, but idea screening is the most critical.

1. Cost of errors grows rapidly. After screening, every later stage, concept testing, development, test marketing and launch, costs much more. Dropping a poor idea at screening saves large sums.
2. Two errors are possible. In Kotler's terms, a drop error rejects an idea that would have succeeded; a go error lets a poor idea go forward. Screening is where both must be guarded against with clear criteria.
3. It shapes everything after it. The ideas that pass screening absorb the firm's research, production and marketing resources for months or years.
4. Many failures trace back to it. Products that fail often had no real customer benefit or did not fit the firm's strengths: weaknesses that sound screening would have exposed.

(Some argue that commercialisation is most critical because launch spending is largest; but by then the outcome depends heavily on whether the right idea was chosen at screening.)

Conclusion

The new product development process reduces the risk of failure by testing an idea step by step. Idea screening is the most critical stage because it is the cheapest point at which to stop a poor idea and the gateway through which every later investment passes.