Why is it important for companies to continue to improve products and develop new products?
New products and services are the lifeblood of all businesses. Investing in their development isn't an optional extra - it is crucial to business growth and profitability. Show
But embarking on the development process is risky. It needs considerable planning and organisation. This guide will outline the key stages in the lifecycle of products and services so you know when the time is right for your business to start the development process. It will explain how a planned and phased development process will help you make the wisest investment and budgeting decisions. It will also advise you on how best to create a development team and manage a project.
The lifecycle of products and servicesThere are five key stages in the lifecycle of any product or service. Development - at this point your product or service is only an idea. You're investing heavily in research and development. Introduction - you launch your product or service. You're spending heavily on marketing. Growth - your product or service is establishing itself. You have few competitors, sales are growing and profit margins are good. Now's the time to work out how you can reduce the costs of delivering the new product. Maturity - sales growth is slowing or has even stopped. You've been able to reduce production and marketing costs, but increased competition has driven down prices. Now is likely to be the best time to invest in a new product. Decline - new and improved products or services are on the market and competition is high. Sales fall and profit margins decline. Increased marketing will have little impact on sales and won't be cost-effective unless new markets are identified. Manage the lifecycle Identifying where products or services are in their lifecycle is central to your profitability. Effective research into your markets and competitors will help you do this. See our guide on how to understand your competitors. You can extend the lifecycle of a product or service by investing in an "extension strategy". You could:
But ultimately this only delays a product or service's decline. Ideally, you should always have new products or services to introduce as others decline so that at least one part of your range is showing a sales peak. Developing your ideasThere's a lot at stake when developing a new product or service. To minimise risks and allocate investment and resources wisely, you should consider a number of factors:
The clearer you are about your plans, the better you can analyse the risks involved. The following tips may also be helpful:
Match products and services to market needsNew products and services have to offer benefits that meet your customers' needs. You need to discover what these are. Market research, using techniques such as surveys and focus groups, will help you do this. Remember that although the end user of your product or service might be your most important customer, you may have to take the needs of other parties into account. For example, if you were planning a new DIY product, you would need to consider how retailers would stock it as well as how it would benefit professional decorators. If you're creating a toy, you should consider what parents as well as children will think of it. Your competition Not only must you meet your customers' needs, you have to do so in a way that is better than the alternatives offered by the competition. Your new product or service needs a unique selling proposition - a feature or property that makes it stand out in the marketplace. Before entering the market you need to determine:
To find out more, see our guide on how to understand your competitors. Pricing your proposed service or productEstablishing a pricing strategy for a new product or service is an important part of the development process. You should consider pricing the moment you decide to take an idea forward as it will determine how much you can afford to invest in the project. You will need to take the following factors into account:
Strategic pricing can be used to drive sales and regulate demand. See our guide on how to price your product or service. The project development processAn effective development process for products or services should be divided into a number of key stages:
In practice some of these stages may overlap, but the presence of a staged process will help keep timing and costs under control. Creating a project teamEvery potential new product or service requires a dedicated development team. In creating your team you need to include people with a variety of skills. For example, as well as a creative ideas person you may also need a technical expert, a marketing specialist, someone who can source components and someone who understands the supply-chain difficulties you could encounter. All team members should understand your business' objectives and be committed to them. There are many forms of effective team working and the right one for you will depend on your business' needs. For example, team members might:
Teams need someone in a project management role to lead, co-ordinate and motivate the team. See the page in this guide on how to manage a development project. Investment and cost controlDeveloping new products and services is an inherently risky process. You must plan any investment carefully and strictly control your costs. You need to:
Before making investment decisions, consider how much your business stands to gain from a completed product or service. Weigh this against the risks you face. Phasing new product development One way to minimise your risks is to phase investments in projects. By reviewing a project at the end of each phase or stage of development, you can identify products or services that are unlikely to be successful before resources are wasted. If the product or service fails to meet established criteria, the project is ditched. If it meets them, resources sufficient to enable it to reach a next, predetermined, stage are allocated. Finding support A range of government grants and tax breaks is available for research and new product development. Cost control It's essential to keep a close eye on costs when you develop new products and services to avoid them spiralling out of control. You should:
There are two main ways to estimate costs:
Remember that your costs could include staffing, materials, technology, product design, market research, prototyping and incremental overhead costs. Manage a development projectProject managers are essential to ensure the successful development of new products or services. They'll be responsible for:
Timetabling the development process Your project manager should draw up a critical path for the completion of key tasks. SMART (specific, measurable, agreed, realistic and time-limited) objectives can help to control and co-ordinate the development team's advance along this path and stages can be used to monitor progress. However, flexibility must be built into your plans. Any number of unknowns can come into play and result in, for example, a change in the project's specifications or expected completion date. Original document, Develop new products and services, © Crown copyright 2009 Our information is provided free of charge and is intended to be helpful to a large range of UK-based (gov.uk/business) and Québec-based (infoentrepreneurs.org) businesses. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Despite our best efforts it is possible that some information may be out of date. As a result:
Why is it important for a company to develop new products?The primary reason for any new product development is to provide value to its customers. The increasing demands of customers for innovation & new technology calls for the need to develop new or existing products. Otherwise, there is no reason to pour in huge amounts of money in the first place.
Why is it important to improve products?A new and improved product provides a good story (message) for the marketplace. Therefore, a product improvement can form part of the marketing communications campaign for the firm. This gives the company something new and exciting to communicate and may also add to the above benefit of energizing the brand.
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