New Product Development
Developing new products and services is important to the growth of small businesses. New products enable your company to enter new markets or increase your business with existing customers. However, product development is a high-risk activity, so it is important to carry out research into market needs and follow a rigorous development and review process.
Successful companies develop products and services that meet market needs, rather than technical requirements. Before design or development begins, carry out research to identify customer needs that your existing products do not meet. Ask customers for feedback on improvements that they would find useful and analyze competitors’ products to identify features that would improve the performance and market appeal of your own products.
Research provides a source of ideas for developing new products and services. Review the ideas to identify the products that have the greatest market appeal. Your market research also helps you to make provisional forecasts of potential demand and revenue for each idea. By assessing the potential cost and development effort required to bring each idea to market and comparing the costs with potential revenue, you can create a shortlist of the most suitable ideas to take forward.
When planning your products, you also have to consider the target market. You can develop new products for existing customers or new products for new markets. Developing new products for new markets carries a higher level of risk because you also have to overcome any barriers to market entry. Existing customers know your company and your products, so you can build on the relationship when you launch your new product. In new markets, you must establish your company’s credentials as well as launching a new product. That will take a greater marketing effort.
When you have identified suitable ideas and evaluated their market potential and level of risk, you can proceed to detailed technical and production development. If you create a prototype for the new product, you can use it for customer evaluation. Ask a small group of customers to try the product or service and provide feedback.
You can also use the prototype to carry out test marketing. A test market is a small-scale version of your full market. You choose a test region that reflects the full market as closely as possible and run the type of marketing campaign you have planned for the full launch. Running a test market helps you assess the potential success of your new product. It can save you wasting money and effort if results are poor in the test market. Depending on the results of the test market, you may decide to carry out additional product development and testing to produce a final version for launch.