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Everything You Need to Know About Product Development

How to leverage research to develop fail-proof products

A successful product strategy allows companies to respond to evolving market dynamics, win and retain customers, and increase their profits. However, building successful products is not easy, and the failure rate of products is 40%.

Creating products that align with customer needs, outperform competitors, and capture market share requires two things:

  1. A product strategy that balances profit and growth
  2. Targeted research to develop products that align with market demand

In this article we will explain how to build a foolproof product strategy and the key research and insights you need to collect and analyze throughout the product development process to successfully launch your products.

What is a product strategy?

A product strategy is how companies set the direction and focus of new or existing products. A strong product strategy allows businesses to evolve and align with current market demand, stay competitive in their existing market, and expand into new markets.

There are four different product strategies based on whether companies are expanding their product capabilities, their market share, or a combination of the two.

  • Market Penetration: Strengthen existing products in existing markets
  • Market Development: Expand existing products into new markets
  • Product Development: Build new products for existing markets
  • Market and Product Diversification: Build new products for new markets

Most companies choose more than one approach. The specific mix will vary depending on the company, its current portfolio, available resources, business goals, appetite for risk, and other market factors.   

Hanover Product Solutions

Build an effective product strategy with expert support and in-depth data.

Reasons to rethink your product strategy

While you may already have a product plan in place, if you are experiencing new or ongoing business challenges, your product strategy might be both the problem and the solution.

Here are some common signals that a new product strategy is necessary:

  1. Sales are declining
  2. There is a decline in customer satisfaction and renewals
  3. A shift in customer needs is affecting product demand
  4. The release of new technology (e.g., AI)
  5. Competitors are stealing your customers
  6. New competitors have entered the market
  7. Your current market is saturated
  8. An adjacent market is expressing interest in your products

If any of these seem familiar, it might be time to evaluate how your products can evolve to tackle your business’s biggest challenges.

How to pick the right product strategy

The right product strategy mix for your company depends on your goals, resources, current product portfolio, and market opportunities and limitations.

Ask yourself the following questions:

  1. How can our products support our company goals?
    Products are a key driver of company success, but only if they are aligned with set and measurable goals. If expanding their customer base is the goal, product development or even market development are viable approaches that result in a wider customer base to sell to. If your company wants to strengthen their market position, the product strategy should focus on market penetration and could also include product development if new features or product adjustments can address an untapped opportunity.

    Before you start developing a plan for your products ensure that the predicted benefits of your strategy align with the goals of the company. Doing so can also help add weight to your requests for company investment in your strategy.

  2. Do our current products have the potential for improvement or expansion?Can your current products adapt to shifting customer needs or evolve to incorporate new technology? Improving or adapting existing products versus building new offerings is typically faster, less expensive, and is more likely to succeed. It is also less risky as companies more often know the price, demand, and margin of existing products. Strengthening your current products in the short term can also increase revenue and market share, which can help in pursuing alternative product growth strategies in the future.
  3. What is the best way to address gaps or opportunities? One of the key considerations for product development is building a product that addresses customer needs. Can an existing product be updated to address current gaps in customer expectations or will customers be better served by a new product? Would a single product with expanded features be in demand or would the market be better served by multiple products or a customizable offering so that they can choose what they want?
  4. Where is there demand for our products? As customer needs shift, the need for your products can emerge in other markets. Analyze the new and adjacent markets to identify how closely your current offering serves the needs and preferences of the new market. If adjustments are needed, how many changes are necessary to gain traction in the new market?
  5. Will our current products and potential enhancements be profitable in the future? While updating products costs less time and money in the short run, it may not be the best long-term investment. If market dynamics (customer demand, market trends, technology, etc.,) mean that the potential enhancements to your products will have short-term demand or will have limited profit or scalability, your company could be better served by investing in a long-term solution by building a new product or exploring a new market.

Product Development Strategy Guide

Learn which product strategy is right for your company and the tools and research you will need to succeed.

The foolproof path to successful product development

Now that you know your ideal product strategy, it’s time to develop and enhance your products.

What is product development?

Product development is the process of planning, developing, launching, and updating goods or services for sale. Product development typically entails multiple steps, each collecting critical data and insights to ensure the finalized product (or product enhancements) align with customer demand.

Why is it important to get product development right?

On average 40% of product launches fail.

There are numerous reasons why:

  1. Fails to accurately address market demand
  2. Does not solve key customer needs
  3. Can not compete with competitor offerings
  4. Priced to high or is too complicated to use

With companies spending an average of almost $100,000 on creating a product, plus the time and resources dedicated to its development, it’s a hefty investment to leave to gut instinct and chance.

While some of the above situations are inevitable, there is a way for companies to protect their investments and minimize unsuccessful launches: Market research.

Research allows companies to identify early signs of product failure and either address these challenges by altering the product or pivot investment to a more promising concept.

companies use research to inform product development
0 /3
of organizations prioritize research when developing and refining a product
0 %
of executives say comprehensive product development is necessary to the success of a product
0 %

Critical Pitfalls

 Learn the common mistakes avoid when developing a product and how to ensure success.

Data-backed product development

There is a variety of research companies can conduct, often tied to which stage of the product development process they are in.

Gathering in-depth insights is critical to understand market potential and customer needs, fine tune product elements, and evaluate the success of a product launch. Data-backed research provides companies with an average of 15x ROI and saves them 1.5 months in development.

Step one: assess current market position 

Before you start developing a new product it is critical you assess the current state of your company and your target market.

What you need to know:

Market factors

A product is a long-term investment, the success of which is highly dependent on shifting market factors. External elements like customer demand, industry regulations, and shifting economic factors will impact customers’ need and willingness to buy.

Solution: Market Analysis

This research evaluates the potential for business success and customer behavior by analyzing market demand, size, trajectory, trends, and key competitors. These insights help companies identify areas of opportunity and uncover potential risks that might affect business success.

Current and emerging competitors

Your competition will impact how successful you are. You need to know who they are, what their offering is, and your similarities and differences.

Solution: Competitive Analysis
Through a competitive landscape analysis, companies can create profiles for each of their competitors, focusing on their overall business health, product portfolios, and additional company-specific information. This provides companies with an understanding of potential opportunities and risks of competing for market share.
Your standing in the market

Understanding your brand's health and strengthening your brand equity is crucial. If your brand is unknown (or unliked) your products are going to struggle to succeed.

Solution: Brand Equity Analysis

Measures the strength of your brand and competing brands while identifying how much the role of branding leads customers to use products or services. This provides insights into a brand’s health and influence, highlighting strengths and uncovering weaknesses that need to be addressed prior to building something new.

Step two: idea generation

Identify promising product ideas that enhance your capabilities, increase your market share, and align with what customers want.

What to evaluate:

Your current product offerings

Examine your current products to see what new features or complementary products can strengthen your market presence.

Solution: Product Portfolio Review

A product portfolio review assesses the level of success, gaps, and any feature overlap of all the products a company offers. This provides insight into untapped opportunities, potential risks, as well as the most needed enhancements customers are searching for.

Solution: Product Attitudes and Usage

This research assesses how customers use a company’s products and how they evaluate them. Sometimes, customers find new ways to leverage products for their needs that differ from the original intent. At other times, customers find that products are not sufficient to meet their original needs. It’s important to analyze how customers use and evaluate products to identify gaps and unknown benefits that can be further enhanced

What customers want

To build products people will buy you need to understand what they want and what will motivate them to purchase.

Solution: Key Market Drivers Analysis

A key market drivers analysis evaluates market dynamics (e.g., key drivers and threats to growth) and evolving and emerging trends to understand the health and trajectory of the market. It allows companies to uncover hidden gaps, untapped opportunities, as well as potential risks.

Solution: Customer Needs Assessment

Identifies key elements of customers’ experience with a brand, product, and service, including needs, pain points, challenges, purchasing behaviors, and what attributes are essential. This allows companies to identify gaps in their customer service as well as opportunities to build products customers need.

Potential markets

New products or product enhancements increase the value and benefits of what your products have to offer. Look outside your current market to see if adjacent markets have a potential need for the products you are developing.

Solution: Adjacent Market Analysis

This research analyzes adjacent markets to identify the markets size, trends, and competitors as well as assess if there is potential need and demand for existing products. Though these markets might not readily accept a product as is, with some targeted product enhancements, a product may be able to access a whole new consumer base.

State of Product Development

Learn how companies leverage product development, the top challenges they encounter, and best practices for a successful product launch.

Step three: start development

Take all the potential ideas you generated and evaluate them against each other and their potential for success.

What you need to do:

Gather customer feedback

Customer demand should be at the core of your product development. After all, a product can only succeed if customers are willing to buy it. Ensure the products you are making align with customer preferences by collecting customer feedback.

Solution: Voice of Customer

A voice of customer analysis provides critical insight into the customer experience, including expectations, preferences, and habits, to understand how to most effectively reach your target audience through quantitative data analysis and qualitative feedback.

Solution: Customer Satisfaction Survey

Customer satisfaction surveys evaluate how happy customers are with a company’s current products, services, and overall experience. This research helps identify the weaknesses in customer experience and evaluate if the planned product enhancements will be able to address these gaps.

Solution: Concept Testing Surveys

Product concept testing gathers feedback from a target audience to test company assumptions and identify the viability of product enhancements. Insights from this survey can be used to inform further concept refinement.

Step four: product refinement

Test, adjust, and review every product aspect till your initial concept is refined into a working prototype

What you need to test:

Product elements

Products don’t always work as intended. To ensure the product contains the elements that matter most to customers and effectively address their needs, you need to test them.

Solution: Product Testing

Collect data on customers’ potential usage behavior, preferences, and reactions to the updated product by allowing them to use the product before it launches. Testing products early allows companies to quickly identify any problems and conduct further enhancements to the product to ensure it will have a successful launch.

Solution: Conjoint Analysis

This survey mimics real-life choices by measuring stakeholder preferences and tradeoffs on features, attributes, products, or services to infer preferences. This research can help identify the most desirable product enhancements while also identifying potential risks.

Solution: Price Analysis

Identifying the right price is critical to product success. If a product can’t generate revenue or fit into the price range of an existing portfolio, it is considered unviable. In fact, 21% of products are found not viable at the pricing analysis stage, regardless of how well the product had performed. To minimize wasted investment and avoid building and launching a product with poor ROI, you need to ensure your product will generate sufficient revenue.

Princess Cruises Case Study

Learn how Princess Cruises leveraged research to develop an effective offering for their customers.

Step five: launch preparation and product launch 

Now that your products have been developed, tested, and optimized, it’s time to prepare your launch strategy.

What to analyze:

Who your customers are

Design enhanced service strategies by identifying the varying characteristics of your customers.

Solution: Customer Segmentation

Customer segmentation is the process of collecting demographic and behavioral information about customers and separating them into groups with similar characteristics and motivations. This data allows companies to develop more targeted, influential interactions with current and potential customers, ultimately reaching those customers more effectively and increasing sales.

How to effectively reach them

Develop effective outreach strategies by understanding where your customers are active and what messaging resonates with them.

Solution: Product Message Testing

This research leverages direct customer feedback and message analysis to identify which themes will resonate with the target audience, ensure the updated product stands out, and engage customers.

Solution: Channel Strategy

This research involves evaluating historical channel performance, reviewing competitors’ channel strategies, as well as collecting direct feedback from customers to determine the most effective mediums to reach and engage clients. With this data, companies can identify the best channels and tactics for distributing products and reaching their target audience.

Step six: product review and additional refinement 

Evaluate how the product is performing compared to expectations and goals and spot potential improvements or refinements.

What to learn

How customers interact with you

Identify the key touchpoints along the path purchase to develop sales and service strategies that meet customer expectations.

Solution: Customer Journey

Identify the full customer journey from awareness and consideration to purchase and retention. By researching how customers interact with a brand and its products, companies can uncover what strategies are not working and identify opportunities for improvement.

What's (not) working

Learn customers motivations for buying your new product or why they chose not to purchase to identify your product’s strengths and weaknesses.

Solution: Win Loss Analysis

A win loss analysis evaluates won and lost sales to evaluate the performance of sales strategies, product offerings, and customer experience. This research helps identify key factors of the buying process, including customer pain points and gaps in sales positioning, product features, and service offerings that are turning customers away.

How customer perception has changed

Measure how customers view your new product and your overall company. Is your new product solving their pain points or does your new offering fall short, damaging your brand name?

Solution: Customer Satisfaction

Companies should reissue a customer satisfaction survey postlaunch to evaluate how product enhancements have impacted satisfaction and whether any new issues have arisen with the new updates.

Solution: Brand Perception

Changes to a product will affect a brand’s image. It’s important to track how brand perception has changed, identifying the negative feedback that should be addressed and the positive feedback that should be leveraged and incorporated into sales and marketing strategies.

Enhance your products with the right data

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