Did you know that approximately 80% of all new products launched each year fail?
Whether you are developing a new product or your own version of an existing one, having a sound development process makes the job easier, is less stressful, and increases the likelihood of success.
Keep in mind that having a development process is just as important for a service business as it is for physical products.
The product development process can be broken down into seven phases:
- The Idea
- Research (includes pricing)
- Sales and Marketing
Let’s take an in-depth look at each one.
Product Development Process Phase 1: The Idea
Sometimes, an idea for a new product appears out of thin air like a stroke of genius. But how can you know for sure?
These questions can help you determine the viability of your new product idea:
- Have you identified a specific group of people who need it? As you develop a target audience for your new product, include anyone who fits the potential customer profile. You can narrow this group down later.
- Have you surveyed your current customer base or target group to gauge interest?
- Do you currently have the resources to produce it?
- Is it relevant to and consistent with your long-term business vision?
- Does it offer a unique solution or fill a demand gap?
If you still feel confident in your new product idea after answering these questions, move on to the next step.
Product Development Process Phase 2: Research
Perform your research based on the following:
- What your product does
- Who uses it
- Price threshold
Many entrepreneurs get so excited about a product idea they skip over the research phase and jump straight into production because they believe they have a “winner”.
But this is like leaping out of a building without being sure there is a net to land in. Validating an idea with thorough research will save you a lot of time and money while increasing the likelihood of its success.
If you are attempting to develop a new product or service—one that has never been on the market before—you must determine demand and whether people will pay for it.
Here are some ways to test market demand:
- Survey existing customers or a target customer group to gauge interest. A word of caution: while this can be a valuable source of information, people don’t always follow through on what they say. They may tell you they will buy your new product or service when you make it available, but whether or not they actually do is another story.
- Launch a Kickstarter or crowdfunding campaign. The response will provide some indication of interest.
- Check Google Trends. This will give some insight into what kinds of products and services consumers are currently looking for.
- Talk with other business owners and representatives in “shoulder niches”. These folks work in the same target market but are not your direct competitors. What trends and feedback can they offer? Do they sense there is a need for your new product?
If you have customer service representatives, find out what feedback they are receiving from customers.
Be sure to set success parameters. Don’t guess or limit research to random question and answer sessions.
If you are developing your own version of an existing product or service, a competitor analysis will reveal features and benefits you can offer that others in your industry have missed.
Analyze at least ten competitors using their websites and marketing content. What promises are they making? What unique angle can you take to separate your new product or service from the ones they are selling?
Become one of their customers, if possible. Sign up for their email lists and observe their sales processes. Note any benefits and features they are leveraging to get attention.
A Word on Pricing
While not all models for product development would include pricing in this phase, I have included it here for a practical reason. You should always determine if a worthwhile profit can be made on your new product before investing time and money developing it.
Research will help you set a retail price estimate. Remember, this is only an estimate—it doesn’t have to be perfect. But having some evidence that you can establish and maintain a solid profit margin will give you confidence before you proceed with development.
If you are creating your version of an existing product or service sold by a competitor—and I expect many of you will be—investigating and analyzing those competitors will provide a solid, though not always accurate, pricing structure.
I will expand on this in phase five (see below).
Product Development Process Phase 3: Design
In this phase, your new idea begins to take tangible form.
For physical products, create a sketch for what it will look like—its dimensions, features, and how it will function. If you are developing a service, outline specific benefits the customer will receive and how you will deliver it (in person, virtually, digitally, etc.).
Make a list of materials needed. For physical products, this includes components you will make as well as those supplied by vendors. For service products, this may include software or other tools necessary for delivery.
Here is a sample design checklist:
For physical products:
- Patent/Legal considerations
- Assembly requirements/process
- Timelines for production
- Project templates
- Features/Benefits analysis
- Subcontractors/team members/other necessary parties
- Copyrights and other legal considerations
- Cost of materials/software/hardware
- Defined customer expectations
You should also plan for services and materials acquired from other sources. For example, if you are manufacturing a product that uses aluminum, where will you purchase it? How long will it take to receive the aluminum? What happens if that supplier runs into an issue and can’t get it to you on time?
Service businesses may use independent contractors to assist in delivery (i.e. a web designer may partner with a graphic designer). Consider the details of working together. What will happen if they get busy or sick and can’t deliver on time? Will they make your order a priority if they run into delays?
The point here to is to plan for potential problems and how you will respond. Remember, the customer will ultimately hold you responsible for everything, so be prepared when problems arise because they will.
Product Development Process Phase 4: Testing
The prototype is the first version of your new product. In this phase, we find out how well it works and what improvements are needed before it is ready for an official launch. Testing may take a while, so remain patient. This step often separates great products from all the rest.
The quality of feedback you receive will depend on who provides it. It is critical to submit your prototype to people who are best suited to give you accurate insight.
For example, if you are designing new software, find a small group of users who fit the target customer profile or who have experience using similar types of software. Avoid soliciting random opinions.
Document everything. It may take several rounds of beta testing to uncover all the bugs. As you make improvements, certain aspects of the design or development will change. You may also have to replace one or more vendors with others who provide better service. Dimensions may change, altering the packaging and storage requirements. Don’t get frustrated because this is a natural part of the development process.
It is unlikely that you will ever reach perfection but don’t stop looking for ways to improve the design and development of your product.
Proof of Concept vs. Prototype
I want to clarify the difference between these two terms, often used interchangeably and sometimes inaccurately.
Proof of Concept confirms that a product theory or idea—a concept—is feasible and can be made. Many people have ideas that sound good in theory, but aren’t doable in the real world.
A prototype is the first or original form of a product or service, used specifically for testing. If you are developing your version of an existing product or service, you don’t need proof of concept because that has already been accomplished by the businesses that came before you.
Product Development Process Phase 5: Costing/Financing
Production costs and terms of financing set the stage for how much profit you make. Many small businesses set their prices based on what they think the market will stand or what their competitors are charging.
Instead, start by listing each expense as a line item and account for every penny it takes to make a product. This includes obvious expenses, such as materials, but also items like shipping costs, storage, taxes, fees, finance charges, and marketing.
You must to test to set accurate prices. Don’t make assumptions or guess. Pricing is a complex process that goes beyond the scope of this post, but if you would like to know more, read:
Once you know how much it will cost to create, develop, and deliver your new product, you are ready for the next phase.
Product Development Process Phase 6: Marketing and Sales
Marketing begins early, even before you establish a launch date. Don’t put too much pressure on yourself and rush a launch. Allow plenty of time to promote your new product or service in advance. On the other hand, don’t start promoting too soon or your prospects will lose interest.
The timing of your launch will have a big impact on how successful it is. Be sure to consider the time of year—vacations, holidays, school seasons, even sporting events. A misstep in timing can derail a successful launch.
Branding Your New Product or Service
Before you promote your new product or service, think about the position it will occupy in the marketplace. Don’t wait until after you have launched it to begin the brand building process.
What type of customer is this product for? How will it compare to your competitors’ products? How will it fit in with products you already offer?
If you have done proper research, you already know the answers to these questions.
Branding not only applies to individuals and companies, but to products and services as well. Build a story around the development process and the product’s features and benefits.
Here are a few ways to promote a new product or service:
1. Work your network. Start with people you know. Ask them if they would be willing to post an announcement or link to your product launch. An endorsement from them will go a long way in building credibility and trust with multiple audiences.
2. Build a list of interested prospects. Use websites, social media, and other forms of communication to build a list of people who show interest in your new product. Tell everyone you can.
3. Forge marketing alliances. Create marketing partnerships with businesses who complement what you do but are not direct competitors. For instance, a dog kennel could partner with a veterinarian and cross promote each other’s products and services by sharing prospects, customer bases, and marketing expenses. If you do this, be sure to draw up an agreement that stipulates dos and don’ts as well as any compensation or commissions included in the partnership.
4. Webinars/Seminars: Getting in front of people—in-person or virtually—is a powerful way to sell. Designing a presentation for your new product is an effective way to demonstrate everything it can do.
5. Print and digital advertising. This is self-explanatory, but ads are a great way to reach the masses if you have the budget.
6. Social Media. People love spending time on social media which makes it a great source of free advertising. Just be sure to target the audience your product has been designed for. Telling a lot of people who can’t use your new product won’t generate sales.
7. Contests. Start a contest and offer to give away one or a limited number of product units, or perhaps offer an introductory rate. Be careful with discounting. You don’t want to market on price alone. Stay away from the word “discount” and use terms like “promotional pricing” instead.
Product Development Process Phase 7: Launch
Okay, you have researched your idea, developed it, designed it, tested it and promoted it. Your confidence in this new product is through the roof. Now it’s time to launch and follow up.
Be prepared to execute each of these in the launch phase:
1. Have a refined customer service process with well-trained staff. If you will be handling the customer service personally, make sure to be available and respond as quickly as possible.
2. Be prepared to work out issues with initial delivery. Have a backup plan just in case.
3. Make sure your order system functions properly.
4. Be prepared for how your competitors might respond. Will they offer a sale or promotion of their own? How will you counter it?
5. Take note of initial reactions and look for additional improvements you can make. Get them done as soon as possible.
6. Prepare a case study that shows your new product in action. This can be used in future marketing to show how well your product works. For more on case studies, click here.
7. Keep sales statistics and monitor trends. What days are you selling the most? The least? This information will prove invaluable for future marketing activity.
8. Keep an accurate, up-to-date list of customers and follow up to ensure their satisfaction. You can use this list for promotions and marketing events at a later date.
9. Keep a list of problems customers encounter and the solutions to those problems. This is a great resource for training future employees or team members.
There you have it, a complete guide to the product development process—from idea to launch.
If you need help or have questions, reach out to me personally at firstname.lastname@example.org.
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