Post #5: How to Develop a Successful Product/Service

Today’s post focuses on developing a popular, and hopefully lucrative, product or service through what is known to marketers as the new-product process, the seven stages an organization goes through to identify business opportunities and convert them into salable goods or services. This post proceeds to break down, define, and give examples for each of these stages in the process.

Stage 1 of the process, new-product strategy development, defines the role for a new product in terms of the firm’s overall objectives. The firm determines these objectives through environmental scanning and SWOT analysis which allow it to assess its strengths and weaknesses relative to the trends it identifies as opportunities or threats. This information enables the company to establish a procedure for each new-product idea in addition to the strategic role it may play within the company.

Stage 2 covers idea generation, which involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage’s results. Many companies partake in open innovation, when an organization finds and executes creative new-product ideas by developing strategic relationships with outside individuals and organizations. A modern example of this is the Vermont company, Renewable NRG, which created a joint venture, called Lidar Wind Technology, with the French company Leosphere. Leosphere had developed a new product idea for measuring the wind, but did not have the funds or resources to produce it. NRG sought them out and agreed to manufacture their product for a 50% profit share, allowing them to remain one of the leaders of their industry. Lidar exemplifies the use of Smaller Firms, Universities, and Inventors by larger businesses to create new products. Companies in search of new ideas also seek out their Employees and Co-Workers suggestions, Customer and Supplier suggestions, utilize Research and Development Labs, and analyze the Competitive products of the market.

Stage 3: Screening and Evaluation internally and externally evaluates new-product ideas to eliminate those that warrant no further effort. For instance, the internal approach includes an evaluation of the technical feasibility of the proposed new-product idea to decide whether it satisfies the objectives of the new-product strategy development process. The external approach uses concept tests, external evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual product. Therefore, these are typically modified existing products that the consumer is unfamiliar with. An example is 3M’s Post-It™ Flag Highlighter, shown below:

Stage 4: Business analysis specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections. In other words, before the creation of a prototype, the company must agree upon the practicality and capacity for success of the proposed new-product, and its consistency with the company’s mission and objectives—will the company be able to economically develop and manufacture the product? And what sort of marketing strategy is required to have it succeed in the market place?

Stage 5: Development is the transformation of the idea into a prototype. This is not merely manufacturing the product, but also conducting consumer and lab tests that ensure the quality and accuracy established in the new-product strategy development process. This includes both internal and external development, either reflecting and developing the product internally, or searching externally for ideas on how to produce the product. A crucial part of development by companies includes safety tests. Car companies are generally known for such tests, simulating accidents by repeatedly crashing their cars to constantly improve and assure the safety of their product.

Stage 6: Market Testing involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy. Test marketing involves offering a product for sale on a limited basis in a defined area for a specific time period. The three main kinds of test markets are described below:

1. Standard Test Markets: when a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities which demographically represent the selected target market for the new product.
2. Controlled Test Markets: involve contracting the entire test program to an outside service.
3. Simulated (Lab) Test Markets: replicates a full-scale test market to a limited degree, but saves the firm time and money. For example, these simulations tend to take place in malls, where consumers are shown the product, marketing tactics and ads including their competitors, questioned about who would use the product, and finally given money to decide to buy or not buy the product.

Stage 7: Commercialization is the positioning and launching of the new product in full-scale production and sales. Here are a few related terms to remember when commercializing your product:

Regional rollouts: in order to minimize the risk of new-product failure, companies may introduce a product sequentially into geographically areas of United States, allowing for production levels and marketing activities to gradually grow.

Parallel development: when a firm has cross-functional team members who conduct the simultaneous development of both the product and the production process remain with the product from conception to production.

Fast prototyping: the “do it, try it, fix it” approach—encouraging continuing improvement even after the initial design. Apple has proven its approval for such a technique with its constant updates for its operating systems and programs such as iTunes, in addition to the way it ‘fast prototypes’ such popular products as the iPod, iPad, and iPhone.

To wrap up this post, I want to emphasize the importance of the new-product process when beginning a business. It is a reliable, effective, and in-depth method when brainstorming and crafting a product, evaluating the product’s success by determining consumer interest and possible risks. I encourage any of you considering the development of a product to utilize this process, carefully considering all influential aspects associated with your business, such as your target market and the demand for your idea, before simply commencing production. Thank you for reading today’s post. I hope you have found value in its content and the desire to apply what you have learned to your future business endeavors!

-Adam