New Product Development Process With 3 Unique Examples! (Must Read)

Hello guys, I am back with yet another super boring post and here I am going to explain new product development process with some practical examples, when I say “practical” well I mean it seriously! 😉

So let’s get down to the topic!

There are two approaches or processes that can be used to develop new products, first one is the way how academics think it should be done and second way is, how practitioners (like me 😉) think how it should be done!

In this article I am going to provide you guys, a blend of both these approaches with practical examples (three product examples) of how you can do a typical product development from A to Z.

New Product Development Process with 3 Super Cool Examples!:

Here in this post I have provided three different products examples and in coming posts I will be adding more examples of new product development process!

I am going to show you guys how to develop the following three products, from scratch, that includes all costs, design, price, packaging material, packaging machines, raw material so on and so forth!

Here is how our three new products (examples) looks like!

And here is how it looks like in box packaging

And here is how carton box packaging of these products looks like!

K let’s start with the first step & second step of New Product Development Process (NPDP)

Idea Generation & Idea Screening:

Having launched over couple dozen products (some quite successful and others just doing fine), I have this brand new idea, I saw these sweets (picture below) available in bulk in market offered at reasonable price of just $0.80 per kg, these sweets come in all different shapes and colors as you can see and with mint taste that kinds of feel cool in the mouth, actually these sweets aren’t much different than those famous Polo candies with holes.

Considering my experience (over 7 years now!) and gut feeling I have strong belief that branding this product with a new pouch/sachet packaging design, theme all that will make it one good hit within its target market that are children (between age 7-16).

And since these sweets are being sold in bulk only where they are mixed with other sweets and retailers buy them and sell them in kilogram packs, I haven’t seen these sweets being available in small pouches/sachets of 18 or 20 grams, so there is an opportunity there.

Second these sweets don’t weight that much, means having two pieces of these sweets barely makes one gram in weight that means you can pack at least 35-36 pieces of these sweets for pouch/sachet packing for net weight of 18 grams.

Coming to net profit from this product, consider the following costs first!

Per gram cost of sweets is $0.0008, I have calculated this by dividing per kg cost which is $0.80 by 1000 grams.

And so 18 grams of this sweet will cost $0.0144, I have calculated this by multiplying per gram cost into 18.

Now as per my knowledge of the industry one kg of sachet packaging material costs around $4, where one empty sachet weights around 2 grams, that means cost of one empty sachet material is $0.008, I have calculated this by dividing per kg cost sachet/pouch packaging material which is $4 by one thousand, which gives me per gram cost of sachet/pouch packaging material and then I multiplied it in 2, to get per sachet/pouch cost.

The math may sound boring (hopefully not overwhelming! 😲), I know, but just bare with me! Lol

Now since per empty sachet/pouch cost is $0.008, then a bundle of twelve empty sachets/pouches cost will be $0.008 X 12 = $0.096.

And now if we put 18 gram of those sweets into those empty sachets/pouches, then per sachet cost will be $0.0144 (18 grams sweet cost) + $0.008 (one empty sachet cost) = $0.0224

And so 12 non empty sachets cost will be $0.0224 X 12 = $0.2688

Well so far, If you didn’t get the math, then do let me know about it in comments or just message me!

Though I suggest that you reread it couple of times, it’s easy! Winks!

Now I am about to calculate the packaging box cost, a box where you will put 12 sachets in it, check the above pictures, I am referring to that box.

As per my industry knowledge and experience a single such box will cost around $0.17, that means a box along with non empty dozen sachets/pouches will cost $0.2688 + $0.17 = $0.4388

Now if I want to make a carton box which contains 24 such boxes, then again my experience suggests that such a carton box will cost me around $0.50 and if I divide this cost on 24, I will get per small box cost (I am referring to those 24 boxes that will be put in this carton box).

That cost is, $0.50 divided by 24 = $0.208, so small box with non empty sachets will cost me $0.4388 + $0.208 = $0.6468

This cost $0.6468 is the total cost of converting those sweets into branded product, with its own packaging sachets, box, carton.

Now let’s get to the next step!

Concept Testing:

Coming to this bit, well since the core product (sweets only) which is being sold in bulk is already doing well, then no wonder it will do well here too!

Target market is clear here, kids between age 7-16 plus if you are not sure whether kids will like it or not, try it in some school and you will get a definite answer!

Business Analysis:

As we have already calculated the manufacturing cost of the product, which is $0.6468 per box that contains 12 filled sachets that means even if we sell each sachet/pouch for just $0.10 (retail price), it will earn a total of $1.2 per box.

That means we can easily sell this product (box) at $0.80 to wholesale, where wholesale sells it to retailers at $0.85-0.90 and retailer takes the rest of the cake.

Selling at $0.80 to wholesale means we will earn $0.16 profit per box, while wholesale will earn between $0.05-0.10 per box and retailer will earn between $0.30-0.35 per box.

Our profit per box which is $0.16, is 25% of manufacturing cost (which is $0.6468) not bad!

Now it is obvious that you can’t cover all of your expenses like labor cost, admin cost, marketing cost, fixed costs, variable costs etc with just these three products, which means you will need at least a dozen such products to earn some serious profit.

In coming articles I’ll be doing exactly that, giving you around a dozen product ideas, that will hopefully help you in launching a brand with a dozen products under it.

Now let’s move to the next step!

Product Development:

To develop these three products successfully, you will need to invest around (at least) $17000, that’s the minimum you will need, now let’s see where you will need to invest this money.

Note: I have already included all other relevant costs, in case you want to launch this business!

• You will need to invest $1700 to buy packaging machine.
• You will need to invest $1000 to design, manufacture sachets/pouch packaging material.
• You will need to invest $200 to buy those sweets in bulk
• You will need to invest $500 to buy (and design) carton packaging
• You will need to invest $900 to buy (and design three different) boxes for putting sachets/pouches in it
• You will need to invest $700 in miscellaneous items like carton tape etc that you may need to utilize in packing, cash book, sales vouchers, data entry software, computer, office furniture etc.
• You will need to invest money in the market as, as you may need to do credit, that means the more target market area you penetrate the more money you may be required to invest in the market.
• You may need to buy a vehicle to make supplies to your target buyers in all potential market regions, that will cost you around $7-8000.
• You will need to rent out place for manufacturing at nearby industrial zone, which again will require you to make certain investment.

You will also need some money to do pamphlet, booklet advertising, it is quite likely that due to budget constraints, being a small startup you may not have huge financial backup to cover all advertising channels therefore print advertising, internet marketing may be the only options you may have.

Once you are able to cover all these expenses only then you will be able to develop the product as required and will be able to market it efficiently & effectively.

Test Marketing:

Before going for full market coverage I believe it is quite necessary that you do test marketing, it is likely that you may identify some problems that you may have not seen while planning the whole thing.

Problems like product is too insignificant in terms of net weight and so you may need to increase net weight or you may be required to increase or decrease certain color in your product (sweets) perhaps you may receive such suggestions from your distributor, wholesaler so on and so forth.

Commercialization:

If the product performs good at test level then you should go for commercialization on large scale, like targeting the whole country or specific state of that country by developing weekly route plans etc.

Remember the more you penetrate the market the more investment you will need.

Review of market performance:

Here you will need to keep check on market performance of the product in terms of key performance indicators (KPI’s) like sales, demand, return, customer satisfaction, middleman satisfaction etc and taking corrective measures afterwards.

Repeating this process over and over until desired results are achieved!

Finally let’s talk about important things in manufacturing you will need to make all of this happen.

Number one is the machine, I mean the packing machine, that will do all pouch/sachet packing for you, here is how it looks like:

And here is how it works!

The machine in the video is a bit different, due to being made by a different company, though the function is same!

That’s it!

I will be adding more similar articles in coming days so don’t forget to subscribe to this super kick-ass website 😉😈 and yeah do me a favor, share this article with your friends, colleagues on Facebook, Twitter etc.