The market is oversaturated with consumer products, yet the pursuit of developing and releasing new product innovations remains a widespread business objective for both startups and established companies.
Businesses need to develop products that can meet demand while providing customers with a solution to their problems or give them something that they need. There’s an irrefutable connection between market research and developing successful customer-facing products.
Product development provides a competitive advantage for businesses and helps determine how to successfully price products, how to produce them in a cost-efficient way, identifies gaps in the market, and offers a means to achieve these goals through an effective product lifecycle.
Agencies need to use market research for product development to visualize market opportunities and reduce associated risks in releasing a product.
There are a few types of product development:
- Altering Existing Products: Modifications are added to existing products in response to changing customer needs, or to improve its performance.
- Additions to Current Product Lines: Products are added to already established product lines, such as augmenting a product line with a new product that can add a solution or make it better.
- New Concepts: An entirely new product that has been created due to a drive to innovate, and which might create a whole new market.
Purpose of Market Research in Product Development
Market research has a purpose for every stage in a product lifecycle, as can be seen in the diagram above. From recognizing and establishing needs, to testing products and improving their performance, to identifying its place in the near and distant future, market research is the most crucial component in solidifying an approach to product development.
Companies apply significant portions of their budget to research:
- Electronics companies average an R&D budget that matches about 15% of their sales because of the quickly changing nature of the market.
- A majority of companies spend between 2% and 5% of sales on R&D, such as Honda, Siemens, or Boeing.
- More than 90% of all product innovations that are truly successful actually start as a failure and are considered happy accidents, such as Velcro, Post It Notes, the telephone, and x-rays.
Examples of Successful Product Development Due to Market Research
Implementing a standard process when planning product development is something a lot of companies do. Of course, there are a lot of variations, but most of them rely on an 8-step process:
The 8-Step Product Testing Process
Offers insights about consumers and what product features they need. Includes secondary research to pinpoint consumer trends. One of the main objectives of the research from a primary research standpoint is to provide insights into any gaps in existing product offerings or to identify unfulfilled customer needs.Step 1
Idea Testing and Development
Offers insights about consumers and what product features they need. Includes secondary research to pinpoint consumer trends. One of the main objectives of the research from a primary research standpoint is to provide insights into any gaps in existing product offerings or to identify unfulfilled customer needs.Step 2 & 3
The potential business implications of releasing a new product is determined via the analyzation of competitive market space, branding, production expenses, marketing, and pricing.Step 4
Market Researching teams need to remain very involved in this stage to keep products aligned with the consumer insights that created a foundation for the idea.Step 5
Includes marketing, effectiveness research, tracking research, and product satisfaction research using any number of methods like basic surveys or QR codes on mobile devices.Step 6
Commercialization, Monitoring, Evaluation
Tracking marketing effectiveness and customer satisfaction are very much needed. Analysis of the result is dependent on the questionnaire layout, sample quality, and reporting.Step 7 & 8
A company’s ability to design new products from conception to release must involve in-depth market research to sustain or surpass market goals and realize the true competitive advantage.
Market Research for New Product Development
Companies shouldn’t underestimate the virtue of solid market research. Many successful new companies can enjoy market durability due to regularly performed market research that offers insights about their market, consumer problems, and competitors.
Though market research can be conducted at any stage in the business lifecycle, a clear understanding of the market from the very beginning helps establish a strategy for brand growth.
Businesses also need to figure out and define their unique goals for successful market research:
Primary Market Research
- Sale effectiveness
- Measuring service quality offered by the competition
- Identifying competitor communication channels
- Measuring active competition in the market
Secondary Market Research
- Published company data reports
- Existing studies or surveys
- Newspaper reports
- Government Information
Market Research Process
- Analyze if any similar research has already been conducted.
- Study the existing data that meets your goals.
- Decide how any existing data can be used and who will use it.
- Figure out if your company needs to perform primary market research, and if not, decide who will conduct it.
Market research helps new businesses understand the way their customers think so that they can be converted into champions of your brand. Typically, there are three types of customers:
01Smart ShopperUsually wants to find the best available value for their buck and are usually informed about competitor pricing.
02InfluencerEducated about your target market and is in a position to influence other customers that value their opinion and insights.
03End UserRegularly uses your products and services and are the perfect candidate for primary market research.
When to Begin Market Entry Research
To sidestep issues like wasting internal resources, money, and time, businesses need a new product development strategy (NPD) that helps avoid:
- Launching a weak product.
- Mispricing products.
- Ineffectively allocating resources and budgets.
- Exposing your company to competitor threats.
Here are some critical steps for planning an NPD strategy:
- Define your product.
- Identify market needs.
- Establish development and implementation timeframes for your product.
- Pinpoint key challenges and develop appropriate approaches for your customers.
How to Conduct Research and Identify at Which Stage a Market Research Agency Should be Approached
Diagrams 1 and two above illustrate a specific methodology involved in the market research process, along with an example of the six-step process, respectively:
Defining Goals and the Problem This stage is when you must figure out what the core question is that market research can help you answer. Usually, it’s a business opportunity or problem that requires action and helps keep research heading in the right direction.
Figuring Out a Research Design Enables businesses to plan the market research method, which might be a focus group or survey. Also includes selecting your sample of research customers and the research method like mail, in person, or the internet. It’s based on what type of data needs to be collected:
- Exploratory Research Perfect for when the topic isn’t well defined or understood, and the knowledge base is limited.
- Descriptive Research Produces detailed information through quantitative research, with the objective of evaluating targeted topics.
- Causal Research Test or experimental research phase that helps identify the relationship between different variables, such as a possible connection between sales and store ambiance.
Creating the Research Tool Starts with preparing a questionnaire, aligning a focus group, or gathering materials for a moderator, all dependent on the tools determined in step 2.
Data Collection All the insights gathered and recorded in this step are vital in the conclusions that you’ll draw.
Data Analyzation Turns raw data into actionable insights, summaries, and reports that help define trends and inform decision making.
Data Visualization and Communication Transforms insights into a meaningful way of interpreting market research, and includes showing answers, recommendations, and insights in a way that helps support decision makers.
How to Interpret the Research Data in New Product Development
8 Steps in New Product Development
Interpreting research data in New Product Development (NPD) is crucial in ensuring that the proper stages can be completed before introducing the new product in the market.
Pooling ideas from different sources like internal, SWOT Analysis, customers, market research, competitor SWOT analysis.Step 1
Used to weed through the best and most lucrative ideas and get rid of those that don’t work. Business strengths and weakness, customer needs, trends, and forecasted ROI are all a component.Step 2
Concept Development and Testing
Preparing a blueprint of an idea and testing it.Step 3
Business Strategy and Analysis and Development
Determining the branding, marketing, and other strategies that are used to project profitability of both product and market.Step 4
Turns a concept into an actual product, like a prototype or limited model.Step 5
Product prototypes are provided for research and consumer feedback.Step 6
Marketing strategies need to be ready when the product is ready. Preparing final marketing strategies or bringing in different departments for decision making is important.Step 7
The beginning stage of the product lifecycle when products are released on the market.Step 8
Engineering Feasibility Analysis for New Product Development
Determining the feasibility of manufacturing products can be complicated. Businesses need to assess the cost-effectiveness and efficiency of their chosen methods to ensure that quality, production, pricing, and engineering processes align with product development objectives.
First, ask yourself if your product is feasible for market success, and then decide if your concept is a candidate for further development. The business model, funding, and intellectual property are all elements of NPD that should be included in a feasibility evaluation.
Certifications and Required Legal Approvals
Product Development Certificate Programs
Gaining the right type of training or an equivalent academic certificate in product development encompasses the processes and steps involved in developing ideas for new products or services.
Executive Certificate Problems for Product Design and Development Management
Northwestern University’s Segal Design Institute offers a certificate program for customer-based product development and innovation including how to incorporate industrial designs, research, marketing, intellectual property, and human factor.
Unix Shell Scripting Certification Training
These courses provide an understanding of Unix operating systems, architecture, and advanced concepts to apply in different technologies by working on real-life projects.
Innovation and Product Development Certification
The University of California at Irvine provides an understanding of moving from product conception to product introduction in a commercial space.
Secondary Research on Product Concept and Developments in the Past
There’s uncertainty surrounding NPD, and this can’t be avoided using only forecasting ability. Insights acquired from quantitative modeling, along with social, technological, legal, and political elements, are integral to successful NPD.
One of the most challenging aspects of new product research is minimizing the high rates of NPD failure. There’s a strong tendency to focus on successful NPD, which provides minimal information about any elements that contribute to failure.
There’s a lot of famous cases of NPD failures that prove that even elevating successful existing products aren’t guaranteed to succeed:
1980’s Coca-Cola product “New Coke,” which was built on an already existing product.
1990’s McDonald’s burger, the “Arch Deluxe Burger.”
Nokia’s attempt to keep up with Apple’s smartphone in the mid-2000’s failed and resulted in the company’s decline and sale to Microsoft.
There are two main areas of uncertainty connected to NPD:
Epistemic Survival bias where the majority of products that we are exposed to are the ones that were successfully integrated into the market. Successful new products are fundamentally different from unobserved failures, so evaluating the causes of NPD failures based solely on evidence from NPD successes is vulnerable to misidentification and leaves the NPD process at risk of selection bias.
Ontic Uncertainty in the change of the nature of reality that occurs from a successful new product. Due to the uncertainty in decision making, there’s no certain NPD forecasting value.
Therefore, the best way to avoid NPD uncertainty is to combine forecasting with scenario planning.
What Research is Necessary for Product Prototyping and Simulation
Virtual Prototyping Environment for New Product Development
When developing new product prototypes, Simulation Driven Product Development (SDPD) and Simulation Driven Design (SDD) are two methods that are used successfully.
For example, the S80 model by Volvo was developed based on simulations that took place in 2001. Spot-welding strength was forecasted through digital calculation rather than traditional testing methods.
The distinctions between SDPD and SDD reside in the implementation:
SDPD: Simulations provide the foundation for the whole product development methodology, not just the decision making that’s connected to the design stages. It might be a mixture of different forms of virtual testing or virtual factories, and physical testing may still be an important factor in verifying any legacy necessities for accurate model simulations.
SDD: This is utilized to help design engineers create concept options built on simulations. Simulation is also a complementary method for physical testing to help verify solutions.
However, product development and production cycles are heavily computerized today and rely on Computer Aided Design (CAD), Computer Aided Engineering (CAE), and Computer Aided Manufacturing (CAM) which provide the stages of virtual prototype environments.
Target Market Research and Impact in New Product Development
Even established businesses should acknowledge the value of product market research for product development. Honing product details and acquiring the opinions and thoughts of your target demographic, is what shapes decision making for packaging, marketing, and branding.
If you aren’t effectively offering what customers want, they’re going to patronize your competitors. So, it’s important to use product market research to seize opportunities to develop products that are wanted or needed.
Other critical components of market research for product development:
- Helps businesses connect and communicate with potential customers.
- Reduces risk associated with new product launches.
- Helps identify new market opportunities.
- Measures business reputation.
- Pinpoint issues within a business’s service range, packaging, website, or product features.
Helps deliver better value to different demographics.
Market Feasibility Research
Using market research feasibility studies enables the business to acquire insights into their market and assess if there’s a strong enough demand for a new product venture to be fruitful.
There’re five elements to market research feasibility studies:
Stakeholder In-depth Interview Discussing your venture with stakeholders is a good starting point because it allows all groups to gain ownership of the process and support market research and helps market researchers become acquainted with project objectives.
Trend Analysis and Demographic Evaluation Using secondary research and market analysis establish a demographic population and target audience that businesses use for demand modeling and calculations. This is particularly related to trends, consumer budgets, and other statistics that factor into project feasibility.
Quantitative Surveys Primary data is gathered from end users with a questionnaire that targets current and predicted use and evaluates what impact a new product venture may have on the market.
Competitive Evaluation Determines how competitors can impact a new business via competitor profiling, which helps businesses identify product gaps that they can take advantage of.
Demand Model and Valuations with Guidance Combines the first four elements (above) and then applies the respective findings to develop a demand model that forecasts the potential for a new business or product.
Businesses truly need to understand the ins and outs of the economic, social, and cultural context of demographic markets. Thorough and focused market research for the planning phase of a startup business, and before launching products and services, have an undeniable impact on success rates.
Qualitative research, surveys, social media, online traffic analysis, and data analytics are showing consistent growth rates among businesses, with data analytics seeing a 350% rise in usage from 2012 to 2016.
Companies should consider the accessibility, measurability, and possible maturation and size of each market segment to determine the potential ability to find customers and develop a winning strategy.
Competitor analysis is one of the most valuable information sources for startup businesses because they can understand what works well and what doesn’t for similar companies and have a blueprint of overall success.
Defining an approach to competitor research can be done with a few questions:
- Which businesses do you directly compete with?
- How are these companies positioned about a customer base, their key products and services, and pricing?
- What’s their success rate for market growth?
- Which marketing strategies have they used successfully?
- What types of online reviews do they have?
There’re a couple of different ways to handle the supply chain for acquiring equipment, supplier, and components for NPD:
In-House Product Development Occurs when product development is handled internally, usually by a contractor who is separate from manufacturing because that’s a supplier duty.
External Product Development The constructor relies on the supplier to provide knowledge bases for development, and apart from the main purpose that’s fulfilled by product or system, only the interfaces are detailed.
Product Development Partnership R&D competencies that are necessary to acquire from external businesses, where a constructor and the system suppliers work together right from the initial stages. There’re varied contracts between all of the different businesses that are working within the partnership, so there needs to be full transparency.
Co-Development Associates cooperation and competition that arises when a supplier works for a group of specific manufacturers which positions them in direct competition. The manufacturer demonstrates their intention to the suppliers during the beginning project phases using a reference to key program objectives to integrate the chosen supplier into the process as demonstrated in the image below.
Example of a Co-Development Model in the Automotive Industry
Product Development Process (PDP) supplier integration forms include two different types of collaboration, illustrated in the graphic below, which features an example from an automotive perspective.
Example of PDP Forms of Integration for Automotive
- A Quasi Supplier Integration The knowledge base and information reside individually, but there’s a sharing of feedback and recommendations
- Full Supplier Integration Involves a free sharing of knowledge and information across the entire product development cycle.
How to Logistically Distribute the Product
Likelihood of New Product Development Success
Despite a business’s best intentions and excessive preparation, there’s always a chance for product launches to fail:
- The new product doesn’t live up to its claim.
- The new product creates a new market category and needs a significant amount of customer education but can’t acquire it.
- It’s a ground-breaking product without a market.
- The business can’t support rapid growth rates.
These are just a few reasons why market research needs to be conducted before product development occurs. In fact, 75% of consumer packaged and retail products fail to earn even $7.5 million during their first year because of the transient nature of customer shopping behavior. And under 3% of new consumer packaged goods exceed $50 million in first-year sales (the hallmark of a successful launch).
NPD processes can fail because companies are using outdated research or gut instinct to move new products to the next stages of development instead of relying on fact-driven market research.
Companies also need to avoid tunnel vision about the product itself and incorporate the sales process into their knowledge base, so that product rollouts succeed. And finally, they need to test their functions with a proven product market research process.
Research for Product Development Research
90% of new product market research focuses on product modifications and additions instead of concepts because improvements are natural developments and are typically more readily accepted by customers than entirely new products.
Conceptually new products can be extremely risky:
- FedEx lost $340 million on a new zap mail system.
- DuPont lost $100 million on their Coram Synthetic Leather products.
Companies must commit to using market research as a type of insurance to minimize risk and apply the skills of market research analysts to interpret their product development research findings and gain insights.
– Research Optimus
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