You can start small but you cannot remain small as an entrepreneur. This is why small business managers are always looking for growth strategies to take their businesses to the next level. New product development (NPD) is one of those business growth strategies according to the Ansoff Matrix. These strategies include:
- Market penetration– Pushing the existing products in the existing market. (Risk factor- 2)
- Product development– Developing new products and selling them within your existing market. (Risk factor- 4)
- Market development– Selling your existing products in a new market. (Risk factor- 8)
- Diversification– Selling new products in a new market (Risk factor- 16)
Product development and launch are risky and costly processes. Market penetration is much easier and less risky. It should be done after the business has penetrated the existing market using the existing products to an optimum level.
There are several steps involves in new product development and successfully launching it into the market. This is called the product development life cycle.
New Product Development process
- Product planning and strategy.
- Product design and development.
- Product testing/ piloting/ pilot testing.
- Getting into the market.
- Continuous improvement.
Let’s discuss each in depth.
1. Product planning and strategy
This is where you decide that you need to design and launch a new product. This, as we pointed out, is done as a business seeks to grow its portfolio and increase its revenue.
To an existing business, the managers might realize that the existing products are becoming obsolete. This is because customers keep changing their tastes and preference. It might also be because of competition from new technologies in the market.
Products have what we call the product life cycle (PLC). They include the following:
- Introduction phase
- Growth phase
- Maturity phase
- Aging phase
As products get into the maturity and aging phase of the PLC, the prospects of growth are limited. The company now needs to develop a new product and push it into the market. As the cycle continues, the business should develop more and more products.
This means that the business should have a product in each cycle. It should have new products in the introduction and growth phase as well as old products in the maturity and aging phase.
The above reasons necessitate the development of new products.
After realizing that you need to develop a new product, it is good to get an NPD strategy. This is because the NPD process is complicated.
This calls for an integrated NPD strategy. This is one that involves all the departments in the firm. An inter-departmental team should be formed to plan ad strategize on the NPD process. After all, all of them will have a part to play in the process.
The planning process should ensure that the following resources are available for the NPD process:
- Human resources– You will need people with the expertise to develop the new product.
- Financial resources– As we said, the product development process is costly. You need finances to carry out research and development as well as product design, launch marketing, and after-sale services.
- The right technology– Products need the right technology to develop. Do you have the machinery that is needed to develop the intended product?
The strategy the firm is going to use to enter the market after the product development process is complete should be set out at this stage.
Assign roles to various individuals and set a budget for the same. After the planning process is complete and the strategies are laid out, it is time to get to work.
2. Product design and development
At this stage, the actual product development is undertaken. The developers will now implement what the inter-departmental team planned and strategized.
The actual product design is made as per the plan. The development process then starts under the watch of the product development leader.
The following is important at this stage:
- A lean product development strategy should be adopted- This is one that takes care of the cost. If the development cost is high, the unit price will also be high for the consumer to purchase.
Pricing being one of the important factors in the marketing mix should be an important consideration.
- An agile product development strategy should also be adopted- The developed product should take into consideration the future changes in market preferences. It should be easy to redesign and adapt to market changes.
- Differentiate your product– The product should have extra features from what the market already has. This is a differentiation strategy. It is one of the generic business strategies according to Michael Porter.
If your product is differentiated, you can charge a premium in the market. The product will also have a competitive advantage since customers are always seeking for new product features.
- Develop with the target market in mind– This is called Market Orientation. Think of the target market and develop what they want, not what you want.
This means that the product is already something people are demanding but with some extra features.
Two important things to consider:
When developing a new product, the following is crucial to consider:
- Usability– Is your product usable? Does it perform as expected by the customer? Is it easy to use? Does it present life or health dangers to the user? What is its useful life in years? Does it easily break down? If yes, what is the cost of the service?
- Branding– Branding is important in attracting a potential buyer to the product. The branding should show what the product is about. The customer should know what to expect from the product by just looking at it. These are called brand messaging.
The colors you use affect your brand. After all, colors communicate. What you write in that limited space should convince the prospect to buy your product and not that of the competitor.
Produce a better product than your competitors. This is what Seth Godin calls designing the marketing into the product. You can do this by getting your competitors’ products, analyze them, and improve on them. Create something that seems different and one that is superior in functionality.
3. Product testing/ piloting
This is also called pilot testing. It is where you introduce a prototype into a small controlled market to test its viability.
A prototype is an early sample built to test a concept or process. The initial product that you have developed will act as the prototype for piloting.
Sell the product to around 100 people and set up a feedback mechanism. Seek to understand what the customers are saying about the product. These views can be used to improve the product before you launch it.
Testing ensures that the product has what the market needs. It incorporates whatever you might have forgotten to put in during the product development process.
The following tests should be done:
- Technical test– This is a test of the usability of the product. It seeks to understand whether the product is performing as expected.
- Commercial test– This seeks to understand whether the product can be sold commercially. Is this a product people want? Is this the right market and the right price?
Observe the product for several months and see whether it works as expected. The following are important to analyze:
- Customers’ complains– Customers complain when their expectation is not met. They will let you know what is working and what is not.
- Break down rate– How many products break down and at what stage?
- Product return rate– encourage the customers to return the product if it is not working. When the customers return the product, its performance is pathetic.
- Price complains– How many customers said that the price is too high? If they are too many, you need to revise the price.
- Product reviews– How many people gave a positive review? (4 or 5 stars). How many gave a negative review? (1,2 or 3 stars) If the latter is more than the former, you need to work on the product further.
- Is the target market demanding the product? If not, change your target market.
After the test, analyze the feedback, and make the necessary changes. The new product will be the absolute will of the target market.
4. Getting into the market
After making all the changes, it is time to launch the product for mass sales. You can do this through a ceremony that attracts media attention or just quietly without creating the hype.
At this stage, you will need to do the following:
- Get distribution partners. This can be a chain store or just local retailers. These partners will help take the product where the potential customers are. Remember, if the customers cannot get the product at their convenience, they will buy from your competitors.
- Do intensive advertising– At the introduction phase, you need to let people know that your product exists. This is done through advertising. Use various channels that you deem effective to reach your target market. The advertising message should be convincing. It should magnify the benefits and the unique selling proposition (USP)
- Get a professional sales team– A sales team is an important part of every business. They are the ones who push the product to individual prospects.
This is different from advertising because it focuses on individuals. It is more personal and this makes it more effective. Continuously train the salespeople because they are the face of your business. If they fail to act professionally, it is your business reputation that is at risk.
- Set up the necessary business systems– This is where you set up everything that is necessary for the management of the product in the market.
Customer relationship management (CRM) systems, quality control systems, accounting systems, inventory management systems, etc. are all systems that you should set up.
Important also to set up is an after-sale services system. You need to provide these services to create loyal customers with high lifetime value to the business.
Successfully introducing a product into the market is never easy. It needs a coordinated approach and professional management.
5. Continuous improvement
As you sell more products, you will continuously gather feedback from the verbal and non-verbal reactions of the market. You need to keep improving the product to suit the market needs.
This is why we said that the product development process should be agile to allow for continuous development.
As the product age, market preference will also change. You need to improve your product to suit the new market preference.
Final thoughts on product development
As the product moves from one phase of the product life cycle to the other, you need to go back to the drawing board and plan to develop another product altogether.
Therefore, product development is an important part of business development. It is an ever-ending process. As we said, a business should have products in all phases of the PLC.
There you go, that is how to develop new products and introduce them successfully to the target market. I wish you all the best in all your business endeavors.
Founder/ C.E.O- Wealthy Wolves Consulting & Giimark Ltd/ Best-selling Author/ Speaker.