The various stages in New Product Development are:

  1. Generating New Product Ideas
  2. Idea Screening
  3. Concept Testing
  4. Business or Market Analysis
  5. Estimating the Demand for New Product
  6. Actual Development of the Product
  7. Market Test
  8. Test Marketing
  9. Commercialization. 

Generating New Product Ideas:

New product ideas may come from customers, dealers, in company sources including the market research group & external research organization. Customers problems are the most fertile ground for the generation of new product ideas. In a variety of product, ranging from shampoos to computers, company workforce, market research staff, R&D staff & salesmen are also sources of new product ideas. Market research group are a particularly useful source. They conduct frequent studies on the consumers, products, competition etc. These studies often reveal product gaps- gaps between existing supply of products. 

Gravity techniques like brainstorming and synectics are also used for product idea generation. In brainstorming, a small group of people is encouraged to come up with ideas on a specified problem. In synectics, the real problems are initially kept away from the group & only a broader framework is given to them. Sometimes new product ideas come out just as a matter of happening.   

E.g. Portable stereo cassette player of Sony of Japan. 

Idea Screening:

In this stage, various new products ideas are put under rigorous screening by evaluation committees.

Answers are sought like: 

It there a felt need for the new product? It is an improvement over the new product? etc.

Concept Testing:

Concept testing is different from market test / test marketing. What is tested at this stage is the product concept itself, whether the prospective customers understand the product ideas, whether they are receptive forwards the ideas; whether they need a product. This exercise helps the firm to thrash out much of the vagueness associated with the new product idea. Concept testing is of special importance when a totally new product in contrast to a ―meet too‖ product – is being planned for introduction. 

Business / Market Analysis:

This stage is of vital importance because several important decisions regarding the project are undertaken based on the analysis done at this stage. 

This stage will decide whether from the financial and marketing point of view, the project is worth proceeding with. Investment analysis and profitability analysis of the project under difference assumptions are made at this stage.

Estimating the Demand for New Product:

Firms usually take up estimating the demand for the new product as a part of business analysis / market analysis.

There are 2 methods to estimate demand of new products: 

  • Substitution method
  • End use method  

Substitution method

In substitution method, the demand for the existing product is forecasted using standard forecasting method. Based on that, an idea of the demand for the new product is gained. Analysis will show which products & market are open for substitution by the new product. The estimated demand for the existing product can serve as the maximum limit for the demand for the new product. 

End use method

In, end use method, products that have an altogether new end use do come to the marketer occasionally. The only way to assess the demand for such products is to define the end use of the new product & to locate the potential customers for it. The aggregate of potential customers in each use category is taken as the potential demand in that category.  By adding the demand in the various use categories, one can get an indication of the total potential demand for the new product. This is to be taken as the upper limit of potential. In this method, the forecaster should be particularly cautious in defining the end use for the product.

Actual Development of the Product:

In this stage, the firm develops the product as such. In the actual development, production & marketing departments are actively involved besides research and development.   

Market Test:

Now, the new product should be tried out in selected market segments. Market test is essentially a risk control tool. It is experimental marketing at minimum cost & risk. When firms decide on a full-scale manufacturing & marketing of the product based on the results of the experiment, it helps avoid costly business errors.

Test Marketing:

In test marketing, the new product, with the support of the chosen marketing mix is launched & marketed in few selected cities / towns / territories. Test marketing needs careful handling. Care is required in the first place in selecting the test markets. Test marketing is also a time-consuming process, it should be carried out for a long duration to obtain a reliable indication. E.g. HUL introduced organics, but failed. 


At this stage, the company takes the decision to go in for large scale manufacturing and marketing of the product. At this stage, the company fully commits itself to commercialize the new product with the required investment in manufacturing & marketing.

marketing management

January 03, 2018