New Products and Services
Timing is everything. That is especially true when it comes to expanding your business through new products and services. The introduction of a new product or service must come at the right time not only for your customers, but for you and your business as well. Before you can expand in this method, it's crucial to think about your company's future and direction. Ask yourself where your company is today and where you want it to be in five to 10 years. When thinking in terms of product expansion, use your company's future as a guideline, making sure your new product/service fits into your long-term game plan. This article will help you evaluate potential new products for their viability, plan their development, and test and market your new product or service with new and existing customers.
- Getting Started
- Products That Complement Existing Offerings
- Products That Can Stand Alone
- Screening Ideas for Viability
- Planning the Development Process
- Product/Service Development
- Product/Service Design
- Distribution and Delivery
- Testing Your Concept With New and Existing Customers
- Marketing New Products
- Scaling Up
- Monitoring Progress
So you have decided to expand your business, and you have established that new products or services may be the way to go. Now where do you begin? A good starting point is analyzing your current product line. Are there any obvious holes you can fill? What kind of new products or services would you like to offer: Those that complement your existing ones or those that can stand alone?
Next, you must identify your customers' needs. If ever there was a golden rule in business, it is to give customers what they really want, not what you think they want. If you are unsure about customer needs and desires, don't be afraid to ask them. Most consumers welcome the opportunity to ask for what they want.
Another invaluable tool in the development of a new product/service is your employees. Remember, they interact with your customers daily, and it is quite possible that over the course of time, that they have heard customer grumblings, like, "Oh, I wish you had this," or, "I haven't been able to find this anywhere." Don't be afraid to pick your employees' brains for new ideas.
If you are still at a loss as to how to expand, get out of your office and talk to people. Visit trade shows and talk to people in your industry. It's a great way to see what's new in your field, as well as what lies in store in the not-so-distant future. Often you will spot something that inspires you and suddenly, ideas begin popping.
Should you have the funds available, you might also want to visit different geographic locations and check out products/services offered there. Different parts of the country may offer different ideas than those common where you live. You may be able to "borrow" some of this genius and introduce it into your region by putting your own spin on it.
If you come across good product/service ideas that aren't being offered in your geographic location, or ideas that could be improved upon, begin researching their feasibility. And, on the flip side, don't fall into the mentality that all the good ideas have already been taken. Also, just because something hasn't been done before doesn't mean you can't do it — and do it well. For more information, see Conducting A Market Analysis.
The following questions can help you understand when the time is right for you to expand with new product development:
- How are my current products/services performing?
- Do I have the financial resources to venture into new product/service development?
- Do I have the technological capabilities to support product/service expansion at this time?
- Do I have the manpower to support new product/service development?
- Is the product/service currently being offered by other companies? If so, how can I improve upon it?
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Products That Complement Existing Offerings
Once upon a time, The Gillette Company made only razors. It's hard to believe when you look at Gillette's vast array of shaving products today, isn't it? Yet, it all started with a single razor, and grew into a cash cow from there. How? It may seem like sheer genius, but when you break it down, the concept is incredibly simple. Gillette looked at the product they were successful with and asked themselves what else they could offer their customers that went hand in hand with the razor? Hence came the shaving creams and gels, skin care products, after-shave and deodorants.
You can do the same thing by zeroing in on your existing products or services and seeing what you might be able to offer as a companion to those you already have. What do customers want and need? If you have a hair salon, for example, ask yourself why people come to you in the first place. The obvious answer is to get a haircut. But if you look a little deeper, you will see that they also come to maintain or improve their personal appearance. So what other products or services could you add that would complete the picture? Manicures? Leg waxing? A line of skin care products or make-up? Now zoom in on some of your other customers. Do they perhaps come to you for slightly different reasons? Maybe some like to be pampered? What services could you add for them? Facials? Massages? Aromatherapy products?
Returning to our Gillette example, the company has also been successful in creating products that are all but guaranteed to take off. Take, for example, some of their razors. When designing certain models, Gillette makes certain that the only blades that will fit the new razors are the Gillette brand. Thus, by creating a new razor, they have guaranteed demand for another of their products -- razor blades.
You can do the same. Look at the products/services you now offer and see what you can add as an accessory.
Next Step: Can you think of other companies that, like Gillette, have mastered the art of new product development? What ideas do they give you that can be applied to your business?
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Products That Can Stand Alone
Additionally, you can expand your business with new products or services that are unlike those you already offer. There can be many reasons for this. Perhaps your products or services were based on past trends, and those trends are on their way out. Maybe changes in society, both technological and economical, have made your current product/service line obsolete. Or it could be that you simply have a hankering to do something totally different.
Whatever your reason, you are moving into uncharted territory, so in order to stay on course, it is crucial you do some intense research. First of all, you must zero in on who your target customer is. What is the gender, age, geographical location and income level of those to whom you will be marketing your new product/service?
Next, research your competition. Does another company already offer this product or service? If so, how can you do it better? Have you come up with a new twist on an existing product/service that will be irresistible to customers? When conducting research, look for holes in the market. This is where you will have the greatest chance of success for new products or services.
For an in-depth look at how to research new products and services that will work in your market, see the following: Conducting A Market Analysis, Analyze Your Competition, Creating a Competitive Advantage and Targeting Your Market.
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Screening Ideas for Viability
Once you have honed in on a new product or service, you must make absolutely certain that your concept is indeed feasible. In order to save time and money, it is critical that you do research up front.
In today's technologically advanced society, researching your ideas is relatively easy by consulting the Internet, trade publications and your local library. These sources often contain vital facts and figures on future trends within your industry. However, if your new product/service is cashing in on an existing or future trend, you will want to research how long experts expect that trend to be around. Will your time commitment and financial investment be justified, based on the trend's life span?
Another way to research your concept is to face your competition head on. Go out to stores and businesses similar to yours and see what they are offering. Do they offer products similar to yours? If so, how can you make yours different so it stands out?
Most importantly, you must make sure that a need for your new product or service really exists. If you are a restaurant owner, for example, you may have noticed while on vacation in Southern California, that Mexican restaurants are a hot commodity. But, if you live in a "meat 'n' potatoes" part of the country that has a limited Latino population, adding a Mexican section to your existing menu may not be justified.
Ask yourself the following questions to see if you are ready to move forward with the development of your new product:
- Does my new product/service complement my existing offerings or will it stand alone?
- Is there a market for my new product/service?
- Are my customers excited by the possibility of my new product/service?
- Have my employees endorsed the idea of my new product/service?
- How is my new product/service unique?
- How does the new product/service fit into my company's long-term goals?
- Have I adequately researched my new product/service?
- Have I researched my competition?
- Is my new product/service dependent on existing or future trends? What are they?
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Planning the Development Process
- Product/Service Development
Once you have established that your concept is a viable one, you must decide how to get it on its feet. The first thing you should do is assemble a development team. How many people will this require? The answer is, as many as it takes. Ideally, you want people with diverse areas of expertise who can handle all aspects of the development phase from manufacturing to marketing. If you are concerned with costs, you may not have to pay your team full-time wages, but rather consulting fees based on the amount of hours they put in. If you have full-time employees who can fit the bill in certain areas, and you can spare them, you may want to put them on your team.
Once your team is in place, you need to set up guidelines for the development process, beginning with a deadline. Without a deadline, your new product might remain a loose concept forever. Ask yourself when you can reasonably expect your new product/service to be introduced. Don't try to do too much too soon, lest the results be a half-baked product. In addition to the money you could lose by putting a product on the market prematurely, you could also damage your reputation.
The next step in the development process is to establish a budget. How much will it cost to bring your new product/service to life, and where will this money come from? List a line-by-line approximation of what you expect to spend, including supplies, employee overtime and consulting fees.
Properly forecasting with realistic numbers, and attempting to stick to those numbers, will help keep you out of the red. Remember to include extra padding in your budget to cover unexpected costs down the road. As with most things in life, there are always hidden costs, or things that you have forgotten to include. Better to be prepared for a rainy day than to be scraping at the last minute to come up with necessary funds.
For more information, see Prepare a Cash Budget.
- Product or Service Design
Designing your product/service is not something you want to rush into. Again, this is an area where it is crucial to do your homework. Before you set out to design your product/service, be certain you have all the supplies you will need at your fingertips. Nothing is less constructive or more costly than having a production team in place, only to find out you are missing some key elements.
Once the design process begins, examine each phase of your new product/service as if you were looking at it through a microscope. Are there any shortcuts that can be taken? You will be surprised how much time and money you can save by eliminating a step here or there, as long as it doesn't compromise the quality of the finished product.
When possible, it's a good idea to create a prototype that prospective customers can look at and offer constructive feedback on. Their comments can be so valuable to the design process that you might want to consider giving them a stipend for their time. This way, you are assured that they will take the time to answer very detailed questions about your new product/service and give in-depth answers. There are many prototype design firms that can assist you in developing a working model. Search the Internet or your local Yellow Pages to locate them.
As you move forward in the design process, it is a good idea to keep looking over your shoulder, making sure that you haven't fallen off track. Make yourself a checklist and continuously refer to it.
- Distribution and Delivery
Establishing a distribution and delivery system ensures that your products/services are getting where they belong — to your customers. Remember to include distribution and delivery costs in your overall budget. Include costs for warehouse operations, transportation and product returns. If you are in a business that requires you to rent shelf space, put that cost down as well.
To determine if you are ready to move onto the next phase of product expansion, ask yourself the following:
- Have I established a strong and creative development team? Who will be the members?
- What guidelines will govern the process from beginning to end?
- On what date do I plan to introduce my new product/service? Is that date firm or flexible?
- How much capital will I need for this expansion?
- Have I included padding in the budget to cover unanticipated costs?
- Does the company have the ability to fund the expansion or do we need to raise outside capital?
- What methods will I use to distribute my product/service to customers?
If you do not have enough information to answer the above questions, you need to stop immediately and obtain the answers before moving forward.
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Testing Your Concept With New and Existing Customers
You may think that your new product or service is the greatest thing since sliced bread. That's all well and good, but the true test is whether or not your customers agree with you. Before investing a lot of time and money, you may want to test your concept with new or existing customers. When gathering consumer feedback, it is important to go straight to the horse's mouth. For example, if your new product is a power tool, chances are, your target customers will be men. Therefore, obtaining feedback from women and children — people who probably won't be buying your product — seems pointless. However, comments from men, especially those who own a home and therefore might be in the market for such a gadget, will be extremely useful.
Once you have defined your target customers, there are numerous ways to approach them for feedback. Focus groups, for instance, can be invaluable. Depending on the type of product/service, you might also consider offering free samples through newspapers or mail. Be sure to enclose a questionnaire. Here is a sampling of some questions you might want to ask:
- What features do you like about the product/service?
- What features do you dislike about the product/service?
- What would you like to see improved in the product/service?
- Would you pay for this product/service on a regular basis? Why or why not?
- How would you rate this product/service compared to similar products and services?
Always include some space for comments. Occasionally, there may be the tendency to underestimate the customer and disregard certain comments, especially if they appear to disagree with your vision for your new product or service. Ignoring customer feedback could prove to be a colossal mistake. The bottom line is, if you aren't going to take their opinions seriously, why waste the time and money to ask them in the first place?
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Marketing New Products
In bringing new products or services to the market, pricing becomes a key consideration. How much should you charge? If you go too high, it may not sell, but if you go too low, you won't make any money. So how do you decide on a fair price? The following questions are designed to help you determine the cost of your new product/service:
- What does my competition charge for a similar product/service?
- Have I accurately researched the fair market price for my product/service?
- How much are customers willing to pay for my product/service?
- Would customers be willing to pay more for my product/service based on my reputation?
- Would customers be willing to pay more for my product based on its unique features?
When pricing your product/service, it is tempting to want to take the lowest cost approach because you think it will make for an easy sale. The truth is that most customers are attracted more to highest value items than those with the lowest price tags. Ben and Jerry's Ice Cream is a prime example of this. If you have ever treated yourself to one of their confections, you may have been shocked by its price. It's obvious this dynamic duo didn't set out to be the least expensive treat in town, but it's equally obvious they did set out to be the best. Thus, you may pay a little more for a scoop of their ice cream, but your taste buds know the difference. The smash success of Ben & Jerry's proves that often people are willing to pay more if they feel they are getting their money's worth.
Once you have settled on a price for your product/service, you must now come up with a marketing plan. You must inform the public that your new product/service exists.
You can advertise in a variety of ways, depending on your budget. Placing ads in newspapers, TV or radio is a great way to reach the masses, but it can also be quite costly. Though not as widely used, coupons or rebates inserted in newspapers or via direct mail are a fabulous way to reign in new customers. Often people will give you a try if you offer them even a small incentive. Another way to generate publicity is to create a Web page for your product or service. If you already have a Web page for your business, use it to your fullest advantage to get the word out about the new items you will be offering.
Another way to go is with advance marketing. Start tooting your horn before you debut the products/services, and hopefully, your customers will line up to meet you as you approach the starting line. But beware, once you have begun marketing, you have made a commitment to your customers, and you must be absolutely certain you can deliver what you have promised. One of the worst things that can happen is to excite customers about your product/service, and then disappoint them by not being ready. If you aren't 100 percent certain you can deliver on schedule, it's best not to say anything at all.
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When venturing out, it is ideal to have a ballpark figure of how much product you need to churn out. If you can, take orders before your first production run. This will insure that you don't end up with a warehouse of product that isn't moving. It will also insure that you aren't putting out tons of money up front that you may never recoup if sales don't pick up. Once you establish a successful market for your new product/service, you will then get into a manufacturing rhythm. But until you know for certain what the public response to your new product/service will be, it is best to start small and scale up from there.
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Once your new product/service is launched, you may feel it's time to celebrate, but you still have much work to do. You must now monitor your new product/service, carefully tracking its successes and failures.
Remember that all important catch phrase, "The customer is always right"? If ever there was a time or place it applies, it is here. You must give your customers precisely what they want in order to keep them coming back. How do you know if your new product or service is filling your customer's wants and needs? Simple. Ask them. Customer feedback is not only a valuable way to monitor the progress of your new product, it can also be relatively inexpensive.
There are a number of easy ways to obtain customer feedback on your new product/service. For example, you might want to enclose a survey that customers can fill out and return to you. Remember, ask only a few pertinent questions that will help you evaluate how your product or service is doing. If a survey looks too time-consuming, some customers might just toss it out with the wrapping.
Warranty cards also give you a chance to get feedback on your product or service. More so than with surveys, customers are apt to fill out warranty cards and get them back to you. Seize this opportunity by asking a few key questions about your product/service.
Another great way to get feedback from customers is to set up a toll-free 800 number.
Ideally, this should be a separate line, used for the sole purpose of obtaining feedback on your product. While you could opt to have someone on hand to answer the number, it might be more efficient to hook it up to voice mail. Consumers are often more honest when talking anonymously to a machine than they are with an employee. Also, in the long run, voice mail can be cheaper as it frees up you and your employees to do other things.
Whatever method you choose to monitor the progress of your new product/service, always remember that your customers' time is valuable. Be respectful of this and reward them for helping you out. Of course, that doesn't necessarily mean you have to spend more money. Often a thank you note goes just as far as a dollar rebate or coupon. Many customers get a great deal of satisfaction just knowing that their complaints and concerns have been registered on caring ears. So, be sure you ask for addresses and/or phone numbers from those consumers who take the time to contact you.
When monitoring the progress of your product/service, it is important to be prepared for some bad feedback. Don't take negative comments personally, but instead view them as a positive way to improve upon your product/service and give your customers what they really want. Keep in mind that Rome wasn't built in a day, and chances are, your new product/service won't be either. More often than not with new products, there are bugs that need to be worked out. But if you really listen to what your customers have to say and take the time to tailor your new product to fit their wants and needs, you will be well on your way to having yet another successful product/service.
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