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Product Development and Business Growth: Process & Strategies

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  • 0:05 New Product Introduction
  • 0:48 What Is Product Development?
  • 1:59 How These New Products…
  • 4:52 Where the Growth Comes From
  • 5:39 The Cost of Product…
  • 6:48 Lesson Summary
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Lesson Transcript
Instructor: Rob Wengrzyn
Product development is an essential part of any company's growth strategy. It allows for growth in sales and market share. This development, though, is a finely tuned process that we will discuss in this lesson.

New Product Introduction

When was the last time you purchased something - and a few months later a newer, much improved version of that product was on the market? Now, if you're like me, it's hard to keep up with all the changes and advancements, and as soon as you think you have the newest model, something else comes out that's better and more improved.

These new product introductions are part of a strategy that companies take to ensure they continue to grow. Just like a plant, if a company does not have a process to continually help the plant grow, it will die. New sales and new markets are a critical aspect of sustaining growth for any company, and that is why companies develop products: to ensure they can continually penetrate existing markets and potentially enter new ones.

What Is Product Development?

Product development is the improvement of existing products or the introduction of new products into a market. You see, companies realize that the tastes of consumers in the market are ever-changing, and in order for these companies to not lose ground, they need to stay current with those changes.

A great example of this is a cellular phone manufacturer. These companies realized that a phone is not just a verbal communication device, but also needs to be smart and tie in to all sorts of other communication and entertainment. Now, we can text, use a GPS, get our emails and even videoconference someone on our phones. These advancements came as a direct result of product development.

It's easy to see how these changes made phones more attractive to the consumer, thus spurring sales and business growth. Now, people need a phone not just to make calls, but to literally keep them in touch with their entire world. Developing a device that used to be used just to make and receive calls and text messages into a true 'smart' device helped cell phone manufacturers ask for more money for their phones and offer more services (data plans, etc.) so they could get continuing revenue.

How These New Products Come About

Companies do not just get up in the morning and say that they're going to make a new product. Instead, these new products are usually the result of an exhaustive effort of market research. That research is centered on several different areas or methods.

First, we have focus groups. Companies will bring a group of customers into their offices and ask them questions about their products - what they like and do not like or what they would think of a competitor's product. This information helps the company to get real-world feedback on their products.

Next is competitor product analysis. Organizations will sometimes take a competitor's product and bring it into their offices to directly compare it to the products they produce. They will look at how it functions, how it works and how easy it is to service and compare that to their products.

A great example of this is the tablet market. Right now, every manufacturer is taking their competitors' products and literally tearing them apart to see how they work and how they can produce a superior product.

Finally, we have surveys. I am sure that over the years you have taken part in some sort of survey. These surveys help companies to gather answers to specific questions about their product and the product segment so they can improve their products where needed.

The one important aspect of a survey is that it gives a company statistical data. In other words, they will ask 20 questions to hundreds of people, who will select an answer from 1-5. The company can then tabulate all the answers and have statistical information as to where they are strong and where they need to improve. They do not typically get that with a focus group, as the focus group is much smaller.

Once all this data is compiled and the companies understand what they need to do to their products, they will start to do a cost analysis. They want to see what advancements or changes they can make and how that will affect the cost of the product. Just because they have received feedback on the product does not mean they can afford to make those changes and still keep the product at the price it needs to be at.

For example, if they make changes to a product so it can compete with the function of a competitor's product, but those changes make the product twice the price of the competitor, it makes no sense for a company to make those changes. They have to make the changes - indeed, survival might depend on it - but they cannot make those changes and price themselves out of the market.

Think if Android came out with a tablet that had all the features of an iPad but was $200 more. Would you purchase it? You might - but only if those features, in your mind, were worth $200 more. If they were the same features, you probably would not purchase the product.

In addition to this, the company has to think about marketing the new and improved product. They have to tell the world it is new and improved, and that takes money. All these aspects come into consideration when we're looking at the cost to further develop a product.

Where the Growth Comes From

Growth can come from two areas as it relates to product development.

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