More than 30,000 products are introduced each year, and only an estimated 5 percent of them succeed according to Inc. Although that can seem intimidating, there are ways to become part of the successful 5 percent.
Inc. named the new product development process as a major key to success, and Harvard Business Review took the sentiment one step further. It reported lack of preparation as the biggest problem plaguing new products. Companies are so focused on how to develop a product and manufacture it that they wait on the research component until it’s too late.
Adopting a new product development process can help ensure a product’s success.
New Product Development Process: The 8 Critical Steps
There are several models that can be used to develop a new product. The most significant is probably the Stage-Gate model, which is an industry standard way to conceptualize, develop and commercialize new products. Some form of it is used by more than 80 percent of companies in North America, according to the Stage-Gate International, which oversees the new product development process model.
Product ideas are considered by examining affordability and the product’s potential return on investment.
The first step of the new development process often involves utilizing a SWOT analysis, which can help with strategic planning. This tool uses an acronym that refers to four distinct parts of the analysis.
Important Tip: Flexibility is vital. According to the software firm Smartsheet, experts often recommend developing multiple versions of a product’s road map at this stage to represent different risk levels.
2. Screen the Idea
Objective criteria are used to gauge which ideas should proceed and which should not.
This is where product features and ideas are judged against what’s important. It can help to have an objective third-party perform this step. The key is making sure that criteria are set in stone before the screening. That way, bad ideas can be sent back in a timely manner, allowing improvements to be developed more quickly.
3. Test the Concept
Potential customers test the idea to help determine whether they want or need the product.
Focus groups can be helpful in figuring out if a product will be successful. They can also provide insight into what marketing messages could work with the planned product.
Important Tip: Understanding how customers perceive and relate to the product is the goal. Do customers understand the product? Do they have ideas to improve upon the idea? What are the biggest drawbacks they see?
4. Business Case Analysis
Business metrics are developed to support the now-fully formed product idea.
A great product idea can be undermined if the business case isn’t solid. This step in the new product development process examines the argument of potential success. How long will it take to develop? What value is it projected to have for the business? Is there a realistic marketing strategy that will help meet the expected revenue?
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5. Product Development
The product’s design is completed, including beta versions, manufacturing questions and packaging.
Up to this point, the product may only exist in a text document, graphic or prototype. This step covers the full development of the product, which can take a considerable amount of time and money.
Important Tip: Development includes safety tests and anything else (e.g., backward compatibility for software) relevant to the product.
6. Test Market
The product and marketing messages are tested in realistic settings.
Companies now have the chance to test out virtually everything involved in launching the new product. Consumer test groups can offer valuable feedback to the product itself, its usefulness and attractiveness, as well as considerations like packaging and marketing messages.
Important Tip: How much testing is performed can vary. For instance, if the product poses a high amount of risk to the company, or if the company is new to product development, then extensive testing is likely necessary.
If the product passes all of the previous steps, final plans are made for the product to enter the marketplace.
This step involves a great deal of attention on marketing and distribution. Those teams are finalized and prepared to act, based on when the company has chosen to launch the product. Once they know when and where the product’s launch will happen, they are in place to support it. Other areas, like customer or technical support, should be established in preparation for the product’s launch.
The launch plan is finalized.
There are seven items that should be included in the launch plan, according to Smartsheet.
- Market research, which includes who will purchase the product
- Competitive analysis that features product differences and similarities, why customers may purchase something else and how customers will be marketed to in order to encourage them to purchase the new product
- A market strategy featuring tests with focus groups
- A public relations program
- A complete product
- A marketing plan timeline
- A trained and ready sales team
Mistakes to Avoid When Launching a New Product
Failing to implement and follow a new product development process can undermine everything. Yet, there are several other ways to impair the success of a new product, as Harvard Business Review found in the following cases.
- The company can’t support fast growth. One company created a great way to kill mosquitoes, and it came during the height of the West Nile virus scare. Unfortunately, quality dropped when the business was forced to expand to keep up with demand. They didn’t have a strong plan to follow for if their product took off.
- The product doesn’t meet claims. Microsoft planned $500 million to market Windows Vista. However, it was plagued by compatibility and performance issues, causing loyal customers to go to Apple. Microsoft launched the product when it wasn’t actually ready.
- The new item exists in “product limbo.” In 2004, Coca-Cola released C2, which had half the calories and carbs of its original flagship drink. Customers didn’t agree with Coke’s $50 million advertising campaign and lofty claims, and it wasn’t distinctive enough to grasp anyone’s attention. As a result, it faced “product limbo,” which means that the product lingered before it was eventually discontinued. Coke should have tested it more. Fortunately, a year later, the company released Coke Zero, a no-calorie drink that has become a big success.
- The product creates a new category, requiring a great deal of consumer education — but it doesn’t happen. In 2004, P&G launched a scent “player” that emitted scents every 30 minutes on $5.99 discs. It looked like a CD player and commercials featured popular country singer Shania Twain. All of these factors confused customers; they thought the product involved music and scents. The company failed to see that customers wouldn’t be able to grasp how to use the product.
- The product is revolutionary, but there’s no market for it. A secret product that could be an alternative to the car produced a great deal of buzz. On the other hand, the invention carried a $5,000 price tag and an unorthodox look. The Segway didn’t sell the anticipated 10,000 machines a week — it was closer to 24,000 in its first 5 years. The product’s inventor failed to anticipate who would be interested in the product at its planned price.
Overcoming the challenges of designing, developing, testing and launching a new product isn’t easy. There are considerations to balance across areas like marketing, production and business analytics. Earning an online MBA can help you learn how to develop a new product. You’ll receive a strong education that’s designed to enhance your entrepreneurial skills and give you the tools to grow your business. Also, you’ll gain the knowledge needed to pursue and thrive in management- and executive-level business careers. Our program is offered in a fully online format that allows you to maintain your personal and professional commitments.