What is a product development strategy?
The market today is far more competitive than it used to be probably a decade ago. Single product designs are becoming obsolete, causing revenues to falter. Savvy companies have realized that product evolution and modification are inevitable to stay at the top of the game in the industry. An effective product development strategy is essential for this. Let us first understand what it is.
Product development strategy definition
A product development strategy can be defined as a strategy that involves developing new products or making modifications to existing products and then offering them to current or new markets. A product development plan or a product launch strategy is employed when there is no scope for growth in the current market with the company’s existing offerings. Here, the companies have three choices to make- create an updated version of the current product, introduce a new product, or cease the production of an existing non-performing product.
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Benefits of product development strategy
Product development strategy acts as a framework for introducing new products or for improving the performance, cost and quality of existing ones. One of the key product development strategy advantages is that it helps companies achieve their business goals including venturing into new markets, selling more quantities to current customers, or winning customers from competitors. However, a new product development strategy requires careful planning in order to minimize the risk of costly mistakes. Some of the other notable product development strategy advantages include:
Win business from competitors
An effective product development strategy proves to be helpful in winning businesses from the competitors who are unable to meet the new performance levels of the company. A product development plan also helps improve performance and thereby raises revenue and profits by charging higher prices. Gaining firsthand information from sales representatives or the consumers themselves will be useful in identifying the performance factors that are most important to the market.
Reduced cost and improved competitiveness
A good product development strategy should take into account the best ways to reduce costs. When the costs are lower, the company is at liberty to lower its prices and consequently win new business. Reduced costs also contribute to increasing the profit margin. How to achieve reduced costs? The product development teams can attain this by eliminating product features that the market does not need, using lower-cost materials, and simplifying the manufacturing process by redesigning that product.
Improve reputation and goodwill
The company’s product development plan must include targets for quality improvements. This helps boost sales. It must be also ensured that you deal with companies who have their own set of pre-defined quality standards. Making quality improvements as a part of the company’s product development strategy also makes it easier for companies to enter the markets with stringent quality and regulatory requirements.
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New product development strategy: Key questions to answer
Question #1: who will lead the new product development strategy?
Although a company might possess all the expertise and capacity required in developing a new product development strategy, there are chances that they might be consumed with other projects or lack specialized expertise to address specific challenges. A key component of a company’s product development plan will be to list out who will participate and how it will be managed. Companies can opt from the following options:
In-house: The product development strategy and the project management are executed by the company’s own resources.
Outsource: An external partner is employed to design the product, manage the process, and source and coordinate the work of additional suppliers. The company’s employees provide them with business oversight, identify requirements, and contribute feedback to the project.
Hybrid: In some cases, it becomes more feasible to manage the project in-house and then coordinating the work of a design firm and one or more suppliers. This is a mix of both in-house and outsourcing functions.
Question #2: How to validate the product design?
Commercial failure is one of the biggest risks associated with a new product development strategy. Even if the product development is on time and meets the specs and budget requirements, chances are that the sales will fall flat. So, throughout the product development lifecycle, it is vital to seek validation of market demand, the product’s value proposition, and the product design and features. Some of the main strategies to achieve this include:
Crowdfunding: Use a popular crowdfunding platform depending on the product category. This may prove to be highly effective to promote your idea early in the development cycle, attract investment, and validate the appeal of the product idea.
Prototyping: Companies can use prototypes at several stages of the product development strategy to demonstrate the product idea, gain feedback, and secure lead customers.
Low-volume tooling: Major investments for hardware products include production tooling and setup. Companies can start by building less-expensive, short-life tooling for a low-volume production run of your product in order to facilitate a market test.
Question #3: What is the best business model for acquiring customers?
The company’s customer acquisition and revenue models may have implications for the product design. Products that work on modern technology such as IoT consist of ecosystems of hardware, applications, connectivity, data storage, and data feeds. This expands the company’s range of possible business models, here are the options you need to consider:
- Subscriptions for data feeds, storage, or hosting
- Opportunities to increase user engagement and the network effect, exposing
- Purchase, lease, or metered usage for hardware or application components
- Free basic functionality with paid upgrade opportunities
- Recurring revenue opportunities through consumables, maintenance, and upgrades
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