What Is the Process of New Product Development?

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  • Written By: Terry Masters
  • Edited By: Shereen Skola
  • Last Modified Date: 14 December 2018
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The process of new product development typically involves three stages of business activity, including concept development, market development and product testing. Not all new products require the same development framework or are best realized through a traditional development approach. From a conceptual standpoint, however, these three stages of new product development and the steps included in each comprise the general theory that underlies the process.

Businesses rely on new products to retain and increase market share. Every good or service that a company sells transitions through a product life cycle that often ends with diminishing returns as a product becomes mature. A company cannot stand pat on its current product line, even if it is wildly profitable. Eventually, old consumers will tire of a product, better or different products will be introduced by competitors or a product will stop attracting new customers because of changing tastes and trends.

Product development ensures that a company has something to replace old products with as they age and become less profitable. Generally, the process of new product development can be broken down into three operational stages and seven steps. The first stage can be called concept development; this is the part of the process where the company decides exactly what its new product should be.


Concept development includes idea generation, idea screening, and concept development and testing. In practice, this stage can involve a company's research and development department, its executives and marketers or an outside consulting firm as a facilitator. Basically, the company looks at the market and the products offered by competitors and tries to identify opportunities for innovation or needs that are not being met. Idea generation relies on research and brainstorming, while screening attempts to narrow ideas down to the most feasible choices. The final step of concept development and testing involves the creation of prototypes and mock-ups and exposing the working concept to focus groups.

The second stage in the process of new product development involves market development and planning. This stage can proceed concurrently with stage one, and involves market research and developing the product marketing mix. The company evaluates the potential market for the product and the competition, and develops a marketing plan. Meanwhile, the marketing department exposes the prototype to more extensive consumer testing in an attempt to define specific market segments that can drive advertising.

Product testing is the final stage in the process of new product development and results in commercialization, or a product that is ready for sale to the public. Companies will typically introduce the product in limited geographical areas as a test to determine the likelihood of success in a real world environment. If the product succeeds in limited distribution, it is prepped for distribution in all of the company's relevant markets.



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