In This Article

  1. Introduction
  2. The Eight Stages
  3. The NPD Funnel
  4. Success Factors
  5. Why Products Fail
  6. Conclusion

Introduction

New Product Development (NPD) is the process of bringing a new product to market. A structured NPD process increases the probability of success by systematically reducing risk at each stage. Research shows that only 1 in 7 product concepts becomes a successful product.

The Eight Stages of NPD

Stage 1: Idea Generation

Generate as many ideas as possible from various sources:

  • Internal: R&D, employees, brainstorming
  • External: Customers, competitors, suppliers, distributors
  • Techniques: SCAMPER, mind mapping, crowdsourcing

Stage 2: Idea Screening

Filter ideas to identify promising ones:

  • Fit with company strategy and capabilities
  • Market attractiveness
  • Technical feasibility
  • Financial potential

Stage 3: Concept Development & Testing

Develop detailed concepts and test with target customers:

  • Product concept: What is it? Who is it for? Key benefits?
  • Concept testing: Present to customers, get feedback
  • Refine based on feedback

Stage 4: Marketing Strategy Development

Develop preliminary marketing plan:

  • Target market description
  • Value proposition and positioning
  • Sales, market share, profit goals
  • Marketing mix strategy

Stage 5: Business Analysis

Evaluate business attractiveness:

  • Sales forecasting
  • Cost estimation
  • Profitability analysis (NPV, IRR, payback)
  • Break-even analysis

Stage 6: Product Development

Create physical product:

  • Prototype development
  • R&D and engineering
  • Functional and consumer testing
  • Manufacturing process development

Stage 7: Test Marketing

Test in realistic market conditions:

  • Standard test markets (selected cities)
  • Controlled test markets (panels)
  • Simulated test markets (research facilities)

Stage 8: Commercialization

Full-scale launch:

  • When: Timing decisions
  • Where: Geographic rollout strategy
  • To whom: Target market priorities
  • How: Launch marketing plan

The NPD Funnel

Typical Attrition:
100 ideas → 30 pass screening → 12 concepts tested → 6 in development → 3 test marketed → 1-2 launched successfully

The funnel concept emphasizes that most ideas won't make it—and that's okay. The goal is to fail fast and cheap on bad ideas while nurturing winners.

Success Factors

  • Customer orientation: Deep understanding of needs
  • Cross-functional teams: Marketing, R&D, operations working together
  • Speed to market: First-mover advantages
  • Clear product definition: Avoid scope creep
  • Senior management support: Resources and commitment
  • Stage-gate process: Go/no-go decisions at each stage

Why New Products Fail

  • No real need: Solution looking for a problem
  • Poor execution: Good idea, bad implementation
  • Inadequate marketing: Target market doesn't know about it
  • Wrong timing: Too early or too late
  • Competitive response: Incumbents react strongly
  • Overestimated market: Market smaller than projected
  • Poor positioning: Value proposition unclear

Conclusion

Key Takeaways

  • 8 stages: Idea generation → Screening → Concept → Strategy → Business analysis → Development → Test → Launch
  • Funnel approach: Many ideas in, few products out
  • Fail fast: Kill bad ideas early when cost is low
  • Customer focus: Understand needs throughout
  • Cross-functional: Marketing + R&D + Operations collaboration
  • Stage-gate: Clear go/no-go decisions
  • Only ~15% of new products succeed—process reduces risk