New product development (NPD) has many benefits. Expanding your customer base, increasing your value proposition, strengthening your competitive advantage, and top-line growth are just a few of the benefits of developing and launching a new product.
Along with numerous benefits, building new products comes with its share of challenges and risks. On average, building new products costs almost $100 thousand. Depending on the complexity, developing new can take anywhere from a few months to a few years. Even if companies can devote the time and resources, only 60% of new products succeed.
To build profitable, in-demand products worth the investment, companies need to proactively protect their product development.
Why Do Some Products Fail?
There are various reasons products fail — some avoidable, some inevitable, but all identifiable.
- Avoidable reasons are ones that companies can prevent if they are aware of the issues and develop strategies to solve for. These mistakes often result from a lack of data or a lack of a product development strategy. They could also include skipping or rushing steps in the product development process or failing to collect necessary feedback on product performance and market opportunity.
- Inevitable reasons for product development failure are ones that can’t be controlled or changed. These can include a lack of interest in their target market, limited to no profit, or lack of supplies and resources to support the product’s creation, distribution, and sales.
Collecting and evaluating data at critical points in the product development process allows companies to identify what factors can affect product success. Whether these factors are avoidable or not, knowing the risks enables companies to adapt or pivot to a more profitable product development strategy.
Tips for Successful Product Development
As you begin developing your next great product, keep the following tips in mind to protect your NPD investment and identify early signals of failure.
1. Don’t Skip Steps in the Product Development Process
New products are often a result of an unmet need in the industry or a new opportunity. Therefore, companies that are confident about the success of a new product idea are tempted to skip steps in the product development process to quickly capitalize on customer interest or beat their competitors to market.
This is extremely risky. At least 1/3 of product ideas are terminated at each stage of a structured product development process. By skipping steps, companies fail to collect critical data that indicates whether a product is strong, needs to be adjusted, or is unviable. Rather than saving resources, companies can end up wasting more time and money trying to belatedly adjust products or unknowingly develop an unsuccessful product.
Though it requires up front investment, following the product development process saves companies over 1.5 months of work and provides an ROI of 15x the investment due to the insights gathered at each stage.
2. Look for Signals of Product Development Failure
Simply following the product development process isn’t enough. You need to examine what the data tells you, adjust where you can, and accept when the data tells you the product will fail. While this may sound like common sense, it’s often easier said than done. It can be even more challenging when multiple stakeholders get involved and hold firm to their preconceived beliefs, experiences, and preferences over what the data shows.
Some common signals of product failure are:
- Limited market demand for an offering
- Shifting external factors (supply chain, regulations, technology) that could harm or halt products in the long-term.
- Features not effectively addressing customer needs
- New product cannibalizes existing offerings
- Product is too challenging to use, dissuading prospects and increasing churn
- The production cost exceeds what customers are willing to pay
- Can not feasibly compete with competitor offerings
By ignoring the data, companies miss a potential opportunity to refine their product to ensure market viability and, as a result, protect their NPD investment. If refinement isn’t an option, listening to these signals and accepting the product’s likelihood of failure allows companies to avoid wasting further resources on a product with no return.
3. Ensure Sustainable Product Development
As you build and refine your products to appeal to customer needs, it’s important to consider long-term sustainability. If you don’t have the means to support the ongoing creation and demand for your product, you will overtax your company and employees.
Once your product does generate demand, failing to consistently supply it can also harm your brand reputation, with customers receiving delayed deliverysupport or constant out-of-stock notifications.
As you develop and refine your product, keep these questions top of mind:
- Budget: Has your company secured enough money to develop, sell, and distribute your product?
- Materials: Do you have access to materials to build the product secured? Do your employees have the necessary tools to perform their job?
- Manpower: Do you have enough employees to support the creation, sale, service, and distribution of your new product? Do those employees have the adequate training, skills, and resources necessary to produce and sell your product?
Developing an in-demand product means nothing if you cannot maintain production in the long run. Make sure your company and employees have all the support they need to sustainably produce your new product.
4. Consider Long-Term Demand
Before investing a significant amount of time and resources in new product development, consider the long-term demand for your offering.
Does the product you’re developing have longevity, or is it a short-lived fad? Developing products in response to a fad or trend isn’t necessarily a bad idea, but it’s important to compare your investment against long-term viability. Consider these questions:
- Are you sacrificing your core product to divert resources to this new product?
- Can you revert this investment if the market for your new product cools down?
While you may have the resources and time available to produce your new product, if the demand for it is short-lived, then your return might fall short of your long-term expectations. This can also harm your core products and leave you with an excess of supply and no demand.
Rather than investing in a short-term product, you may be better off investing in your existing products to expand your current market share or exploring adjacent markets that might be interested in your products.
5. Monitor the Competitive Landscape
Lastly, remember you aren’t building your product in a vacuum. There are other companies out there who are likely investing in or already offer a similar product.
In fact, two of the biggest post-product launch challenges companies face are an existing offering (36%) or a new competitive offering (26%) that they failed to account for. So, despite confirming that a product is both in-demand and profitable; by failing to account for more competitive offerings these companies will struggle to sell the product.
To protect your NPD investment, identify the current and emerging competitors for your offering and answer the following questions:
- Is this new product applicable in your industry where your brand is recognizable, or will your competitor have stronger brand recognition?
- Do your employees have the skills and knowledge to produce and promote a competitive product, or will they be outperformed by competitors?
If the results of these questions favor your competitors, this might not be the right product for your company to invest in. While you might end up losing out on this product, by redirecting your resources and investment to areas with higher returns, you will be better positioned the long run.
Long-Term Product Success
Product investment does not end once your product launches. To leverage your products to increase revenue and grow market share, you need to build a long-term product development strategy.
Investing in a product development strategy allows your company to be responsive to evolving market dynamics and appeal to new customers and markets. Depending on your goals and available resources, long-term product strategies can include assessing existing products for improvement opportunities, exploring new and adjacent markets that have a need for existing offerings, and developing additional offerings and features to expand product portfolio and market share.
