Product development strategy

Building a plan

Successful new product development strategies rely on several aspects. First, you'll need the relevant skills and resources to design, make, test, package, cost, price and market (either in-house or by partnering). Second, your new product concepts should aim to enhance your existing product rather than replace the original, encouraging customers to purchase multiple products. Finally, a successful product development process should include:

• A basic feasibility test to check that you can sell your product at the price or volume necessary to profit.
• Gain a competitive advantage by checking that your product idea is hard to copy, so other companies can't launch a similar product line or service (at least for some time).
• An effective distribution chain, route to market and any approvals, certification or regulations you need to comply with.
• An internal product team to manage each stage. Create a cross-functional team to improve product innovation and provide solutions to any challenges faced during product development.
• A scheduled stage where you release your product creation. Often businesses will release a ‘minimum viable product' (MVP) for early market testing and then make any necessary changes. Many companies release new product offerings knowing that it's not the last iteration.
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Invest time in idea generation with your development team. Idea screening can help identify any new products or services that will complement what you currently have to offer and be something that you know will appeal to your customers.

Start with research

Whether you are entering a new market, filling a unique niche, or improving your offerings in an existing market, your product development strategy must include thorough research - and customer research is one of the most proactive product development strategies you can undertake.

 Ask for customer feedback on what else they may want now or in the future. Sounds simple, but often business owners are so busy working that they forget to look ahead. Suppliers, industry groups and your networks are all excellent sources of direct research.

Other research includes:

• Spending time online reviewing online research, competitors, whitepapers or industry news.
• Setting up a group of target customers (called focus groups). Then, facilitate a workshop to understand what they think and gain a deep understanding of consumer needs and motivations.
• Encouraging customers to take part in an online survey you create using Survey Monkey or Google Forms.
• Testing the waters via your social media networks by starting conversations or building an online community of people to feed new ideas for your product development.

Once you have confirmation of market need, evaluate risks by thinking about:

• The likely volume of sales, as well as the marketing and the sales costs per sale to ensure a satisfactory return on your investment.
• Whether your target market is growing (good) or shrinking (bad) and any other foreseeable changes in demand that could affect the success of your product.
• The competing, existing products in the market, as ideally, your new product offering is different and unique.
• If your competitors could replicate your proposed product or service easily, and therefore you may need any intellectual property protection (trademarks, patents, etc.).
• Which distribution channels you plan to use.

Increasing capacity

Consider the implications of your new product development strategy. Do you require new equipment, facilities or staff to meet consumer demand? You'll need to identify the impact on your finances in your product development strategy. Will you need to allocate funding to increase capacity (working capital for additional staff or materials), equipment or infrastructure?

Test

Next, begin marketing testing. Develop a prototype or have a soft product launch to test your product ideas with a segment of your target audience. Use the collected data to iterate and refine your product development strategy. You may choose to launch your offering to a beta group or release it at a discounted rate in return for feedback. Product testing is a great way to convince customers to try your product concept, who might not have otherwise bought it at full price. Part of a great product development strategy is also to seek input from your product managers and consider what internal changes, support or training are required for success.

Launch to market

Now, you need a working marketing strategy. First, build intrigue and momentum by starting a promotion around 6-8 weeks before you intend to launch your new product or service. Consider a strategic roll-out to select customers or industry commentators who can help amplify promotion through their own networks and platforms. Offering early-bird or limited offer pricing, or a further incentive with purchase, is an excellent market development strategy to encourage uptake. Second, prepare necessary content that will support your launch, such as demos, downloads and videos.

Successful businesses are those that are continually looking for ways to innovate. This is an essential component of their growth strategy. A proper strategy distinguishes your brand from the competition and, at the same time, helps you become a market leader. So whether it's a new product or service, or one you've come up with that's designed to complement an existing product, make sure you consider all the above carefully to maximise the chance of success of your product development strategy.

Next steps

• Evaluate where new opportunities exist to expand or upgrade existing products.
• Perform current market research to test viability and to review industry trends and competition.
• Prototype and test your idea with a market segment to gather feedback.
• Decide if you need intellectual property protection from the NZ Intellectual Property Office.
• If you require investment to increase capacity or expand your facilities, talk to your bank manager or business advisor to see what options are available.