In this lesson, you will learn the six stages of the new product development process that companies use when they develop new consumer products. You’ll also learn why it is important for companies that develop new consumer products to use this process.
It Starts with a Consumer Need
Vince the Vampire has a problem. After years of delivering pizza at night, he has just started his new day job delivering flowers. Like all vampires, Vince is very sensitive to sunlight and is having trouble reading the delivery addresses in the bright sun. Vince has tried everything to shield his eyes from the glare of the sun. His latest solution is to wear two pair of sunglasses, which eliminates the glare but has its drawbacks.
New Product Development Process
As luck would have it, one day Vince runs into the president of Cool Dude Shades. Vince explains the situation to him, and the president says he will try to help him with his problem.
All new consumer products start with a consumer need. In order for a new product to be introduced into the marketplace, it must first successfully pass through a six-stage process known as the new product development process. This is a six-stage process in which potential new products are evaluated. This process involves people from many different departments of the company that develop the new product. The potential new product can be terminated at any of these six stages if the introducing company finds that developing the new product is likely to be an unprofitable venture. The six stages of the product development process are…
Creating the New Product
Idea generation stage – This is when the creation of new product ideas takes place. This is the first stage of the new product development process. Once the consumer need has been identified, company scientists look for a solution that will solve this consumer problem. The president of Cool Dude Shades explains the problem to his research team: Vampires who must be out in the sunlight need a very strong sunshade to protect their sensitive eyes. After much trial and error, the scientists develop three possible solutions to this consumer problem: sunglasses with very dark lenses, a hat with an oversize brim, and a goggle with a dark mesh lens.
Next, the process moves to the idea screening stage, or the analysis of new product ideas. In this stage of the new product development process, marketers decide which ideas to develop further and which ideas to reject. Marketers also research products currently available in the marketplace that attempt to solve the same consumer problem. The executives at Cool Dude Shades find that no companies are currently marketing a sun shade for vampires. They eliminate the hat, which is out of the scope of their current production capabilities, but continue to consider the dark glass lens and the mesh lens as solutions to this consumer problem.
Once the company thinks they have some quality new product concepts, the concept development stage begins. This is when the company beings the testing of the new product ideas. In this stage, the potential products that remain are further developed and shown to potential consumers. The marketers at Cool Dude Shades show the two possible solutions to a test panel of vampires. The test panel finds that the dark glass lenses are effective at blocking the sunlight but are too difficult to see through. The goggles with the mesh lenses do an excellent job of blocking sunlight and allow for great visibility. The test panel of vampires seems genuinely excited about this potential new product.
Selling the New Product
Now, Cool Dude Shades moves into the market strategy stage. This is the stage when the company begins marketing the new product concept. Marketers identify their target market and determine the best way to promote their new product to this target market. The marketers determine how to effectively use each of the four ‘Ps’ of marketing: product, price, place, and promotion. The marketers at Cool Dude Shades learn that vampires like to wear the latest fashions and decide to run a full-page print ad in a variety of fashion magazines to introduce their new goggles. They determine the price for their new product and decide to sell them through their existing sunglasses retailers.
If the company believes they have a product that meets the needs of their target market, they begin the product development stage. This is the stage where creating the new product concept happens. At this stage of the process, the new product is given a brand name and packaging is created. The new product is test-marketed in certain areas to gauge its acceptance by the target market. The marketers at Cool Dude Shades decide on a name for their new product – ‘Goth Goggles.’ They create a flexible case for the Goth Goggles and decide to test-market them in three cities in Arizona (where many vampires live and it is sunny most of the time).
After test-marketing the new product, introduction of the new product to the market happens during the product launch stage. During this final stage, the company that is introducing the new product reviews the test market results and decides if they should launch the product nationally. Based on the positive results of the test-marketing in Arizona, Cool Dude Shades decides to launch Goth Goggles nationwide. They decide the best date to launch their new product is June 21st, which is the summer solstice and the longest day of the year.
Although taking a product through all six stages of the new product development process is a time-consuming and costly process, it is important that companies introducing new products follow this process in order to increase their chances of introducing a successful product.
Goth Goggles started with a consumer need and became a very popular product with vampires all over the country. The employees at Cool Dude Shades were careful to use every stage of the new product development process to be sure the product solved the problem for their target market. For a variety of reasons, most new products do not make it all the way through the new product development process. Over 80% of potential new products that begin this process do not make it to product launch.
Let’s review. The new product development process is a six-stage process that companies who introduce new products use to increase the chances that a new product will be a successful venture. The six steps of this process are:
- Idea Generation Stage
Once a consumer need has been identified, the new product development process begins with the creation of new product ideas by the company introducing the new product.
- Idea Screening Stage
During this stage, the company introducing the new product performs an analysis of new product ideas to decide which ideas to develop and which to reject.
- Concept Development Stage
The company introducing the new product next performs a testing of new product ideas during this stage by showing the new product concept to potential consumers to find out what they think of it and if they would buy it.
- Market Strategy Stage
At this stage, the marketers begin marketing the new product concept by determining what type of promotion to use in order to reach their target market.
- Product Development Stage
This stage is where creating the new product concept takes place. Finishing touches are put on the new product, such as packaging, and the new product is test-marketed to measure its acceptability by the target market.
- Product Launch Stage
After test-marketing, the company then begins introduction of the new product to select locations or nationwide.
Most new products do not make it through all six stages of this process; they are eliminated when the company introducing the new product determines the new product is likely to not be accepted by the target market. Although the new product development process is a costly and time-consuming process, it is important for companies that develop new consumer products to use this process to ensure that the products they introduce are profitable additions to their existing product lines.
After this lesson, you will be able to:
- Describe the six stages of the new product development process
- Understand why this process is important
- Explain why, when in the process, a company might eliminate the new product
- Know the percentage of new products that do not make it through the new product development process