In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing

a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.
Contents
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1 The process 2 Fuzzy Front End 3 NPD organizations 4 NPD strategies 5 Related fields 6 See also 7 References

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process

1. Idea Generation is often called the "fuzzy front end" of the NPD process Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats), Market and consumer trends, company's R&Ddepartment, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or Ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features. Lots of ideas are being generated about the new product. Out of these ideas many ideas are being implemented. The ideas use to generate in many forms and their generating places are also various. Many reasons are responsible for generation of an idea. Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step). 2. Idea Screening The object is to eliminate unsound concepts prior to devoting resources to them. The screeners should ask several questions: Will the customer in the target market benefit from the product?

What is the size and growth forecasts of the market segment/target market? What is the current or expected competitive pressure for the product idea? What are the industry sales and market trends the product idea is based on? Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the customer at the target price?

3. Concept Development and Testing Develop the marketing and engineering details Investigate intellectual property issues and search patent data bases Who is the target market and who is the decision maker in the purchasing process? What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering, and rapid prototyping What will it cost to produce it?

Testing the Concept by asking a sample of prospective customers what they think of the idea. Usually via Choice Modelling.

4. Business Analysis Estimate likely selling price based upon competition and customer feedback Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation Estimate profitability and break-even point

5. Beta Testing and Market Testing Produce a physical prototype or mock-up Test the product (and its packaging) in typical usage situations Conduct focus group customer interviews or introduce at trade show Make adjustments where necessary Produce an initial run of the product and sell it in a test market area to determine customer acceptance 6. Technical Implementation New program initiation Finalize Quality management system Resource estimation

Requirement publication Publish technical communications such as data sheets Engineering operations planning Department scheduling Supplier collaboration Logistics plan Resource plan publication Program review and monitoring Contingencies - what-if planning

7. Commercialization (often considered post-NPD) Launch the product Produce and place advertisements and other promotions Fill the distribution pipeline with product Critical path analysis is most useful at this stage

8. New Product Pricing Impact of new product on the entire product portfolio Value Analysis (internal & external) Competition and alternative competitive technologies Differing value segments (price, value, and need) Product Costs (fixed & variable) Forecast of unit volumes, revenue, and profit

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that the NPD process takes, many companies are completing several steps at the same time (referred to as concurrent engineering or time to market). Most industry leaders see new product development as a proactive process where resources are allocated to identify market changes and seize upon new product opportunities before they occur (in contrast to a reactive strategy in which nothing is done until problems occur or the competitor introduces an innovation). Many industry leaders see new product development as an ongoing process (referred to as continuous development) in which the entire organization is always looking for opportunities. For the more innovative products indicated on the diagram above, great amounts of uncertainty and change may exist, which makes it difficult or impossible to plan the complete project before starting it. In this case, a more flexible approach may be advisable. Because the NPD process typically requires both engineering and marketing expertise, cross-functional teams are a common way of organizing projects. The team is responsible for all aspects of the project, from initial idea generation to final commercialization, and they usually report to senior management (often to a vice president or Program Manager). In those industries where products are technically complex, development research is typically expensive, and product life cycles are relatively short,

strategic alliances among several organizations helps to spread the costs, provide access to a wider skill set, and speeds the overall process. Also, notice that because engineering and marketing expertise are usually both critical to the process, choosing an appropriate blend of the two is important. Observe (for example, by looking at theSee also or References sections below) that this article is slanted more toward the marketing side. For more [1][2] of an engineering slant, see the Ulrich and Eppinger, Ullman references below. People respond to new products in different ways. The adoption of a new technology can be analyzed using a variety of diffusion theories such as the Diffusion of innovations theory. A new product pricing process is important to reduce risk and increase confidence in the pricing and marketing decisions to be made. Bernstein and Macias describe an integrated process that breaks down [3] the complex task of new product pricing into manageable elements. The Path to Developing Successful New Products points out three key processes that can play critical role in product development: Talk to the customer, Nurture a project culture,and Keep it focused.
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Step 1. IDEA GENERATION

The first step of new product development requires gathering ideas to be evaluated as potential product options. For many companies idea generation is an ongoing process with contributions from inside and outside the organization. Many market research techniques are used to encourage ideas including: running focus groups with consumers, channel members, and the companys sales force; encouraging customer comments and suggestions via toll-free telephone numbers and website forms; and gaining insight on competitive product developments through secondary data sources. One important research technique used to generate ideas is brainstorming where open-minded, creative thinkers from inside and outside the company gather and share ideas. The dynamic nature of group members floating ideas, where one idea often sparks another idea, can yield a wide range of possible products that can be further pursued.

Step 2. SCREENING
In Step 2 the ideas generated in Step 1 are critically evaluated by company personnel to isolate the most attractive options. Depending on the number of ideas, screening may be done in rounds with the first round involving company executives judging the feasibility of ideas while successive rounds may utilize more advanced research techniques. As the ideas are whittled down to a few attractive options, rough estimates are made of an ideas

potential in terms of sales, production costs, profit potential, and competitors response if the product is introduced. Acceptable ideas move on to the next step.

Step 3. CONCEPT DEVELOPMENT AND TESTING

With a few ideas in hand the marketer now attempts to obtain initial feedback from customers, distributors and its own employees. Generally, focus groups are convened where the ideas are presented to a group, often in the form of concept board presentations (i.e., storyboards) and not in actual working form. For instance, customers may be shown a concept board displaying drawings of a product idea or even an advertisement featuring the product. In some cases focus groups are exposed to a mock-up of the ideas, which is a physical but generally non-functional version of product idea. During focus groups with customers the marketer seeks information that may include: likes and dislike of the concept; level of interest in purchasing the product; frequency of purchase (used to help forecast demand); and price points to determine how much customers are willing to spend to acquire the product.

Step 4. BUSINESS ANALYSIS

At this point in the new product development process the marketer has reduced a potentially large number of ideas down to one or two options. Now in Step 4 the process becomes very dependent on market research as efforts are made to analyze the viability of the product ideas. (Note, in many cases the product has not been produced and still remains only an idea.) The key objective at this stage is to obtain useful forecasts of market size (e.g., overall demand), operational costs (e.g., production costs) and financial projections (e.g., sales and profits). Additionally, the organization must determine if the product will fit within the companys overall mission and strategy. Much effort is directed at both internal research, such as discussions with production and purchasing personnel, and external marketing research, such as customer and distributor surveys, secondary research, and competitor analysis.

Step 5. PRODUCT AND MARKETING MIX DEVELOPMENT

Ideas passing through business analysis are given serious consideration for development. Companies direct their research and development teams to construct an initial design or prototype of the idea. Marketers also begin to construct a marketing plan for the product. Once the prototype is ready the marketer seeks customer input. However, unlike the concept testing stage where customers were only exposed to the idea, in this step the

customer gets to experience the real product as well as other aspects of the marketing mix, such as advertising, pricing, and distribution options (e.g., retail store, direct from company, etc.). Favorable customer reaction helps solidify the marketers decision to introduce the product and also provides other valuable information such as estimated purchase rates and understanding how the product will be used by the customer. Reaction that is less favorable may suggest the need for adjustments to elements of the marketing mix. Once these are made the marketer may again have the customer test the product. In addition to gaining customer feedback, this step is used to gauge the feasibility of large-scale, cost effective production for manufactured products.

Step 6. MARKET TESTING

Products surviving to Step 6 are ready to be tested as real products. In some cases the marketer accepts what was learned from concept testing and skips over market testing to launch the idea as a fully marketed product. But other companies may seek more input from a larger group before moving to commercialization. The most common type of market testing makes the product available to a selective small segment of the target market (e.g., one city), which is exposed to the full marketing effort as they would be to any product they could purchase. In some cases, especially with consumer products sold at retail stores, the marketer must work hard to get the product into the test market by convincing distributors to agree to purchase and place the product on their store shelves. In more controlled test markets distributors may be paid a fee if they agree to place the product on their shelves to allow for testing. Another form of market testing found with consumer products is even more controlled with customers recruited to a laboratory store where they are given shopping instructions. Product interest can then be measured based on customers shopping response. Finally, there are several high-tech approaches to market testing including virtual reality and computer simulations. With virtual reality testing customers are exposed to a computer-projected environment, such as a store, and are asked to locate and select products. With computer simulations customers may not be directly involved at all. Instead certain variables are entered into a sophisticated computer program and estimates of a target markets response are calculated.

Step 7. COMMERCIALIZATION
If market testing displays promising results the product is ready to be introduced to a wider market. Some firms introduce or roll-out the product in waves with parts of the market receiving the product on different schedules. This allows the company to ramp up

production in a more controlled way and to fine tune the marketing mix as the product is distributed to new areas.

New Product Development Process

Because introducing new products on a consistent basis is important to the future success of many organizations, marketers in charge of product decisions often follow set procedures for bringing products to market. In the scientific area that may mean the establishment of ongoing laboratory research programs for discovering new products (e.g., medicines) while less scientific companies may pull together resources for product development on a less structured timetable. In this section we present a 7-step process comprising the key elements of new product development. While some companies may not follow a deliberate step-by-step approach, the steps are useful in showing the information input and decision making that must be done in order to successfully develop new products. The process also shows the importance market research plays in developing products. We should note that while the 7-step process works for most industries, it is less effective in developing radically new products. The main reason lies in the inability of the target market to provide sufficient feedback on advanced product concepts since they often find it difficult to understand radically different ideas. So while many of these steps are used to research breakthrough ideas, the marketer should exercise caution when interpreting the results

Five steps in the New Product Development Process, as understood by most marketing textbooks

1. Idea Generation
brainstorming - thinking about it creating a new product based on some observed need thinking of a new product based on some accident or chance circumstance

2. Screening
getting opinions from o employees o potential customers o media o government what are the weaknesses of existing products that are similar is there any competition for a new product What are the industry sales and market trends the product idea is based on

3. Idea Evaluation / Concept Development

estimate costs, revenue, profit, do market research target market segmentation o describe the main group of people who will be the first customers

4. Development of Product / Business Analysis

physically design and manufacture the product estimate likely selling price based upon competition and customer feedback estimate sales volume based upon size of market produce a physical prototype or mock-up test the product (and its packaging) in typical usage situations

5. Commercialization
"make enough to sell" o manufacture a large amount to send out to the stores that will stock the items so enough inventory on hand for the public to buy launch "promotion campaign"

While the Dilbert cartoon is funny, it represents the challenge that companies always have coming up with new products people like using the old product - especially software products that take some time to learn people don't like the expense of a new product people don't like it when parts or tech support is not available for an old product so they resent companies always churning out new products best example in 2010 is people not liking Windows 7 and wanting to continue using Windows Vista, or the older Windows XP people want to wait until the new product has been on the market for some time so they can evaluate whether it is useful to switch or not o one of the prime reasons companies feel compelled to come out with new models is because of the competitive environment - their competition will see what is selling, and make a new version with better features, so the original manufacturer has to come up with a "new and improved" model or customers will switch to the competition also Chapter 10 and Chpt 4

Shapiro book,

10th edition Chpt 7 page 209 of the MRK 106 text . Five steps in the New Product Development Process 1. Idea Generation 1. Idea Generation - thinking about a new product or service of the BUS 106 Text

sources of where new ideas come from (see also www.witiger.com/internationalbusiness/countryinfo.htm

employees feedback from sales staff who get comments from customers direct feedback from customers news stories government agencies o new regulations established may require some innovations industry associations consumer surveys competitors see www.witiger.com/ecommerce/competitorintelligence.htm accident and chance Reese's Peanut Butter Commercial youtube.com/watch?v=DJLDF6qZUX0

.
2. Screening Five steps in the New Product Development Process 2. Screening - obtaining opinions from potential users
sources of where you can obtain opinions employees o do they think the new product will sell o can they see themselves being able to sell the product compared ti the existing product line-up customers o can be done with a survey, formal or informal

"what do you think if we came out with this..." o customer opinion may help you tweak features of a new product, eg. colour, shape, size, pricing

media o newspaper stories may discuss a similar product being launched in another part of the world and the initial feedback may help you decide how to develop your product o newspaper stories may discuss deficiences in existing products which may suggest new opportunities o online blogs may discuss cuistomers disastisfaction with a certain product, which may provide ideas to inventors or a new product or service government agencies o rules and regulations may have some limitations on what your new product can do o governments can enact new laws making changes to the way people use a product, which provides opportunity when new law created banning cell phones while driving, many companies rushed to sell bluetooth devices for "handsfree" calling

some government agebncies can tell you if a new product is complient with pollution controls, or language laws or labelling rules

New Product Development - physical products - cyber products

New Product Development and the Net

Internet Time
Two important apsects, says Prof. Ward Hanson in his book First - it refers to the rapid change and evolution of internet tools, markeplace (the customers) business practices

Second - it is also the acceleration of Chpt 8 in Hanson new product development, competitve activity and business tactics that are made possible by the internet

How New Product Characteristics affect adoption, as explained in the Shapiro book, 10th edition Chpt 7 page 214

New Product 1. Relative Advantage Development - the Competitive Environment Process ... better price than competition
... better features than competition 2. Compatibility - does it fit with what the consumers want to do 3. Complexity - is it easy to use - adoption resistance must be comparably low 4. Trialability - you have to get people to sample it

Chpt 7 p. 209

5. Observability - can you actually see it work - is it obvious it is effective and saves time and money