A Complete Guide to New Product Development Strategy

4 years ago

With a well-considered new product development (NPD) strategy, you can avoid wasting time, money and business resources. An NPD strategy will help you organise your product planning and research, capture your customers’ views and expectations, and accurately plan and resource your NPD project.

What is New Product Development Strategy?

Product development strategy is a plan showing the way in which a firm will develop products, including the design, marketing and development of a final product. It represents the process of selecting the type of product, customer needs and wants, resources and technology. New product development strategy specifies the procedures and people through which these tasks are performed, as well as the sequence of activities.

Generally speaking, the NPD strategy involves three main steps:

  1. New product development

Since the success and even the survival of companies sometimes depend entirely upon a new product development process, there is no room for error. It is absolutely vital to plan each of the three stages of the NPD process in detail before implementation.

Furthermore, it is crucial that the owner or top executive of the company be involved during all stages of the NPD process, as decisions made at any stage of NPD can have dire consequences for the company.

  1. Customer and company analysis

Analyses, both of the customer and the company, are used during the NPD process to create a comprehensive picture of the environment in which the company operates.

In terms of the customer, analysts will ask questions about the customer’s wants, needs and desires.

There are three types of analysis that are utilised in this stage of the NPD process:

Strategists will also use their market knowledge to evaluate the company’s strengths and weaknesses, product development and production, sales and marketing, resources and finances.

  1. Product concept

Once the customer and company analyses have been completed, an overall strategy will emerge. This will be based on the opportunity that has been identified for the new product. Remember that it is essential to narrow down the opportunities without excluding a market.

For example, deciding whether a product idea is in fact a market opportunity can be difficult, and often a business could well be f niche market to succeed. Doing this target market analysis helps to avoid a lot of the risk and failure product development efforts face.

Planning the new product development strategy

To plan your NPD strategy, you will need to examine the business environment and the infrastructure requirements.

Product strategy is affected by the following factors:

Customer focus

The product strategy must be targeted toward the customers and target markets. How the firm relates to the customer and the marketplace will greatly affect how the strategy is formulated.

Market conditions

A company can assume a product-market focus by either segmenting its market or by segmenting the product line. Assessment of market share, demand, competition and pricing will aid in the product strategy.

The company’s products and services

A product strategy, whether customer-focused, market-focused or both, can be a defensive or offensive weapon. Managers can choose to use either a product- or a market focus to defend themselves against their competitors.

Competitive strategy

The product strategy is an important aspect of the competitive strategy.

Resource allocation

A market or product-focused strategy can be implemented using only a minor allocation of resources, but a resource-focused strategy will require much more involvement from management.

Resource use

While implementing a customer or product-focused strategy, the company can have access to industry information relating to suppliers, channels and customers.

The product portfolio

Product extension and deletion are two important aspects of the product portfolio. While extending the product range, care should be taken to ensure that the product strategy is consistent. Similarly, while deleting products, strategies must be developed to minimise market confusion and the cost of deleting products.

The above aspects should be studied in the market, the company’s internal information systems, existing products and the business strategy. The final product strategy will show how the company plans to compete for the segments of the market that are identified.

Allocating resources

In the case of a new product development strategy, the initial phase of the strategy may require only restricted resources. However, as the project develops, more resources will be needed. This will then lead to the next stage of the NPD process, which is the planning and execution of the product development activities.

How do you create a new product?

The NPD process consists of:

  • Identification of customer needs (called the ‘voice of the customer’ or ‘VOC’)
  • Development of the product
  • Implementation of the product

The NPD process is the same whether one is looking at the development of a product or a service. Some methods, such as SWOT analysis, can be used in both cases. It is important to identify the tools that are most appropriate for your project; this will save time, money and resources.

Remember that NPD is often an iterative process, and each stage may be repeated several times until the product is finally launched.

New product development activity planning: For each stage of the NPD process, you must plan the time and budget required to complete it. Activities related to the planning stage include the production of any market studies, research and the development of a business plan, including a competitor analysis.

Product design and development: Create a product template describing the product in detail. Create a cost analysis and a production plan.

Industrial design: Some companies have an in-house design team to design their own products, while others may work with outside vendors. Remember that, from a risk analysis perspective, the origin of the design team may increase the risk of the product development process. This is why a chief engineer may be employed in-house.

In the late 1990s, key steps that were needed to generate a new product included:

Testing is an important stage, because it helps to create a marketable product. It is estimated that 80% of new products introduced over the last five years did not meet the customer’s expectations.

In order to reduce the risk of failure, it is important to perform the right testing. There are five critical success factors in the testing of a new product:

Ideally, the product should be tested in a real-life situation, not just in a lab. Testing in an actual market situation will provide data that is much more relevant to the introduction and sales.

One of the most important factors to consider is that testing should begin as soon as possible after the project is initiated. As with most projects, the earlier testing begins, the better.

Business case

A business case is a formal evaluation of the new product. The purpose of creating a business case is to examine the costs and risks involved with the NPD project. Considerations are included in the business case regarding the feasibility of the project.

The business case consists of three parts:

  • The introduction phase: This is when the product is first presented to the public. Perhaps the most important aspect of this phase is to make it easy for the customer to try the product.
  • Once the product is released, advertising and promotion are important to the success of the product. Adverts should be created to appeal to the target market.
  • Supporting the launch is important to ensure that sales are optimal.
  • The implementation phase consists of establishing the direct marketing systems, production facilities, transportation and sales systems.
  • The post-implementation phase: This is when the company is actively recruiting dealers, distributors and customer service representatives.

Creativity and innovation

Product innovation includes the following five factors to help a product be as successful as possible:

The tool of innovation is as important as the innovation itself. The tool is the method used to create a new product, and it includes:

Creativity is the ability to generate new and useful ideas. The six attributes of creativity are:

The brainstorming session facilitates creative thinking by asking innovative questions and creating a brainstorming-friendly environment.

There are five steps involved in the brainstorming process:

  • Once the key issues of the new product have been identified, the next step is to work on them, in the following five stages:
  • The word ‘prototype’ is a shortening of ‘prototype product’. A prototype is the first physical representation of the product.
  • The purpose of a prototype is to test the product concept. For this reason, the prototype should be simple, yet visually representative of the idea. For the prototype to be effective, it is necessary to evaluate the product’s viability. In other words, if the prototypes are either not effective or they are not financially feasible, then it means that the idea is not viable in the real world.
  • A prototype is the most cost-efficient method for product development. It is not as effective at marketing as the finished product or a demo. The main reasons why a prototype is used are that:

There are three main categories of prototypes:

  • The target market is the group of people the company thinks will be most likely to buy the product. If the company’s customers are young adults, then the product will be aimed at young adults.
  • A market research survey can help determine who the company’s target market is. Some of the requirements that will need to be considered are:
  • The purpose of the market research is to determine whether there is a need for a new product and whether the product will be successful. Key questions to ask during market research are:
  • Target markets should be analysed in order to narrow the focus of the new product. One must consider whether the product will be able to compete with other similar products on the market.

An example of a product that would consider its target market is a dishwashing detergent. Companies like Unilever and Procter & Gamble design products specifically for different markets. Procter & Gamble have different versions of dishwashing detergents for different markets. For the Latin America market, it has Soupline, which is a powder that comes in a small box; for the United Kingdom, it has Daz, a powder that comes in a plastic bottle.

This example also highlights a strategy that many companies use. In this case, the company is rebranding the product to make it more attractive to the market it is currently dealing with. This helps the company to not waste money marketing to markets where the product is not effective.

Concept, brand and technology protection are the three major factors to consider when developing a new product.


Concept mapping, also known as brainstorming, is used to generate new ideas for a number of projects, including product development.

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