15.product development process

8/22/2019 15.Product Development Process

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There are five key stages in the lifecycle ofany product or service.

Development - at this point your product orservice is only an idea. You're investingheavily in research and development.


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Introduction - you launch your product or

service. You're spending heavily onmarketing.


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Growth - your product or service is establishing itself.You have few competitors, sales are growing and profitmargins are good. Now's the time to work out how youcan reduce the costs of delivering the new product.


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Maturity - sales growth is slowing or has even

stopped. You've been able to reduceproduction and marketing costs, butincreased competition has driven downprices. Now is likely to be the best time toinvest in a new product.


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Decline - new and improved products or

services are on the market and competition ishigh. Sales fall and profit margins decline.Increased marketing will have little impact onsales and won't be cost-effective unless newmarkets are identified.


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Identifying where products or services are in

their lifecycle is central to your profitability.Effective research into your markets andcompetitors will help you do this.


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You can extend the lifecycle of a product orservice by investing in an "extensionstrategy". You could:

increase your promotional spending

introduce minor innovations - perhaps byadding extra features or updating the design

seek new markets


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But ultimately this only delays a product or

service's decline.

Ideally, you should always have new productsor services to introduce as others decline sothat at least one part of your range is

showing a sales peak.


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There's a lot at stake when developing a new

product or service. To minimize risks andallocate investment and resources wisely, youshould consider a number of factors:


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Will your new product or service meet customers'specifications? For example, consider its design,ease of use and performance benefits.

How technologically-feasible is the product orservice? Can you meet the design, resource andmanufacturing requirements?

Are you clear about what you hope to achieve with

the new product or service? Does it meet thestrategy outlined in your business plan and play toyour business' strengths?


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New products and services have to offerbenefits that meet your customers' needs.You need to discover what these are.

Market research, using techniques such as

surveys and focus groups, will help you dothis.


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Remember that although the end user of yourproduct or service might be your most importantcustomer, you may have to take the needs of otherparties into account.

For example, if you were planning a new DIYproduct, you would need to consider how retailerswould stock it as well as how it would benefit

professional decorators. If you're creating a toy,you should consider what parents as well aschildren will think of it.


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Your competition.

Not only must you meet your customers'needs, you have to do so in a way that isbetter than the alternatives offered by thecompetition.


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Your new product or service needs a unique sellingproposition - a feature that makes it stand out inthe marketplace. Before entering the market youneed to determine:

how customers needs are currently met

why customers would choose your product orservice rather than the competition's, both now and

in the future what risks you are prepared to take to launch your

product or service into this market


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Establishing a pricing strategy for a newproduct or service is an important part of thedevelopment process. You should considerpricing the moment you decide to take anidea forward as it will determine how much

you can afford to invest in the project.


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You will need to take the following factors intoaccount:

The benefits - or value - to the customer of yourproduct or service compared with what thecompetition has to offer. Will the price be one thatcustomers are prepared to pay?

Whether or not you're first to market, is your

product or service revolutionary or are youfollowing a market trend?


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The selling channels you want to use, which will

affect your promotional spending and distributioncosts.

The speed with which you want to establish yourproduct or service.

The expected lifecycle of your product or service.

Whether you are covering your costs.


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An effective development process forproducts or services should be divided into anumber of key stages:


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Idea generation - to capture new ideas. Idea distillation - to screen out those ideas notworth taking forward. Concept definition - to consider specifications

such as technical feasibility and market potential. Ifyou're planning a new product, you shouldconsider the design process now.


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Strategic analysis - to ensure your ideas fit intoyour business' strategic plans.

Concept development - to create a prototypeproduct or pilot service.

Test marketing and finalizing the concept - toensure your product or service can be modifiedaccording to customer, manufacturer and support

organizations' feedback. This means deciding thebest timing and process for piloting your newproduct or service.


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Product launch - the trickiest stage. Beforesetting a date you must determine how to sell,promote and support your product or service. Butany decisions to delay your launch should be

balanced against the danger that your competitorswill beat you to market.

In practice some of these stages may overlap, but

the presence of a staged process will help keeptiming and costs under control.


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Every potential new product or service requires a

dedicated development team.

In creating your team you need to include peoplewith a variety ofskills. For example, as well as acreative ideas person you may also need a technicalexpert, a marketing specialist, someone who can

source components and someone who understandsthe supply-chain difficulties you could encounter.


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There are many forms ofeffective team working and theright one for you will depend on your business' needs.For example, team members might:

work as a unit dedicated to one project, reporting to aproject manager

work exclusively on one project but remain in separatedepartments reporting to department heads who areunder the project manager

work on several projects at once with both adepartment head and project manager to monitorprogress


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Developing new products and services is aninherently risky process. You must plan anyinvestment carefully and strictly control yourcosts.


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You need to:

factor any future investment in products andservices into your strategic business plan

plan exactly where this investment will bedirected

justify the expenditure on every project manage your costs


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Phasing new product development

One way to minimize your risks is to phaseinvestments in projects. By reviewing a project at

the end of each phase or stage of development,you can identify products or services that areunlikely to be successful before resources arewasted. If the product or service fails to meetestablished criteria, the project is ditched. If itmeets them, resources can be allocated to reachthe next stage.


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Finding support

A range of government grants and tax breaksis available for research and new productdevelopment.


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Cost control

It's essential to keep a close eye on costswhen you develop new products and services

to avoid them spiraling out of control. Youshould:

estimate development costs in advance

monitor expenditure throughout thedevelopment process

introduce phased investment


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There are two main ways to estimate costs:

a top-down approach where you consider previouscomparable projects and use them as a benchmark

a bottom-up approach where all team members agreeon the costs they expect to incur with one projectmanager, who will then estimate the total cost

Remember that your costs could include staffing,materials, technology, product design, market research,prototyping and incremental overhead costs.


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Project managers are essential to ensure thesuccessful development of new products orservices.


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They'll be responsible for:

controlling costs and allocating resources

drawing up the key parameters for the product orservice's specification

coordinating the product development team

timetabling the development process

troubleshooting


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Timetabling the development process

Your project manager should draw up acritical path for the completion of key tasks.SMART (specific, measurable, agreed, realisticand time-limited) objectives can help tocontrol and coordinate the developmentteam's advance along this path and stagescan be used to monitor progress.


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Why new products fail - and succeed 95% failure rate in the United States (Europe rate is

90%

Failures - ignoring or misinterpreting market research,market size over-estimations, sub-optimal

distribution performance, poor design, incorrectpositioning, development costs, ineffective advertising,pricing issues, and competition fighting back

Successes - better understanding of customer needs,higher performance to cost ratio, head start againstcompetition, contribution margin, budget, internalteamwork, top management support, technologicaland marketing synergy, execution and marketattractiveness


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Develop New Products and Services (2009).http://www.infoentrepreneurs.org/en/guides/develop-new-products-and-services/

15.product development process

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