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New Product Development

1. Introduction
The process of bringing a brand new product to the market is called New product
development (further NPD). In other words, it is the transformation of a market opportunity into
something that is available for sale. By the words new product are meant products that have
never been sold by said company (but sold by the competitors) or product innovations, which are
brought to the market for the first time (both original products or improved existing products).
The new product requires a thorough understanding of customer demands and the competition.

Even though development of a new product is a more of a creative process, there are still
certain steps which are needed in order to successfully bring a new product to the market.

In order to stay competitive, companies are continuosly developing new products to be

introduced to the market. For this process to be as effective as possible, one must have a clear
outline of what to do in this situation. Having a structured plan of developing a new product is in
the long run less time-consuming and cheaper than having no plan at all.

2. Stages of Production

2.1 Idea Generation

At the very beginning of the NPD there must be undertaken process of idea generation. There
are several ways of obtaining ideas for a new product.

Firstly, ideas can be obtained from doing a simple SWOT analysis of the current market
trends. SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats, is a
method which evaluates aforementioned four elements of a company, industry, product and more.
Strengths are characteristics of the researched object that give it advantage over others,
weaknesses are the disadvantages of the object in relation to others, opportunities are elements of
the market that may be exploited to the companys advantage and threats are potential obstacles
that are likely to cause issues for the object in question. Thanks to this method it is possible to
find the best course of action for the company developing a new product or its position in the

Secondly, it is possible to brainstorm new ideas in the companys team. There are people who
interact with customers daily, thus they are aware of their issues, comments and feedback.
Employees in any level of the company can be a great source of new ideas. According to
statistics, most of the new product ideas come from internal sources. A number of companies has
implemented a program for employees, in which they can contribute with their ideas.

Thirdly, a great number of new ideas come from customers themselves. These ideas can be
extracted in several ways. Firstly, a company can undertake a market research, in which they
determine what the potential customers desire. Secondly, a good source of ideas is a feedback
from the previous customers, in which they describe the strengths and weaknesses of currently
offered products.

Lastly, a company may analyze its competitors and learn from their successes and failures.
Doing this, there can be discovered new gaps in the market or ways of improvement upon the
competitors product offer.

2.2 Idea Screening

In the second stage of the process occurs the elimination of the ideas generated in the first
stage which are not feasible for the company to work on. The judgment should be done

objectively, ideally by a group or a committee. The company must set specific criteria, which
must be followed in order to discard unwanted ideas. Every idea should be judged carefully
because a wrong judgement and investing into something that is not worth it can be expensive for
the company in the long run.

Among the criteria set by the company can be a great number of things. For example, the
measure of customer demand, most needed product improvements, benefits to the target market,
possession of technical skills required to develop this idea, required investment, potential
profitability of the idea, the competition on the market and more. The eventually chosen idea
must be in the marketing and technical capabilities of the company.

2.3 Concept Development & Testing

At the beginning of this stage it is extremely important to develop a thorough concept of the
chosen idea. In other words, product concept is a detailed description of the new product in
meaningful consumer terms. It is of utmost importance to do this correctly, since an imperfect
concept can lead to unnecessary costs in the future. Furthermore, it is crucial to examine, whether
this new product somehow interferes with someone elses intellectual property, since it is unwise
to commercialize something that has already been patented.

Next, the concept must be tested with real-world customers. Large businesses usually utilize
the collected data from focus groups and thanks to this they determine, whether particular groups
of potential customers would buy such a product. Although smaller companies can use focus
groups to reach a similar conclusion, since they have a smaller pool of customers, asking the
customers themselves can sometimes yield more representative results. Feedback from customers
can also contribute to the changes of the concept itself or it can amend future marketing strategy.

2.4 Business Analysis

As soon as the concept development and its testing with the general populace is finished, it is
important for the company to assess to costs of the product development, logistics and all the
other expenses that are necessary for the new product to be commercialized. Well done business
analysis though not only helps to determine required expenses, but it also predicts what the
potential profit may be. Furthermore, business analysis estimates, based on the competition and
customer feedback, the best selling price for which the new product would be sold.

By the forecast of the sales volume it is possible to determine what amount of the new
product is likely to sell after its introduction to the market. This is related to the so called break-
even point. Break-even point is the point when the sufficient amount of product has been sold
in order to cover its initial production and development costs. It is at this point when the new
product becomes profitable. In a business analysis it is possible to predict when this is likely to

Although it is important to analyze everything necessary concerning the launch of a new

product, it is also important think about its future. Especially it is crucial to forecast, how long the
new product will be profitable in the current market situation, how long it will be of interest to
customers, how much time is necessary for it to bring profit and more. Having determined the
lifespan of the product before the launch will be advantageous for the company because thanks to
this it will be able to develop a new, or improve the current product without the loss of least
amount of profit.

Lastly, new customers need to somehow learn about the new product. For this, it is vital to
have a suitable marketing strategy. Marketing strategy helps determine the position of the product
in the marketplace. Furthermore, it will recognize which groups of the population to target in
other words, it will help choose the target group.

2.5 Engineering Stages

Before the construction of the product itself there must be phase in which the new product is
designed using appropriate software. The whole process (or just parts of it) of engineering design
can be repeated as many times as necessary.

Firstly, the company must undergo a research concerning the manufacturing and designing
the product. It is also possible to gain knowledge of making some product by so called reverse
engineering. This is a process, when a company extracting technological or design information
from other companys product. It is usually done by disassembling the product and analyzing its
components in detail.

The new product must be first designed on the macro level so called Preliminary Design.
The model should be done according to the specifications and requirements set in the previous
stages. It is important to have confidence in the design of the product before stepping to the next

phase of detailing the specific parts. Even though it is important for design to be competitive in
the market environment, it should not interfere with any technical parameters that were agreed
upon previously.

After the product design is finished, it should be delivered to the customer, which will
evaluate its quality. The reviewer will provide their insight about the products design. At the end
of this stage it should be clear, what the final product will look like.

When the design of the new product is finished, the details and internal systems should be
work on. At the beginning, the best course of action is to make drawings of the internal systems
and parts which will the final product consist of. Furthermore, the construction specifications
have to be finalized. Examples of such specifications include materials requirements, packaging
requirements, external dimensions and more.

Computer-aided design programs such as AutoCAD from Autodesk are very helpful at this
point. CAD programs are used in order to increase the productivity of the designer, improve the
quality if the design itself, improve the documentation, and to create a database of the
manufacturing process. For mechanical purposes, CAD programs can use vector-based graphics
to show the objects of traditional drafting or raster graphics to show the appearance of designed
objects. The output CAD file must contain information about materials, processes, dimensions,
and tolerances.

Before beginning the mass-production, it must be decided which tools are needed when
manufacturing the product. Tasks such as selecting materials, selection of production processes,
determination of sequence of operations, and selection of tools are done at this point.

Lastly, the prototype has to be assembled. After the prototype is finished, it is necessary to
find and remove all possible bugs, which might affect the usage of the product. With more
refined products it is likely that this phase will be repeated to achieve the highest possible quality
and the least amount of bugs. When the prototypes are finished, they are sent to the customers to
be tested. In the testing phase, the product is tested on the performance, quality of product etc. If
there are any necessary adjustments (based on recommendation of the customers, malfunctions or
something else), they should be made and new prototypes should be assembled.

When all these steps are completed, the product is ready to be released.

2.6 Launch of the Product

The launch of the new product is arguably the most important part of the whole process.
Launching the product correctly can maximize its potential and prevent more issues in the future.
One of the most important aspects of this is choosing the best timing by judging the current
situation on the market. Furthermore, it is also important to decide the location where it will be
best for the new product to be launched so that the costs are minimal and profits are maximal.

Next, a good Quality management system must be finalized before the launch itself. Quality
management system is a set of businesses processes which are designed to eventually meet the
customers requirements and to enhance their satisfaction with the product. The company also
needs to have prepared the resources, engineering operations or logistics plan.

At this time, direct advertisement, such as direct mail, e-mail marketing or social media
marketing, has to be put in place. The emphasis should be put on the method which is the most
likely to reach the target customer group. It is also possible to contact the media and try to
promote the new innovation through them.

2.7 Commercialization
With launching a new product to the market there high expenses that go with it. The highest
expenditures are usually for manufacturing, advertising and promotion. The price after the launch
should be set in order to be as competitive and as effective in making profit as possible. For this
correct price to be discovered it is necessary to study its competition, the differing situation on
the market, predictions on how will the market change in future and more.

3. Conclusion
The method stated above is just one way of creating new products. Every company is
different; therefore their method of bringing a new product to the market might differ. It also
depends on which industry the company is trying to make profit in. For example, companies
which sell small electronic devices are going to have a bit different methods in making a new
product than companies who sell large glass manufacturing furnaces. The method above is a sort
of unification of steps which are usually recommended to be followed.

A great amount of large companies also does several steps at the same time in order to
introduce the product to the market faster. In these companies it is also not unusual that new
products are being developed according to the anticipated changes in the market so that they seize
the opportunity to conquer the market before anyone else does. Other companies take stance of
continuing development in which new products are continuously being developed and new
opportunities on the market are being looked for.

Since developing a new product is a very diverse process in which both marketing and
engineering expertise is required, for every new product there is an assigned group consisting of
all needed professions in order to save time organizing the whole project. This group is
responsible for every aspect of the project and usually reports to the higher management. In
industries which are technically more complex, there are usually alliances between companies
which help to share costs and expertise so that to product would be introduced faster and cheaper.

4. Further Reading