How to get started with the product development process.
It is rare to develop a product from the start. It is common to have a product that has been developed to some extent, or one that is already on the market. The product development process generally consists of building sustainable market share, profitability and image. Priorities should be set amongst these three aims. A product may be designed to penetrate the market with a high share at a relatively low per unit margin, or it may be developed to skim the market, catering to a niche at a relatively high margin per unit. Products that are developed to enhance or to support image may have features and benefits incorporated that are not necessarily justified on economic grounds.
Product development should start with market segmentation and targeting. It is tempting to undertake product development internally, based on one’s own notions and on the basis of what technologists suggest. The danger in such a process if that the product is developed with features that do not appeal to the target customer segment. The universe of the market consists of different kinds of people in various environments. It is almost impossible to develop a product that would appeal to all people everywhere. Young and old, male and female, rich and poor, city bred and rural, Caucasian and Asian…. there are endless ways of forming demographic segments within the total market. Segments can also be made on the basis of how products are used, where they are available and how they are branded. The basis of segmentation used in the product development process has to be such that it defines the largest possible homogenous group. The segmentation process will lead to the creation of several distinct segments.
Targeting is a process by which a particular segment is selected for a product. This has to be done by listing the key benefits that customers in a segment seek for the product group. Price, availability, speed of action, duration of action and sensorial appeal are some common attributes that customers may seek from a product. The product development process involves comparing one’s own product with the competition, along the parameters that matter to customers in a particular segment. The segment that is targeted is the one for which one’s product has the greatest and most sustainable advantage, and the one that is significant in size and growth potential. Taste and color may matter most for children as far as ketchup is concerned. Tasty and bright red ketchup could then be targeted at children. Targeting on the basis of price may not hold for long because the competition may drop their prices. Astronauts may have a special liking for solid and weighty objects but there are not enough of them around to make for a sizeable and growing business! Targeting requires great objectivity in assessing one’s product versus the competition. It may be very difficult for a product development executive to admit that the company’s car does not accelerate as well as a competitor, but a campaign based on the benefits that people seek in fast cars will probably fail as customers will discover the truth in time.
Targeting may force the product back to the drawing board. The development process in such cases involves trying to build in attributes that meet target customer needs. The torque and displacement may have to be increased in the example of the car, so that it can be promoted amongst people who are known to value acceleration. The development process may not involve tangible elements alone. The core product of a hotel bed or an airline seat may be enhanced through large doses of service, to make it closer to the ideal product that the segment of the business traveler wants. Product development in most services revolves mostly around intangibles.
All elements of the marketing mix come in to play once a product has been designed to meet the key benefits sought by a segment that has been targeted, in a distinct way that others would find hard to copy or match. The core product may have to be enhanced or augmented with elements of service or features, so that it matches the expected product, as perceived by the target segment. The development process then turns to pricing, distribution and promotion. Pricing has to provide a reasonable mark up on cost. It will also reflect the trade-off between market share and profitability. Hence pricing may have to follow primary research to establish the price elasticity of demand. The impact of fixed overheads on total cost will also influence pricing. Finally, pricing has to be consistent with branding and should reflect the personality of the product. Distribution channels and logistics can affect product development in the case of perishable goods or ones that require special handling. Promotion should communicate the key benefits that have been incorporated in the product in a memorable way. Promotion must also be consistent with branding. Product development should incorporate design and pack features that are suitable for point of purchase promotion.
People, Process and Customer service are additional elements of the marketing mix for a product in the Services sector. Such products will have a large share of intangible elements and are likely to depend on customer satisfaction. Internal marketing considerations should be kept in mind during product development so that employees are able to successfully interact with customers when transactions related to the product take place. Process factors will affect quality as well as cost and the product should be developed in a manner by which it is assembled and presented in a uniform manner with minimal wastage and errors. Additional features and options should be incorporated during product development so that preferential treatment can be demonstrated to important and regular customers.
The final stage of the product development process is to document a plan that scans the environment, sets objectives of market share, profits and image, describes a strategy to meet the goals and details resources needed to implement the plan. This document becomes a tool for communication amongst all stakeholders in the product and a control to see if the business is on course. The plan should be reviewed and updated periodically. Lessons drawn from the development and business of one product can be used for future development and for expansion of the product line and range. The planning process may spawn many new product ideas and decisions to invest in several development projects may originate from the planning process. Such planning should be interactive, seeking inputs from across functions and hierarchy. Some progressive firms may involve distributors, suppliers and even customers in their planning process, so that they can come up with new development projects that add value to the business.
Products are the life-blood of any business. They are often tangible and concrete, though Service ones may have large amounts of psychological and intangible elements in them. Products can be presented so that they offer much more than the essential core of the category. However, regardless of their nature, a systematic approach to development saves time and money, prevents mismatches with market requirements and finally yields better profits, growth and makes a positive contribution to the corporate image.