6 Phases in New Product Development

by Eric Dontigney, Demand Media

The term "product" tends to summon images of physical merchandise carefully arranged on shelves, yet anything a business offers in exchange for money qualifies as a product. A heating and cooling specialist, for example, offers furnace and air conditioning repair as a product. In the same vein, anytime a business considers building a new kind of physical merchandise or offering a new service, the business engages in new product development. For a business owner, understanding the basic steps in new product development can minimize risks while maximizing the chances for success.

Idea Generation and Screening

Every new product starts its life as an idea. In some cases the idea comes out of a brainstorming session, while other ideas develop as a direct response to a need in the market or a response to a competitor product. Once the idea generation phase ends, the ideas must undergo a screening process to weed out all but the best ideas. The screening process typically includes a variety of general projections including cost, market reception and profitability.

Concept Development/Testing

The concept development and testing phase seeks to gauge consumer reaction to the overall idea of the new product. Large companies often use focus groups to collect data about whether consumers would buy the product, how often they might purchase and acceptable price levels. Small-business owners can use focus groups, though informal questions to existing customers can also yield valuable information about interest in a new product.


If the new idea survives the concept development and testing phase, a business needs to put together a formal analysis of the new product's viability. In general, this analysis encompasses production costs and expected profit margin, as well as total market size for the product. Businesses must also weigh the product's position within the business brand.

Product Development

Product development calls for the actual creation of a product, such as a working model or running a short-term test with a new service. Most businesses also consider and develop marketing materials during this phase. The product development phase often follows a rinse-and-repeat model of refining the product and marketing, then testing again with customers or focus groups.

Market Testing

In short, market testing takes the product and offers it to a limited group or geographic region. Large companies may also use computer simulations to mimic customer responses. For small businesses that typically cater to a small geographic region or a specific market segment, the market testing phase is often skipped.


The commercialization phase consists of making the product available to the customer base at large and launching a marketing effort to support it. Commercialization includes producing enough of the product to cover initial demand or having sufficient staff to provide the new service.

About the Author

Eric Dontigney received a Bachelor of Arts in philosophy with a psychology minor. He has been writing for more than 10 years and presently works full time as a writer. Most of his writing work is done for private clients.

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