Step 4: Business Analysis
At this point in the new product development process, the marketer has reduced a potentially large number of ideas down to one or two options. Now in Step 4, the process becomes very dependent on marketing research as efforts are made to analyze the viability of the product ideas. (Note, in many cases the product has not been produced and still remains only an idea.) The key objective at this stage is to obtain useful forecasts of market size (e.g., overall demand), operational costs (e.g., production costs), and financial projections (e.g., sales and profits). Additionally, the organization must determine if the product will fit within the organization’s overall mission and strategy. Much effort is directed at both internal research, such as discussions with production and purchasing personnel, and external marketing research, such as customer and distributor surveys, secondary research, and competitor analysis.
Step 5: Product and Marketing Mix Development
Ideas passing through business analysis are given serious consideration for development. Companies direct their research and development teams to construct an initial design or prototype of the idea. Marketers also begin to construct a Marketing Plan for the product. Once the prototype is ready the marketer seeks customer input. However, unlike the concept testing stage, where customers were only exposed to the idea, in this step the customer gets to experience the real product as well as other aspects of the marketing mix, such as advertising, pricing, and distribution options (e.g., retail store, direct from company, etc.). Favorable customer reaction helps solidify the marketer’s decision to introduce the product and also provides other valuable information, such as estimated purchase rates and understanding how the customer will use the product. Reaction that is less favorable may suggest the need for adjustments to elements of the marketing mix. Once these are made the marketer may again have the customer test the product. In addition to gaining customer feedback, this step is used to gauge the feasibility of large-scale, cost effective production for manufactured products.