Strategies for New Product Development
Developing new products or modifying existing products so they appear new, and offering those products to present or new markets is the definition of product development strategy. There is nothing simple about the process. It needs keen attention to competitors and customer needs now and in the future, the ability to finance prototypes and manufacturing processes, and a creative marketing and communications plan.
There are many subsets of product development strategy:
1) Product Development Diversification Strategy: This market is employed when a company’s existing market is saturated, and revenues and profits are stagnant or falling. There is very less or no opportunity for growth. A product development diversification strategy takes a company outside its existing business & a new product is developed for a new market.
An example of this strategy is a company that has sold insurance products and decided to develop a financial education program aimed at college students. The new product is not revolutionary as other organisations are producing similar products, but it is new to the company producing it.
2) Product Modification Strategy: Product modification strategies are generally aimed at existing markets, although a side benefit may be the capturing of new users for the new product. An example of this strategy is toothpaste. Toothpaste that promotes whitening ability or anti-cavity attributes is made on existing plain toothpaste that only promises clean teeth.
3) Revolutionary Product Development Strategy: Revolutionary products are those for which there was no real prior need. Computers and cell phones are good examples. Before these products appeared in the market, consumers did not know that so they need them. But, the germ of an idea on how to better communicate resulted in products that have drastically changed the world and have even changed the competitive landscape.
Failures of New Products
Organizations invest enough time, money, energy and skill to develop a new product. Despite all these efforts, the new products may experience failure in many cases. A failure brings loss to the company in terms of money, time, motivation and image. So it is important to find out the possible reasons for the failure of new products.
Several reasons may cause the failure of new products, some of which are:
1) Over-Estimation of Market Size: If the market of the product is over-estimated, a new product, despite being good in quality, cannot generate the desired level of revenue and may fail.
2) Under-Estimation of Competition: If the marketer fails to anticipate the competitor’s strength and reaction, the new product has to face stiff competition, for which they are not prepared. It may cause the failure of the new products.
3) Poor Market Research: Seeds of failure may lie in their origin. If the market is not studied properly, and the marketer makes wrong predictions about customers’ needs, the product, despite being perfect, may fail to satisfy customers.
4) Lack of Uniqueness: If the new product is incapable of providing meaningful differences in comparison with competitors’ offerings, customers find no reason to accept it.
5) Poor Design: When the new product is designed poorly and is inconvenient to use, the product may fail.
6) Lack of Superiority: A new product is bound to justify its existence by providing something better, in the true sense, than what competitors provide. Only superfluous claims made by marketers cannot create sales of the new offerings.
7) Wrong STP Approach: When the marketer fails to segment the market properly, target the right group and position the new product rightly, it fails to get a toe-hold in the market, and experiences failure.
8) Technical Problem: If the new product suffers from any technical problem, observed by the customer during its use, it fails.
9) Huge Cost of Production: When the actual cost of production exceeds the expected cost of production to a large extent, the company has to set a high price for the product, which may also result in product failure.
10) Wrong Entry Timing: If the management takes a hasty decision to enter the market or gets late in entering the market, the product may fail.
11) Poor Promotion: When the marketer is incapable of utilising its promotional tools properly to make customers aware of the new product and motivated to purchase the product, the product may fail to perform its desired functions.