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MNC Consulting Group > News > Article > The key stages, processes and strategies in PRODUCT DEVELOPMENT
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What is product development? 

This is the improvement of an existing product or the introduction of a new product in a market.

Reasons for product development

  • Company growth objectives; product development strategy is one of the keys enabling tools for the company to continually grow. For this reason, the company will be able to penetrate existing markets and new ones.
  • Technological change; Companies may undertake this strategy not because it is a luxury but because it is a necessity for survival as technology emerges.
  • Replace products at the maturity stage; when a company’s product reaches maturity stage, it can’t grow anymore hence has lower cash flow leading to the developing new ones to replace the products at the maturity stage.
  • Response to both domestic and foreign competition; in this dynamic competitive business world, companies must develop strategies to respond to, outdo and overcome any form of competition that the business may pose.
  • Changing customer’s requirements, needs, and tastes; Customers have a lot to choose from, are less brand loyal, and have changing needs, requirements, and taste for the product they need hence this strategy helps to overcome this.

Criteria for successful new product development

  • Have a uniquely superior product; the product should be highly differentiated, one of superior features, and of high quality.
  • Well defined product concept; the company should carefully define and assess the target market, product requirement, and benefits.
  • Technological and marketing synergy; Combination of both, technology and marketing strength brings a good breakthrough for the strategy.
  • Quality of execution at all stages; should be quality-driven and high standards of high quality should be maintained at all stages.

Avenues of New-Product Development

A firm can obtain new products through:

Acquisition; refers to the buying of a whole company, a patent, or a license to produce someone else’s product.

New product development;   involves the original products, product improvements, product modifications, and new brands developed from the firm’s own research and development.

Reasons for new product failure

  • Overestimation of market size
  • Poor design
  • Incorrect positioning
  • Wrong timing
  • Priced too high
  • Ineffective promotion
  • Management influence
  • High development costs
  • Competition

New-Product Development Process

      1. Idea generation

New idea generation is the systematic search for new product ideas.

To create a large number of ideas

Sources of new-product ideas

  • Internal sources this involves the company’s own formal research and development, management and staff, and intrapreneurial programs.
  • External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms.

      2.Idea screening

This refers to reviewing new-product ideas in order to drop poor ones as soon as possible.

     3. Concept Development and Testing;

This involves;

  • Product ideas for a possible product that the company can see itself offering to the market.
  • Product concept is a detailed version of the idea stated in meaningful consumer terms.
  • Product image is the way consumers perceive an actual or potential product.
  • Concept testing refers to testing new-product concepts with groups of target consumers. To find out how attractive each concept is to customers, and choose the best one.

   4. Marketing strategy development

This refers to the initial marketing strategy for introducing the product to the market.

Marketing strategy statement

Part 1:

  • Description of the target market
  • The planning product positioning; sales, market share, and profit goals

Part 2:

  • Price distribution and budget

Part 3:

  • Long-term sales, profit goals, and marketing mix strategy

    5. Business analysis

This involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives.

   6. Product Development

This involves the creation and testing of one or more physical versions by the research and development (R&D) or engineering departments. Requires an increase in investment

 7. Test marketing

  • This is the stage at which the product and marketing program are introduced into more realistic marketing settings.
  • Test marketing provides the marketer with experience in testing the product and entire marketing program before full introduction.
  • A firms conduct test market when it has uncertainty about product or marketing program
  • When firms may not test market: Simple line extension; Copy of competitor product; Low costs; Management confidence

Approaches to test marketing

    a. Standard test markets

Small representative markets where the firm conducts a full marketing campaign

Uses store audits, consumer and distributor surveys, and other measures to gauge product performance

The results of standard test markets are used to;

  • Forecast national sales and profits
  • Discover product problems
  • Fine-tune the marketing program

Challenges of standard test markets

  • Cost
  • Time
  • Competitors can monitor the test as well
  • Competitor interference
  • Competitors gain access to the new product before introduction

    b. Controlled test markets

  • Panels of stores that have agreed to carry new products for a fee
  • Less expensive than standard test markets
  • Faster than standard test markets
  • Competitors gain access to the new product

    c. Simulated test markets

  • Events where the firm will create a shopping environment and note how many consumers buy the new product and competing products
  • Provides measure of trial and the effectiveness of promotion
  • Researchers can interview consumers

  8. Commercialization

This is the introduction of the new product into the market. It involves;

  • When to launch
  • Where to launch
  • Planned market rollout (the widespread public introduction of a new product )

Importance of new product development strategy to a firm 

  • Helps an organization to penetrate in its current market and enter new ones.
  • It helps an organization to meet the changing customer’s needs as its continuous product development is guaranteed and facilitated.
  • Assists an organization to achieve its growth objectives; through increased assortment, increased productive capacity of its facility.
  • Performs as a strategy to curb competition.
  • Acts as the basis for an organization to diversify across markets and increased product portfolio.

New-Product Development Strategies

a. Customer-centered new product development

This focuses on finding new ways to solve customer problems and create more customer satisfying experiences

  • Begins and ends with solving customer problems
  • The most successful new products are ones that are differentiated
  • Sequential new product development is a development approach where company departments work individually to complete each stage of the process before passing along to the next department or stage: increased control in risky or complex projects; slow – not good!

b. Team-based new product development

This is a development approach where company departments work closely together in cross-functional teams, overlapping in the product-development process to save time and increase effectiveness.

  • increase tension and confusion
  • is faster and more flexible

c. Systematic new product development

This is an innovative development approach that collects, reviews, evaluates, and manages new product ideas.

  • Creates an innovation-oriented culture
  • Yields a large number of new-product ideas


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

  • overestimating and misreading your target market
  • launching a poorly designed product, or a product that doesn’t meet the needs of your target customers
  • incorrectly pricing products
  • spending resources you don’t have on higher-than-anticipated development costs
  • exposing your business to risks and threats from unexpected competition.


About the Author

Thank you for reading this article. The author, James Ndambiri is an avid Business Advisor and Consultant: A Tax Surgeon, Proficient Accountant, Skilled Auditor, a Guru in Financial and Investment management, Expert in Business Strategy Formulation, Business Transformation Wizard, Family Business Advisor, Lecturer, Business Coach and a Family Man.

James is the Founder, Team Leader, CEO & Managing Partner of MNC Consulting Group. MNC Consulting Group is your most trusted and respected professional business consulting firm recognized by our clients for delivering excellent business advisory and consulting services that create value to their ventures. With our focus set on value addition, we offer our clients the highest quality professional services in Accounting, Audit and assurance, Tax, Business Transformation, Investments and Financial Advisory, Family Business Advisory, Company Secretarial Services and Property Management that address their business needs through attracting, recruiting and retaining knowledgeable and passionate professionals who enable us to deliver superior results while contributing positively to the community in which we live and work.


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