Bringing Your Product to Market 4.0

Customers see products and services; they don’t really see much else about your business. You worry your head about the entire business, so you pay attention to marketing, branding, operations, and profit. But your customer only really cares about the thing you make or the thing you do. And when they look at your product or service, they’re asking themselves a bunch of questions that have nothing to do with you or your business. “What value is this to me?” “Do I need this?” “Will this make life easier, happier, better?”

Bringing a product to market involves thinking like your customer. You have to ask the same questions customers ask when they look at your product. Because the success of your product depends on the answering questions about what your customer will do., “Will people buy this?” “Will they like it?” “Who will buy this?”” How many people will buy this?”

Asking questions about your customer―who they are, what they need, what they want―in developing your product is called the marketing approach to product development. This approach has spawned an entire science called new product development; it is a very complex and specialized field in corporate business. Believe it or not, there are folks with PhDs in this field.

Large corporations spend hundreds of thousands to millions of dollars in new product development and, despite their efforts, often make costly and embarrassing mistakes. You’re even more vulnerable to making a mistake because you don’t have the deep pockets and the armies of experts that corporations have to eliminate as many mistakes as possible.

Be assured, however, that you can follow a very similar process. You may not have the millions of dollars that Proctor & Gamble or Microsoft can bring to the table. You may not be able to perform focus groups, large-scale surveys, mall intercepts, or in-store traffic studies, but you can approximate many of these tools with the Internet and Web. There are a number of low-cost to free resources that can help you refine your ideas, gather information, and prototype your product to help you roll out the most successful product or service you can.

We’ll begin our discussion with a short description of new product development and how major corporations go about it. This step-by-step process will structure the rest of the chapter. So we begin our discussion with resources to help you generate and screen ideas; we then move on to concept development and testing, business analysis, prototyping, beta testing, implementation, and, finally, rolling out your great new product or service. We conclude the chapter with a short discussion of licensing and finding a manufacturer for your product.

4.1. Getting Your Product to Market
You’re developing a new product or service on a very limited budget, so why should you care how the corporations, with their deep pockets and MBA brigades, develop their new products? I’ll tell you why. If you understand how a company like Chrysler or Colgate-Palmolive goes about developing products, you’ll have a better handle on what you can do to ensure the success of your venture―even on a shoestring. Each step of the product development or improvement process has valuable tools that help you ensure your product is something people will want to buy. If you’re clever, you can find these tools at little or no cost and work out the bugs in your product idea before you’re facing a roomful of unsold product.

Corporations often spend millions of dollars developing new products through several distinct stages. The goal of the entire effort is to come up with metrics that justify the creative insights and intuitions of the product developers. These metrics are gathered through marketing research, studying the market for a product. Marketing research consists of several elements: surveys, mall intercepts, focus groups, in-store behavior studies (watching consumers behave), and competition research (one of the most important considerations in launching a new product is what the competition is going to do). All of these cost truckloads of money, but you can downscale these processes to fit your budget, no matter how small.

Let’s say that you have a great idea for a product. You know there is nothing else like it on the market. Your instinct tells you that lots of people would buy that product if it were on the market. So you say to yourself, “Why don’t I make that product? I don’t have much money, but I’ll get someone to manufacture it and then launch it on the Internet. Once people find out about it, the money will start rolling in.”

Here’s the problem. You may be right and you may be wrong. You would buy the product if it were on the market. Maybe your friends would jump at the chance to buy the product. It’s entirely possible, though, that no-one else would have the slightest interest. But you don’t know until you try, right? What do you have to lose?

You could lose your entire investment, that’s what. That’s why corporations pour so much money into developing products. Like you, someone at that corporation comes up with an idea for a product. Their instinct tells them that if consumers knew about the product, they’d buy it. New product development is about translating that instinct into measurable consumer insights:

  • What do consumers want to buy?
  • What types of people will buy this product or service?
  • How many consumers will buy this product?
  • What other kinds of things do they buy?
  • What are they willing to pay?
  • What product features would make them want to buy this product?
  • What product features don’t matter to them?
  • What benefits are they after in buying and using this product?
  • Will they like this product if they actually buy one? For instance, if you’re selling pizza, do customers think it tastes good?
  • If they buy this product once, will they buy it a second time?

Corporations pursue consumer insights because that answers basic questions that tell them whether to invest in the product or not:

  • If I make this product, will it sell?
  • How much profit is in it?
  • What features or qualities does the product need to have for lots of people to buy it?
  • What should the price be?
  • Where should I sell it?
  • Who should I target?
  • How should I sell it? In other words, how should I advertise it? What should I say about it when I’m selling it?

New product development is about asking these questions and then applying the answers to developing and rolling out a product. The process is iterative: every step raises new questions and applies new answers to improving the product. The whole product development lifecycle follows a distinct process of six stages:

1. Idea Generation

Also called front end development or Phase Zero, corporations usually have Research & Development and/or marketing units specifically devoted to coming up with new products and product improvements. In your venture, you probably serve as both the R&D and marketing units, so that solves that!

2. Idea Screening

Once a corporate business unit comes up with an idea, a few formal questions are asked to make sure it’s a good idea. For instance, is it even possible to make the product at a decent price? Can you argue that people will actually buy the product? Are there any other products like it out there, i.e., are we just reinventing the wheel?

Idea screening is one of the most important parts of the process and one that entrepreneurs frequently skip. If a product really isn’t going to fly, you want to know it at this stage, not after you’ve poured time, dedication, and money into the thing. If you go too far with a product, you can easily fall into the fallacy of sunk costs, where you feel you’ve put so much time and money into something that you should just keep going. Here’s the economic reality: what you have already invested in a product or business, called sunk costs, should never enter your calculation in considering whether to continue with that product or business. As the proverb goes, you should never throw good money after bad.

3. Concepting and Testing

For me, this is where product development really begins. This is the stage where you sit down and formally define your product. You draw it, describe, and list all of its features and benefits. You roughly determine how you’re going to manufacture it and who you’re going to sell it to. This is called the product concept.

The most important part of this stage, as far as corporations are concerned, is concept testing. In this stage, corporations do lots of consumer surveys: in-store surveys, telephone surveys, mall intercepts, fax surveys (for B2B products), and Internet surveys. They basically tell the consumer what the product concept is and ask them if they’d be interested in buying it. For instance, “We have a product that will clean your clothes without putting them in a washer. You just put your clothes in a basket, put in our cleaner thingie, and your clothes are clean and dry in three hours. How interested would you be in a product like that?” The surveys, of course, are more detailed, but the consumer insights gained from them help prevent costly errors.

4. Business Analysis

Also called the business planning stage, this is the stage where you work out the business mechanics of bringing the product to market: how much it will cost to manufacture, what price to sell at, estimated sales volume, profitability, and breakeven (how much you need to sell so you don’t lose money). The business plan or analysis is not an implementation plan. You are not working out details of suppliers, distributors, offers to distributors, or logistics. That is hard, complicated, and expensive work. In the business analysis stage, you’re just trying to get a good handle on the amount of work you have to do, how much it’s going to cost, and how much you can expect to make.

Remember when I said that one of the most important aspects of new product market research is figuring out what your competition might do? Somewhere around the business analysis stage, corporations begin trying to secure legal protection for their product ideas: patents, copyrights, and trademarks (see Chapter 1 for a fuller discussion of legal protections). Why? Because the most common competitor response to a successful product is to imitate it. For instance, the vast majority of research money that pharmaceutical companies spend is trying to find copycats of drugs already on the market. But once you’ve tested your concept and found it sound, the business analysis stage should also include securing patents and trademarks, anything to keep your larger rivals from stealing your concept and making money that should really be going to you.

4. Prototyping and beta testing

In this stage, you put together two distinct version of your product. The prototype version, also called the alpha version or mock-up, is a semi- or non-functional version of your product. It exists only to show other folks, like possible partners, investors, or licensees, that you’ve got a pretty groovy product going on. The beta version is a fully manufactured, fully working version of your product. This is the version companies distribute in limited release in order to test consumer reactions and determine that the product can hold up under consumer use. (We’re all familiar with beta testing in software where consumers get to find all the bugs so the company doesn’t have to!) Testing frequently involves using a defined set of consumers who offer feedback in surveys or a focus group, which, unlike a survey, involves a small group of people engaged in a discussion with a moderator.

5. Implementation

Once you have tested, retested, and redesigned your product, there comes a time when you actually have to start making and distributing it. You have to line up suppliers, manufacturers, channels (how you are going to sell it, i.e., retail, through the Web, etc.), and distributors. Your job is figuring out how to get the product from raw material into the consumer’s hands. This is the implementation phase, where you work out who does what and how much they’ll get for doing it.

6. Rollout

Corporations typically roll out products in two stages: a limited rollout and a full rollout. For a limited rollout, the company sells the product in one region (it might be, for instance, in all the supermarkets in Duluth, Minnesota) and they test how well it sells. They calculate sales volumes and they survey consumers. They then use that information to extrapolate how well the product will do in a wider rollout and what they need to do to get even better numbers. In other words, corporations use limited rollouts to figure out whether to do a larger rollout and improve the product and its marketing for that wider rollout; so a limited rollout is kind of like a very large beta test.

The remainder of this chapter goes through each step of the process and the resources available to help you in that stage. In the end, the development process is about weighing your desire to eliminate mistakes with your need to go to market as quickly as possible. You’re not alone in this. Every corporation has to make the same trade-off.

4.1.1. SCORE

http://www.score.org

Guess what? The first resource you should consult is SCORE, as it probably should be for any aspect of starting your business. SCORE is an organization that has gathered together retired and working executives, business owners, and corporate leaders to provide free mentoring and advice to entrepreneurs starting their own business. SCORE boasts over 10,000 executive volunteers – representing some 600 business skills―who will correspond with you or meet with you to give you advice based on their years of business experience. The mentor list, as of publication of this book, includes ninety-four counselors who specialize in product design, 249 counselors nationwide who specialize in product development, 265 counselors who specialize in market research, 109 counselors who specialize in market testing, and 119 counselors who specialize in product research.

4.1.2. Don Debelak

http://www.dondebelak.com

Don Debelak.com provides product development services to entrepreneurs for a fee. Services include:

  • Consulting—Don Debelak.com will consult with you on all aspects of new product development. Fees range from $60 per hour for email consulting to $100 per hour for in-person consulting. This is inexpensive in the new product development consulting space, but it’s also not compatible with a shoestring budget!
  • Concept Evaluation—using a distinct analysis model (Great customers, Easy sales, Long life), Debelak will review your business model for $1,200.
  • Invention Evaluations—this is a service more properly oriented toward new product development and will set you back $450.
  • Plans—Market Introduction Plans ($250-$750) and Business Plans ($2,000-$6,000).
  • Patent Services
  • Engineering Services
  • Catalog marketing plan—for a start-up fee of $495 and a sales-based 7% commission, Don Debelak.com works to place your product in various catalogs.

Debelak publishes a very, very useful 15 Steps to Bringing Your Product to Market, reprinted as an appendix to this chapter. Most usefully, he divides the product development process into three distinct business models: Outsourcing, Licensing, and Starting Your Own Company.

  • Step 1: Idea Conception (this corresponds to idea generation)
  • Step 2: Evaluate If Your Product Idea is Worth Pursuing (this corresponds to idea screening)
    • Is your idea feasible to create based upon your abilities
    • Can it be produced profitably?
    • Is there significant competition
    • Does your product make people say, “Wow?”
  • Step 3: Document Product for Intellectual Property Protection
  • Step 4: Target a Market (one aspect of concepting and testing)
  • Step 5: Produce Something That People Can Evaluate (this corresponds to the concepting stage)
  • Step 6: Market Research (however, most corporations conduct market research from concepting to full rollout; in traditional new product development, market research happens all the time)
  • Step 7: Reevaluate and Adjust Your Product Based Upon Market Research Results
  • Step 8: Make a Prototype
  • Step 9: Get a Patent
  • Step 10: Decide Which Track to Take

At this point, Debelak divides the next set of steps based on your business model. These last five steps are the hardest part of introducing a new product, so you should deeply familiarize yourself with them. I have worked with many start-ups―actually making the product or business real is where almost everyone fails.

You have three business models available. As an outsource entrepreneur, you can outsource all manufacturing, logistics, and marketing to other companies. You’re basically hiring other companies to do all the manufacturing and marketing work for you. In a licensing operation, you essentially sell your product idea to another company to manufacture and market. In return, they pay you royalties or a fee based on how much they sell. If you start your own company, you provide the money, resources, and staff to manufacture and market your product.

Outsource entrepreneur

  • Step 11: Find Potential Partners
  • Step 12: Set Up a Proposed Deal Structure
  • Step 13: Approach Manufacturers
  • Step 14: Approach Marketers
  • Step 15: Close the Deal

Licensing

  • Step 11: Find Licensing Candidates
  • Step 12: Prepare a Preliminary Licensing Proposal
  • Step 13: Prepare a Licensing Presentation
  • Step 14: Approach Your Candidates
  • Step 15: Sign the Deal

Start Your Own Company

  • Step 11: Create a Business Plan and a Market Introduction Plan
  • Step 12: Create Packaging
  • Step 13: Find A Manufacturer
  • Step 14: Find Sales Agents/Distribution
  • Step 15: Start Selling

4.1.3. The Launch Doctor

http://www.launchdoctor.com

The Launch Doctor is a site offering books, articles, and professional consulting by Catherine Kitcho. While the consulting services are pricey and primarily oriented to medium- and large-sized corporations, the site offers a number of excellent articles and newsletters to help you understand the ins and outs of launching a product. Most useful for your purposes are the articles Product Launch for Small Business (http://www.launchdoctor.com/launch_forum2.shtml?cutoff=0&id=4) and From Idea to Launch at Internet Speed (http://www.launchdoctor.com/launch_forum2.shtml?cutoff=0&id=5).

In her small business launch article, Kitcho reduces the process to ten questions you need to answer:

The customer:

1. Who is your primary customer? What problem are you solving for them with the product that you’re launching?

2. How can your customer solve this problem now? How is your solution different? Do these differences have value from your customer’s point of view?

The market:

3. How many other people are out there who are similar to your customer?

4. Is demand increasing for your product or changing in any way?

5. What other companies supply similar products to your customer? How is your product different than your competitors’?

The channel:

6. How will your customer find out about your product?

7. Who will be selling your product to your customer; will you sell directly, or through a third party?

8. If you only sell directly to your customer, could an additional sales channel increase your revenue?

The company:

9. What is the business objective you want to achieve with this product? (i.e., enter a new market, effect growth, increase revenue, improve market share)

10. How does the product you’re launching fit with other products you have now? Is it the first product? Is it the last of a product line? Does it leverage other products you have on the market?

The article then assiduously explains how your answers to each of these questions determine how you need to manage your product launch.

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