Did you know that only 1 out of 7 aspiring product ideas ever yield a successful product? And out of 7 product ideas, just 4 will enter the new product development process. Even though it is difficult to pinpoint an exact product fail rate, the odds of your world-changing idea failing are (unfortunately) pretty high.
Simply put, it can be quite challenging to ideate and introduce a new product in the market. You can not just sit in your armchair, scribble some ideas in your notebook, and expect to start hiring individuals to work on your product the very next day. It only works that way in cartoons.
In the real world, you need to undergo a long and difficult product development process with a solid marketing strategy to turn your aspirations into the next big product on the market. Read on to learn the ins and outs of the new product development process in detail.
The New Product Development Process
The new product development process, as the name suggests, simply refers to a couple of stages that the team undertakes to bring a new product idea to market. From brainstorming the product, to researching the market and developing the marketing strategy, to prototyping, this sequential process ensures the product is launched in the right way for the right market.
Here are seven key stages of the new product development process:
- Ideation
- Product Definition
- Prototyping
- Initial Design
- Validation and Testing
- Developing the Final Product
- Commercialization
The process unites various disciplines, ranging from design to product marketing experts, in order to create the product. There’s also the matter of securing the funding to get your idea off the ground. Let’s discuss them in more detail:
Ideation – What’s the big idea?
Of course, there needs to be an idea to begin with. First-time entrepreneurs usually struggle with this stage the most. As the world is becoming more fast-paced and customers are demanding more from companies, entrepreneurs usually find it difficult to nail the idea generation process to come up with a market-changing idea that can sell.
Let me be clear—not every revolutionary idea has to be fundamentally new. Some of the best ideas in the world were inspired by other products on the market.
However, believe it or not, ideation is also not a very simple process. It’s not impossible to get a revolutionary idea out of nowhere one day. But sometimes, you have to put in the extra effort. You can brainstorm a few new or existing product ideas and then start the process of idea screening.
How to Evaluate Ideas
Before you start picking out and brainstorming ideas, you need to have a well-defined business objective. The product vision and methodology need to be in alignment with the business objectives, so the product concept adds value to your company as well. A product vision in itself needs to be long-term and aspirational, which will provide a direction to the team and showcase to the customers what the product aims to achieve.
Overall, a good idea is one that can solve customer needs, enter the target market (or tap a new market), and provide value to the business in return as well. It doesn’t have to be very comprehensive at this stage, since the idea generation will further refine during other stages of the NPD process.
The idea management process can be streamlined using the following strategies:
1. Idea Collection
The first step is to conduct market research and consult key stakeholders to find the best product ideas. In doing so, it is a good idea for the company to have a central tracker for idea submission via a spreadsheet or idea management software.
It is crucial to set your focus on internal and external sources for the idea generation and collection process.
2. Prioritization
Next, it is important to note that not all ideas are meant to be executed. The company has only limited resources at hand to pursue the concept development of just a few ideas. Therefore, you should take measures to prioritize the best ideas out of the entire lot.
Here, one can use a variety of techniques such as the value vs complexity matrix or the bucket approach. Also, at this stage, you need to check the actual value proposition of all the ideas at hand.
3. Quantify User Behavior
Customer feedback and needs can always help in refining new product ideas. Therefore, entrepreneurs or a development team should always prioritize addressing their target audience, identifying what they want, and which existing products work or don’t work for them.
4. Research, Research, and Research
The winning idea can be further fleshed out by conducting market research. It is important to first identify where the startup fits into the industry and then conduct a competitor analysis. Here are some questions you can consider during this stage of test marketing:
- Is there any similar product in the industry?
- Was the final product ever launched on the market in the past? Did it fail? Why?
- How are competing entrepreneurs selling the product on the market?
- How is your product different from others on the market?
- Is there any way the original idea can be refined further to better adjust it to the market needs?
It may take some time before the idea is refined enough to move to the next stage.
Product Definition
The next step in the product life cycle is product definition and planning. In defining the product, you need to basically lay out the complete roadmap of creating the product and identify what resources will be required to bring the product to reality.
The best way to start planning the product is to draw a sketch of what the product will look like with a detailed explanation of all the features and functions. With that, you can identify the components required to complete the product. For instance, the production of a necklace will require:
- Thin nylon
- Crim beads
- Stone
- Clasp
- Crimping Pliers
- Wire cutters
- Jump ring
Besides this, it is also imperative to identify the human resources who will be involved throughout the product development process, such as the design, the marketing team and others, if necessary.
Prototyping
The prototyping phase, is simply the creation of a mockup of the product that showcases how the final product will look like. This stage is sort of an experimentation process, where you will have the liberty to try different versions of the product before deciding on the final design.
You should also note that prototyping differs as a process from one product to another. For instance, if you are introducing a new dish in the market, you can experiment with the recipe yourself until it is perfect. Similarly, if you are trying to release a new shade of lipstick as a home-based business, you can try different varieties.
However, if your product is far more complicated and involves other craftsmen, then your prototype stage will look different. For instance, if your product is for the IT industry, you will have to work with other experts to design the prototype. In fact, technical products like electronics require 3D rendering techniques or computer-aided design and drafting (CAD) software to create prototypes.
The 3D designs are then turned into physical products using either molds or 3D printing to test the product in real time. A minimum viable product provides the primary benefit of feasibility testing for the product. Accordingly, prototyping can come with certain costs as well.
Sourcing
Once you have visualized your product and identified the key resources that will be needed to create the product, you need to start sourcing for the required resources. In other words, you will be building your supply chain.
If you are testing the product on your own, such as a new dish or a cosmetic product, then you can get the ingredients or the products by yourself. Here, the list of resources you created during the product definition stage will prove to be beneficial.
On the other hand, if you are creating a rather complicated product such as a household accessory, then you will need help from trusted vendors in the industry to source the resources for the product. Initially, for the prototyping stage, you can start with inexpensive materials to make acceptable models of the product.
During this stage, you can also look for relevant stakeholders that can help you with prototyping—such as CAD engineers for a technical product, or software engineers if you’re launching an online product.
You can find suppliers both online or in person by researching the market. Many trade shows are hosted locally, where vendors and manufacturers showcase their products.
During the sourcing phase, you also have to consider whether you want to produce the final product in-house or outsource the manufacturing. For instance, many companies have started to outsource their website and app development to offshore companies. Each option comes with its own benefits, as well as disadvantages.
For instance, offshore companies allow entrepreneurs to access talent that is not available in the local industry, but there can be huge differences in the work ethic and time zones of both the in-house and offshore teams. On the other hand, in-house teams can align with the company’s values, but it can be far more costly to build a local team. Conduct a cost analysis for both options and decide accordingly.
Minimum Viable Product (MVP)
During prototyping, you also need to focus on creating your minimum viable product (MVP). Whereas the prototype is the initial version or mockup of your product design, the MVP is an initial functional version of the product that your customers can test.
By developing an MVP, you can use customer feedback to inform the upcoming iterations of your product. However, an MVP can not give you an idea of the market share you’ll achieve. Here are some great examples of successful MVPs.
For instance, let’s look at AirBnB. The AirBnB we know today was once AirBed&Breakfast. The idea was to provide accommodation to individuals coming to San Francisco to attend a design conference. The founders conducted the concept testing of the idea on 3 paying guests and today, it is one of the most revolutionary businesses across the world.
The 3 paying guests utilizing the services of AirBed&Breakfast at that time is an example of a minimum viable product. Accordingly, an MVP allows entrepreneurs to gather feedback about their products from potential customers, practically see how the product will pan out, and identify if there are any improvements needed before the official product is launched on the market.
Similarly, companies involved in software development release Beta Versions of their apps for this very reason.
Costing
The stages of the new product development process also includes costing. This stage also allows entrepreneurs to identify how much the overall product will cost in production and what should be the ideal price tag to earn a profit. Here are some questions you should ask during your business analysis:
- Is the product an everyday item? Or does it fall in the premium category?
- Will the product be produced with local resources or need rather expensive resources?
- Will the product be environmentally friendly?
- What sort of packaging and labels will be required?
- How will you rate and control the quality of materials?
- How high will your production and human resource costs be?
The sourcing stage will have already given you a good idea of the market prices and the vendors available in the industry to help you procure the materials or the overall product. Some of the critical costs you need to take into account include:
- Raw materials
- Factory setup
- Labor
- Manufacturing
- Shipping
- Import and duties (if any)
- Marketing
Initial Design
Once you have created multiple prototypes of the product and also applied your customers’ feedback during iterations of the MVP, you can finalize the design of the product and manufacture a batch of it. Here, you should utilize the actual resources that you aim to use for the product during mass production, so you can see how the product will look in reality.
Validation and Testing
Before launching the final product, you need to test the product, ensuring it works just like you have planned. Here, you can share the product with a far bigger audience as compared to that in the MVP stage and ask for actionable feedback for the product.
This stage is better understood as market testing which allows entrepreneurs to validate their product idea in the market.
In essence, always have potential customers use the product in real-life situations, so you can identify whether the product works well or not.
Develop Your Final Product
This is the most exciting phase of the product development process, as it involves the production of the final product that will be sold on the market. In this stage, you can apply insights from the MVP and prototyping stage, which may require you to go back to the prototyping stage and make some changes to the design. However, it’s better to find flaws and iron them out now because it will get much more costly later on.
The development stage may look different from business to business according to what the product is. For instance, the development of a physical product may involve the assembly of different components in the warehouse, whereas a website may involve writing and optimizing the code to run it.
Commercialization
The final stage in the new product development process is commercialization, which basically means launching the product on the market. Once the product is finally developed and tested, it is ready to be introduced to the market so that customers can buy it. Beforehand, you might have to secure required patents and trademarks to protect the intellectual rights of your product before the launch.
Product Launch
As an entrepreneur, you need to have a comprehensive product launch strategy to create enough attention in the market. You can’t simply put your product on a shelf or release a website and expect customers to flock to the product automatically. You need to create some ‘hype,’ either online and/or offline.
Marketing Your Product
As an entrepreneur, in order to win in marketing, you need to win the hearts of your customers! Marketing is the final gauntlet for boosting the sales of your product and attracting customers. Accordingly, once you have developed your product, you need to invest your time and efforts into building a viable marketing strategy to bring your product in front of the customers.
It’s fine if you do not have a roomy budget to push out expensive campaigns right out of the gate. There are a handful of go-to strategies that you can use in order to attract an initial crowd, such as:
- Creating a subscriber list to send product launch emails
- Working with small-scale influencers as part of an affiliate marketing campaign
- Promoting the product on platforms like Instagram and TikTok through self-created content
- Promoting reviews from the initial customers and utilizing word of mouth
- Reaching out to publishers to have the product featured in gift guides or “top ten lists”
- Aligning a marketing campaign alongside a holiday or days like Black Friday
You can also benefit from face-to-face events to promote your product such as trade shows, pop-ups, and exhibitions. Or you could spread the word with your local target market to create some hype about the product.
For instance, if you are studying and launching a product for people your age, you can start by promoting the product on your college campus, the gym, your circle of friends – the possibilities are endless. If you already have an established network, you can also get your entrepreneur friends talking about the product with their circles to increase word-of-mouth.
Accordingly, there is no ‘one-size-fits-all template’ for marketing a product successfully. No two products are ever marketed exactly the same way. However, the aim should be to maximize the output for the number of resources you input.
For instance, if you know your product does not align with the type of content a certain influencer produces, then it is better to invest your money elsewhere on social media.
Funding: How to Secure Funding for New Product Development
Funding is probably the biggest hurdle faced by any enthusiastic entrepreneur. You might have an excellent product idea and have created a successful prototype as well, but if you don’t have enough financial resources to support the development and marketing of the product, you could watch your dreams come crashing down.
Fortunately, there are various ways by which you can secure funding for your new product and continue your entrepreneurial journey. For instance, one of the most common ways to get business funding is to secure a loan from a bank.
Various banks offer various business packages. However, new businesses can find it notoriously difficult to get loans—especially if they are launching their first product in the market—as banks rely on your previous accounting records to see if you would qualify for a loan.
And even if an entrepreneur is able to secure a loan, it comes with various conditions (such as the repayment timeline, which can always be a lingering sword of Damocles for your business.)
Angel investors are also becoming incredible popular these days. They are basically wealthy individuals who support businesses by funding them. In return, they get a share of the equity of the business. This method is known as “seed funding.”
The angel investor evaluates the business plan as well as the predicted product usage in the market to forecast the potential growth of the company in the future. Even though companies often hand over some control over the business to the investor, these individuals often bring additional experience to the organization and can help an entrepreneur to further grow their product’s success.
There’s also a third option: venture capitalists, commonly referred to as VCs.
Understanding VCs
Venture capitalists are functionally similar to angel investors, and they are perhaps one of the most trustworthy stakeholders these days to secure funding for a new product.
Whereas angel investors are sole individuals, venture capitalists are large corporations that primarily invest in small businesses, as a way to earn financial gain. In other words, venture capitalists strictly look for business opportunities to invest in. They prioritize the business plan and the ability of the product to survive in the market.
In return for the investment they make, they require a certain percentage of the company’s shares. However, they can sell their shares back to the entrepreneur if the investment return seems profitable.
The biggest benefit of venture capital is that early-stage companies that fail to get loans from banks can rely on VCs to help with their funding. Startups are not required to provide any assets or cash flow in return for VC funding, as opposed to securing a bank loan. Another crucial benefit of VC is that they can help with mentoring and networking services as well.
A VC investment can come in a variety of stages. The pre-seed stage for example allows the business to enroll in an accelerator program and get early mentorship from the investors on their product ideas.
On the other hand, the seed funding stage provides funds to the business to launch its first product on the market. This early-stage funding further builds up the capacity of the business to ramp up its production and sales in the market.
There are numerous ways to approach a VC. Usually, these corporations will open up rounds throughout the year, allowing the companies to submit their pitches and business plans. If a VC company is interested in a ‘candidate’, the investor may then conduct a thorough investigation and undergo meetings to better understand the product idea in detail.
Accordingly, entrepreneurs need to be well-versed with regard to their products before looking for VC funding, so they can defend their product idea, withstand the competition in the industry, and gain the trust of the investors.
That’s A Wrap
So there you have it, a high-level guide to developing a new product! I know that product development can seem like a daunting task, but it doesn’t have to be. By following the steps outlined in this post, you can take your great idea and turn it into a reality.
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