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

Post #4: Market Segmentation and Product Positioning

Welcome back!

Once you’re company has established its business plan, it has a product, and understands consumer behavior, it is time to develop a marketing strategy. This first requires the company to define its market segment through market segmentation, which involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. Today, we will focus on this important aspect of marketing, in addition to a few complementary marketing terms.

Let us begin with an example. Ford Motor Company has developed a fun and contemporary style of television advertisement incorporating flashy colors, appropriate music, and exciting text that captions the narrator’s voice as he relays Ford’s message to consumers. The consumers which they seek to attract to their product are primarily hardworking men, in need of a TOUGH, HEAVY-DUTY, HIGH-HORSEPOWER truck that will perform better than any other truck on the road, regardless of the conditions in which the driver chooses to use the vehicle; not to mention, the added benefit of its EcoBoost engine which allows for superior fuel efficiency and reduced greenhouse emissions. Despite the effectiveness of this recent ad, the Ford F-150 has existed in consumers’ minds as the leading pick-up truck on the market due to Ford’s solid reputation which it has acquired over 66 years of F-150 production. Therefore, the Ford Motor Company has successfully used product positioning, the place a product occupies in consumers’ minds as important attributes relative to competitive products, to define their brand as superior to their market segment. See the aforementioned ad below at the following link:

                             http://www.ispot.tv/ad/75Yw/ford-f-150-research-project

Companies can also engage in a practice known as product re-positioning, changing the place a product occupies in a consumer’s mind relative to competitive products. A company may do this to readapt to their market segment if their sales are suffering, or if they hope to infringe on their competitors sales. Burger King is a recent example of a company which has attempted to re-position their food service with the introduction of the Big King, a two-tier burger sandwich. They used this tactic to re-establish their burger in the consumers mind to increase sales; in this case, so much so that their product looked identical to their competitor’s.

Here’s how they describe it on their website:

“Our BIG KING™ Sandwich features two savory fire-grilled beef patties, topped with, melted American cheese, fresh cut iceberg lettuce, crisp onions, crunchy pickles, and featuring a sweet thousand iland style dressing, all on a warm, toasted, sesame seed bun.”

If you’re familiar with McDonald’s Big Mac jingle, you probably realized the two sandwiches are nearly identical. Take a look for yourself at the resemblance:

And here is the Big King ad that I remember watching, jaw-dropped and in awe of BK’s brazen move:

Sadly for Burger King, their attempt to penetrate the market with a new product that they hoped would impede on McDonald’s Big Mac sales did not prove as successful as they hoped. While their initial 2 for $5 dollar deal brought in many customers, but for the most part, the brand loyal Mickey D’ers remained under the Golden Arches alongside their delicious Big Mac.

One final concept to end this blog posting with is product differentiation, a marketing strategy that involves a firm using different marketing mix activities to help consumers perceive the product as being different and better than competing products. Due to our materialistic society and the vast array of products saturating the market, companies competing for the consumers of similar segments must market their products as outstanding, innovative, and unique in order to capture and convince them of the value and worth of their product. The electronics industry proves a highly competitive market, especially today’s cellphone market. The below ad exemplifies both the competitiveness of this market, as well as Samsung’s effort to differentiate their product from Apple’s:

Samsung has spent the past several years not only positioning themselves in the cellphone/tablet/phablet industry as offering a respectable, reliable, and innovative product, but also assured the consumer that their products are both different and superior. Once a company chooses the segment it wishes to target, markets its product successfully so as to position it in the consumers mind, and makes sure to differentiate their product with a uniqueness that captures their audience, the company has laid themselves a solid foundation for a successful future. Thank you for reading this post. I hope to have enlightened you about the ways of marketing today, so as to encourage you to use these techniques when marketing your own personal or business brand.

Until next time!

-Adam