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Reading: Developing New Products

Introduction

The second phase of the new-product development process focuses on the actual development of the new product. This phase includes the following:

  • Stage 4: Business Case Analysis
  • Stage 5: Development

Making the Business Case

The business case is often the most challenging screening process in the new-product development process. It is not uncommon for a product team to get excited about an idea, get positive feedback on the concept from target buyers, and then fail to make the numbers work in the business case. Usually the business case review results in a “go, no-go” decision for the product concept.

The business case doesn’t only need to answer the question “Can this product make money?” It’s also trying to answer a more complicated question: “Will the product provide the greatest total return out of all the potential strategies we could pursue?” In addition, the business case is looking at the expected performance of the product—financial and otherwise—over the entire product life cycle. For these reasons, the business case takes into account a broad range of factors.

One common tool for presenting a summary of the business case is called the “business model canvas” (see Figure 1, below). The canvas doesn’t cover all of the analysis that must be done, but it does provide a nice structure for identifying the different components that are important to the success of the product or business.

The Business Model Canvas. Four sections at the top: Designed for, Designed By, Date, and Version. Nine components in the Business Model Canvas to consider: Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost structure, and Revenue streams.


Figure 1. The Business Model Canvas

You will notice that the center of the canvas focuses on the value proposition of the product, whereas the lower segments specify the costs to create value and the revenue earned by delivering the value. In the analysis of the business case, the key questions are the following:

  1. Does the product provide sufficient unique value to the target customer?
  2. Can that be achieved at a cost that supports the value?
  3. Does that value appeal to a large enough target market to generate sufficient revenue?

If the product development team can demonstrate satisfactory answers to these questions, without introducing other objections, then the product will move into development.

Developing the Product

Regardless of the type of product—a tangible good, a service, a business-to-business product—someone needs to define the marketing requirements for the product. This is the role of a product marketing manager. Product marketing isn’t usually tasked with the technical specifications for the product but is focused on specifying the needs of the target buyer. Product marketing addresses the following question: “What problem does this product solve for the target buyer?” The answers to this question are typically presented in a marketing-requirements document, which also includes a full buyer persona. (Recall that a buyer persona describes the needs, experiences, feelings, and preferences of a specific buyer.)

Defining Market Requirements

Let’s say your new product is a packaged meal item, and you’re the product marketer. Your marketing-requirements document would explain who the buyer is, what she needs, and which particular features of the product will best address her needs. Your buyer persona is a woman named Aleisha. She has three kids and works part time as a nurse. She feels stretched between her job and her kids’ busy schedule and the demands of keeping up the house. She needs to be able to come home from work and get dinner on the table in twenty minutes, yet not feel like she’s cutting corners. It’s important to her to provide her family with a healthy home-cooked meal.

This description of target-buyer Aleisha suggests and guides a set of product requirements that will inform the design and development of the product. Whether the product is a food item, a fashion accessory, a software program, or a banking service, defining the marketing requirements based on the buyer persona will increase the chances that the final product meets the market need.

Defining Product Requirements

The marketing requirements become an input to the product team to define the technical product requirements for the product. In the packaged meal example, someone will need to decide whether there are visible solids in Aleisha’s sauce and how much ground oregano should be added. Those will become product requirements that drive the production process.

With more technical products or products that include a complex manufacturing process, the translation from marketing requirements to technical requirements can be a daunting task. For example, in the manufacturing of semiconductors that power computers and electronics, there is significant interplay between the marketing requirements, the technical requirements, and the manufacturing process. The factory cannot deliver products that exceed their technical capabilities regardless of the market desires. In that case, the limits of the manufacturing process are set, and the role of product marketing is to identify the most attractive products given a fixed manufacturing capability.

In all cases, the product team seeks a tight match between the market need and the product that is designed, developed, and delivered.

Creating the Go-to-Market Plan

The marketing requirements drive the technical product requirements that will be used to develop the product, but they have a second purpose, too. The market requirements are the major input to the marketing plan that will be used during the product launch.

In answering what problem a product solves for the target buyer, we gain information about the messaging and promotion strategy. By understanding the alternatives that the target buyer might select and the unique value that our product provides, we can begin to understand the pricing dynamics. In knowing how she wants to buy the product we have options to analyze for the distribution strategy. The initial marketing mix for the product launch is driven from the information in the marketing requirements document.

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