New Product Development (NPD)

Posted in Marketing and Strategy Terms, Total Reads: 1899

Definition: New Product Development (NPD)

The term New Product Development (NPD) is normally used to refer to the complete process of introducing a new product in the market. Here product can be in terms of a tangible product or an intangible service as well.

The steps involved in the new product development include i) idea generation where the company also decides whether to go for cost leadership strategy or differentiation strategy ii) product design and engineering of the product iii) market research and analysis. Normally the new product development falls within the first stage (introduction phase) of the product life cycle.

A detailed analysis of the stages of new product development is provided below

  • Idea Generation: This involves significant brainstorming, interviewing, SWOT analysis, R&D and study of marketing and consumer trends
  • Idea screening: Through this phase normally the researchers zero in on one or two ideas that look feasible, sustainable and scalable
  • Concept Development & Testing: This involves identifying the target market and product features that can be offered.
  • Business analysis: During this phase the company decides on the likely selling price, sales volume and identifies profitability and break-even point
  • Beta Testing and Market Testing: This includes development of a prototype of the likely product and testing the prototype both from the consumer and the developer’s points of view
  • Technical implementation: Through this phase the company conducts resource estimation, scheduling and leveling, engineering operations planning, supplier collaboration, logistics planning, program reviewing and monitoring etc.
  • Commercialization: This involves the formal launch of the product, promotion and advertising
  • New Product pricing: This phase mainly deals with value analysis and forecasts unit volumes, revenue and profits

These steps may take place sequentially or concurrently to reduce the time to market. Some of the critical aspects of NPD are manufacturability, robust design, self-regulating design, concurrent engineering, involvement of cross-functional teams etc.


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