Look before you leap with product development
Product development can be a tricky process. According to Harvard Business School professor Clayton Christensen, 30,000 new products are brought to market each year, with roughly 95% going on to fail. Developing and introducing a new product or service comes with its own set of risks, including:
- Failure to generate demand
- Operational risks such as production delays
- Price risks, thereby sparking a price war with competitors
- Poor customer experience
- Design flaws, poor testing or a lack of quality control
- Damage to your brand’s reputation
- Problems with inventory such as shortages or excess in stock
- Failure to comply with federal laws and regulations
- Safety concerns
- Poor timing.
These might seem like big challenges, but with the right kind of new product development (or NPD) to fit your business’s needs, you can greatly improve your chances of succeeding.
Proper product development can help you to better understand customer requirements and expectations. It can also help you avoid launching a product that is poorly-designed, from misreading your target audience, and from exposing your business to unnecessary threats from competitors, as well as stop you from applying incorrect prices to your products.
Here are some tips you can use to help ensure the new product development process is a smooth one.
What kind of product or service do you want to develop? What kind of benefits will it provide? How does it stand out from the rest?
Most business owners find themselves struggling to push past the first stage of the new product development process because they expect to instantly strike gold with a product idea.
But rather than feel pressured to come up with something shiny and new, it’s important to keep in mind that the best product ideas usually come from building on an existing product or service. Try to base your idea on something people need rather than what’s cool or trendy at the moment.
But above all else, protect your ideas. The kind of IP protection you’ll need depends on what product or service you intend to create. Any discussions you have with anyone about your idea should be kept private, or even have them sign an NDA or confidentiality agreement.
It’s also ideal to write up a business case to justify why your business should proceed with this product idea. Be clear and concise: Define what the problem is and what solutions your product has to offer. Predict what risk and outcomes might be expected, as well as provide an estimate of time and costs.
Do your research
The prototype phase of the new product development process allows you to identify design flaws before moving on to production.
Prototyping will differ from one industry to the next: While creative industries allow for more DIY prototyping, other businesses will work with a third party to create a prototype.
Search online for services in your area using the terms product designer and industrial designer. If you have the skills in house, create a prototype using software like SketchUp, Blender or FreeCAD. Because 3D printing has become so commonplace, prototypes can be produced more affordably and in half the time.
Once you’ve received a prototype, test and re-test it. Let others use it. Toss it around and drop it on the floor to see if it can withstand wear and tear. Release an early version of your product and improve on its design via feedback from customers.
Prototyping involves plenty of revising and experimenting, so don’t expect to have things all figured out on the first try: You might go through 10, 20 or even 50 versions before settling on a final product.
Always be testing
The new product development process is complex. That’s why it pays to plan thoroughly before starting the design process. Have a clear idea of what your product is, how it works and how it will appeal to customers. Make detailed sketches of your product, with labels explaining its features. Use your design to create a list of components you’ll need to build it.
Although your product design doesn’t have to look too professional at this stage, you can hire an illustrator to produce something if you’re not confident enough in your own drawing skills.
At this point, you should also consider what kind of product you’re creating: Is it environmentally friendly? Is it for everyday use or for special occasions? The retail price, packaging and overall quality also need to be taken into account.
Once you’ve settled on a prototype, it’s time to start building your supply chain, where you’ll collect the materials and vendors needed to help produce your product.
Attempt to diversify your supply chain by contacting multiple suppliers, especially if your product consists of different materials. Look online or visit in person. Compare the advantages and disadvantages of manufacturing your product locally or overseas. Remember to compare costs and to have several backup options in case one of your suppliers falls through.
Some of the best recommendations come from referrals. Ask for connections within your professional networks. Look for people who have had success within your industry. Join Facebook groups or other online communities when building your supply chain.
Even if contact suppliers that can’t help you, they can always point you in the direction of someone who might be a better fit, and will most likely have a ton of great contacts to share.
Cutting through the costs of product development
By now, you should have a better idea of how much it will cost to produce your new product. Track all the costs you’ve accumulated by putting them in a spreadsheet, breaking down each additional cost, including raw materials, shipping costs and manufacturing costs.
Remember to factor in shipping fees, import fees and anything else you need to pay, which could have a significant impact on your Cost of Goods Sold (COGS). You can also include separate columns for quotes obtained from other suppliers. Once your total COGS are calculated, you can start to devise a pricing strategy for your product. You can then subtract the COGS from that price to get your potential gross margin (on each unit sold).
Learn more about Cost of Goods Sold and How to Calculate It.
Now it’s time to market your product. But to actually get people buying, you need to create a marketing strategy that stands out. Send out emails to your subscriber list. Enable Instagram Shopping and collaborate with influencers. Make use of Google’s My Business option.
Plan social media campaigns and utilise good SEO to increase your business’ ranking on Google. Target the right demographic for your product on the right platform. For example, Facebook is great for attracting older customers, while Instagram and TikTok are favoured by a younger user base.
Also consider the size of your product launch: Will it be small-scale or do you want to go all out? If you have enough in your budget, your product managers can hand the job of marketing strategy over to a third party.
Monitoring your product development life cycle
Product development does not end after launch. Rather, it’s an ongoing process. Identifying where your product lies in the Product Development Life Cycle is crucial when it comes to maintaining your business’ market share and profitability in the long term.
Stages in the product development life cycle include:
- Development – brainstorming ideas and investing in research
- Introduction – launch product and accompanying market campaign
- Growth – product is establishing itself in the market with few competitors, with growing sales and healthy profit margins. Devise plans on how to reduce costs of delivering new product
- Maturity – sales begin to slow or stop entirely. Production and marketing costs have been reduced, but prices have been driven down due to increasing competition. Time to invest in a new product.
- Decline – competition is now high, with new and improved products on the market. Sales now falling and profit margins declining. No amount of marketing will have an impact nor is it cost-effective unless new markets can be discovered.
An extension strategy could improve your product’s chances of survival, which might include an increase in promotional spending, updating its design or finding new markets. But keep in mind that this only delays the inevitable decline stage in your product’s life cycle. That’s why you should regularly introduce new products or services as part of your range.
For an overview of business diversification and how product development can play a role in it, see Business Diversification: What Are the Opportunities?
Growing a business with product development
Jasmine Scarr implemented product development to grow her business, Bella Bronze Tan. After establishing tanning salons on the Gold Coast and Brisbane, she turned to product development as the next logical step for growth. She began developing spray tan formulas and blends in 2011, before launching her own product in 2014. Since then, she has developed a range of tanning products sold through retail and wholesale channels.
Her biggest lessons from the product development process are the time it takes to develop products and the importance of protecting your intellectual property.