Every product goes through a life cycle that involves its inception, an increase in growth, a steady maturity and an eventual decline. This process takes place continually as more products face an inevitable decline and need to be removed.
This always serves as a challenge for companies because they have to develop new products in place of old declining products to stay successful in the market. However, the process is not as straightforward and the odds are heavily against them.
In this post, we go through the product development process in detail. We discuss the steps in the process, the teams involved in the process and how can you have better chances at launching a successful product.
What is the Product Development Process?
The product development process or PDP involves various steps that are required to take a product from an idea or concept stage to a stage where it is readily available in the market.
Like other marketing procedures, it involves understanding the needs of the customer, researching competitor offerings, solving a problem, creating a product roadmap and building a minimum viable product.
This process requires efficiency and careful planning as thousands of products enter this process but only a handful of these reach the market.
PDP is a systematic process that is dependent on understanding the target audience, markets and competitors to deliver superior value to customers. Without this deep understanding, the process does not work.
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Which functional teams are involved in the process?
Product managers are typically at the forefront of this process and are ultimately responsible for successful or failed products. Product managers can drive the product development process from a strategic standpoint and are thus crucial elements of the process.
However, the product management function requires the input from various other teams to create a successful product. These teams are as follows:
Role of design thinking in new product development process
Design thinking is a framework that assists the product development process. It revolves around understanding the customers and their challenges, suggesting innovative solutions and designing prototypes to test these solutions.
Like the product development process, design thinking is also customer-driven and has the following steps:
Step 1: Empathize with users
Step 2: Define the problem
Step 3: Brainstorm potential solutions
Step 4: Build a prototype
Step 5: Test your solution
The 6 stages of a new product development process
The product development process varies between industries. Essentially, it can be broken down into 6 steps. Here are the steps in new product development.
This stage involves the systematic search for aspiring new product ideas. Hundreds or even thousands of ideas are generated in ideation but only a handful make it to the next stage.
Many aspiring entrepreneurs often get stuck on this stage waiting for the perfect new product opportunity that rarely presents itself. It is important to understand that many successful product ideas stem from existing products in the market.
Although it is creatively fulfilling to think of “new” successful product ideas, most of the time it is not viable.
One of the best tools for coming up with new product ideas by analysing already existing products in the SCAMPER model. The model works by asking questions about existing products. Each letter in SCAMPER stands for a prompt:
The choice of substituting an element of a product or service. For example: In the case of spectacles, substituting lenses made of plastic with lenses made from glass will lead to incremental innovation.
Combining multiple products and services into a singular product. For example, a mobile phone that was combined with a camera and then with an MP3 player.
Creating a new product by adapting existing product ideas. For example: The functioning of a ballpoint pen inspired the creation of roll-on deodorants.
Enlarging or reducing a component of an existing product. For example: an electric toothbrush that has a sleeker design is more modified compared to the original electric toothbrush.
Put to another use
Using a product for something it was not intended to. For example, using memory foam for dog beds.
Removing certain elements of a product or service. For example: Amazon and Dell Computers managed to eliminate their middleman.
Reversing a process or strategically rearranging the product or service. For example, McDonald’s rearranged their restaurant model where the customer paid first and ate later.
Following this model. Entrepreneurs can come up with exciting ways to transform existing ideas or they can also be adapted to newer target audiences or problems.
Every idea that you come up with needs to be validated first to avoid any missteps. The number one mistake that new entrepreneurs make is not give much importance to validating their idea through research. They want to leapfrog ahead to production that often creates problems. Thankfully, we provide product development services to help you validate your idea.
Product validation methods
Product validation ensures that your money and effort is spent on the right ideas. It also helps you create a product that the customers will pay for. Here are the ways you can validate your product ideas:
- Sharing your idea with family and friends
- Creating an online survey
- Starting a crowdfunding programme
- Seeking feedback on online forums like Reddit.
- Using Google Trends to research the online demand
- Running a “coming soon” page campaign, where you attract customers to pre-order your product.
In order for your idea to be validated, you have to obtain feedback from an unbiased audience that would buy your product. Like every other analysis, Validation Research also involves looking at competitor products that are already available in your specific niche.
Competitive advantage through validation
In order to obtain a competitive advantage, you will need to visit your competitor websites and understand how they make sales or attract customers. You should also ask customers to identify their dislikes about competitor products so you can avoid these things in your product.
All the feedback and information you get from market research will allow you to understand the demands of your customers and the threats posed by competitors. Once you have that information, you can start planning.
Once you are done with research, the product development process can quickly become complicated. To avoid getting stuck, make sure to plan your next moves i.e. building a prototype, sourcing and costing.
Planning is essential because without it, you won’t have a concrete idea on how your product will function and what it will look like. You won’t be able to convey your product idea to the manufacturers and the process will significantly slow down.
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Where to start?
Many people don’t know, but the best place to start planning on how your product will look is to draw a sketch of it. The sketch needs to be as detailed as possible with product features and functions properly explained.
At this stage, the drawing does not have to be perfect as you won’t be showing it to the manufacturers. However, if you are having problems in drawing a basic structure of the product, try hiring illustrators online.
Describing product components
After you have made a plausible diagram, try to imagine the components and materials that will be required to bring your product to life. You don’t have to think about all the materials, just the ones that will be crucial for creating the product.
For example, a drawing of a wallet design could be accompanied by this list:
- Coin purse
- Chain fastener
Price Range and packaging
In addition to the components, also consider the price range and category that your product will fall into. Questions like “Will my product be an everyday item or only for special occasions?”, “Should we use premium materials or environmentally friendly materials?” are very important to consider in the planning phase.
One of the last things to consider are your labelling, packaging and overall quality of materials used to make the product. Then you can move on to the sourcing and costing stage.
Planning also forms the basis of your marketing strategy. The better you plan your product the more successful it will be to market to target customers. It is important to keep this aspect in mind during the planning stage.
Once everything is planned, you can move forward to creating a prototype of the product.
At the prototyping stage, product developers use their research, planning and available materials to create a finished product that may not be the final product, but can be used as a sample for mass production.
Prototyping is usually a long drawn-out process. You won’t be getting your product right on the first attempt. Instead, you will need to experiment with multiple variations of your product until you recognise the strengths and weaknesses of different variations.
This process leads you to eliminate certain materials or features that are not viable. Moreover, prototyping leads to continuous improvement of your product until you feel satisfied with a final sample.
Depending on the product you are developing, prototyping will be different for each different product. Cheap or simple products such as some cosmetic products and food recipes will be easier to prototype compared to complex products such as automobile engines.
Prototyping for simpler products
There are some do-it-yourself options in industries like fashion, design and pottery only if you are an expert in these disciplines or professionally trained. However, most companies and entrepreneurs get help from third party businesses to create a prototype for their product.
If you want help with creating your prototype locally, there are a number of services that can be found in your industry by searching on Google. As an example, you can work with a local seamstress (for fashion and apparel industry), pattern makers (for clothing) or cobblers (for shoes).
Prototyping for complex products
If your product belongs to toys, electronics or household accessories, you would require 3D rendering to make a prototype. In this case, you can acquire the help of professional artists and engineers who are trained in computer software that aid in creating and optimising a product such as Computer-aided design or CAD software.
Before 3D printing was popular, moulds were made for different parts of the product. The problem with this was that moulds were expensive and involved set up fees. 3D printing has been a great innovation that has reduced the total cost and turnaround time.
When described simply, sourcing is the process of identifying, selecting and developing suppliers. Extensively, it involves the creation of a supply chain that involves the product manufacturers, resources and activities required to create a product and get it into the hands of the customer.
Sourcing has great importance in the product development process. Every successful product needs efficiently sourced materials and resources.
At the sourcing stage, you have to answer four questions.
- What are the materials or resources required?
The “What” will lead you to analysing your exact material requirements.
- How can your company obtain these resources?
The “How” will lead you to decide whether your company will be producing the materials or purchasing from others.
- Where can you find these materials or resources?
The “Where” provides answers for location, type, size and quantity.
- Who will provide these resources (suppliers)?
At the “Who” stage, the purchasing company or professional should always evaluate alternatives and determine which one meets the company requirements and strategy.
One of the first decisions to be made is if your company will produce internally or buy the resources from a supplier. If it decides on producing internally, the production area should take care of the request.
In the case of purchasing, your company has some basic alternatives that are briefly explained below.
Local, regional or global suppliers
Supplier location is important and very frequently analysed. Your company may choose suppliers between the ones that are closer to its facilities or any other location.
Each alternative has its pros and cons depending on the situation, items to be bought and your company strategy.
Usually, a company has very few suppliers near its facilities and this can lead to some limitations. If the company expands the sourcing radius, there will be more suppliers to be evaluated.
The benefit of local suppliers is that usually, the lead time is shorter, the supply risk is lower and there is a better relationship between buyer and supplier, although in this case, your company can face some capacity and variety limitations. Also, the unit cost tends to be higher than offshore suppliers.
Global suppliers may give more capacity and lower unit costs. But it comes with a longer lead time, supplier risk and transportation costs.
Manufacturers, distributors or retailers
Some professionals also call this a comparison between indirect and direct suppliers. There are three options.
Your company can decide to buy in bulk directly from the manufacturer or some amount from the distributor or even a few units from a retailer.
From the manufacturer, you can get better prices but you’ll have to buy large quantities with undesirable consequences in the form of transportation and inventory holding costs.
From the distributor, you can get the items at a reasonable price in smaller and cross-vendor lots. In this case you can save in transportation and inventory costs.
The retailer can be a good alternative for spot purchasing, through quick item replenishment but usually at a higher price.
Single or multiple suppliers
Another option is to purchase from a single or multiple sources.
Multiple suppliers can reduce the unit cost and have access to a larger capacity.
Having a single source lets you keep the supply process under better control regarding quality and intellectual property protection.
Large suppliers or small suppliers
A larger supplier can provide more capacity, variety and locations but you will have to agree to standard product and contract terms.
On the other hand, smaller suppliers tend to be more flexible and they are a good option if you need to customise materials, services and supply conditions.
After you are done with researching, planning, prototyping and sourcing, you would have a clear picture of the total cost for producing your product.
In the costing process, all the information gathered before is used to calculate the cost of goods sold (COGS). The reason for calculating the cost of goods sold is to determine a retail price and profit margin.
How does the cost of goods sold relate to gross profit?
Let’s suppose you are full of ideas and like to invent stuff. You have come up with a breakthrough product and got a prototype working. However, your personal strength is in inventing, not in manufacturing or selling.
You get someone else to do the manufacturing for you. They produce the goods according to your specification, ship them to you and you pay cash on delivery. You also get someone else to sell this product to customers.
You ship the goods to the retailer but instead of the retailer paying you immediately, you will receive payment after 30 days. This month you buy 100 units and £80 each and sell 50 units at £100 each. How much profit or loss will you make?
So simplify it, your revenue in this case would be £5,000, your COGS will be £4,000 and your gross profit will be £1,000.
Calculating retail price from COGS
Start by filling a spreadsheet with all costs broken down into singular items. This cost should include everything from raw materials, manufacturing cost and shipping costs.
Also include import fees, shipping, and custom duties that you will have to pay to get your product into the hands of your customers. This is important because these costs can have a significant impact on your COGS.
You can also compare costs between multiple suppliers that you contacted in the sourcing phase to determine which option would be better to reduce the overall cost of goods sold.
Once you have calculated the total COGS, a retail price can be determined by subtracting your estimated revenue from the cost of goods sold and finding the gross profit margin on each unit sold.
What is your unique product idea?
The product development process is a journey that is different for each industry and each category of product. Each product idea has its unique quirks that describe how it is different from existing products.
Remember that every new product faces the same challenges that you are facing. By following these steps, you can break down the process of bringing a product concept to market in detailed digestible stages.
No matter what you plan to launch, careful ideation, research, planning, prototyping, sourcing and costing will lead to better chances of creating a successful product. If you would like more help with that, try out our professional product development services.