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Updated: March 27th, 2020
Innovation sets successful businesses apart. Developing a new product or service for your business can help increase customer engagement, drive demand, and improve profits.
Most new products have a high failure rate, though, which is why you need to plan ahead. Of course, you can never guarantee the success of a new product, but there are several key factors that can help ensure you’re adequately prepared.
Here are six steps to developing a new product.
Every product or service needs to serve a specific purpose. Before you jump into product ideation, take some time to identify potential gaps in the market. Start by surveying your customers; ask them to rate their satisfaction with your current products or services and explain their biggest headaches.
Next, do your research on industry competitors, consumer shopping patterns, and market trends to get a better idea of what people are purchasing lately and why. You can use software tools like HubSpot Marketing or Marketo for marketing analytics. Analyzing the data can help you determine whether there might be a more innovative or effective approach to meeting your customers’ needs.
It’s crucial to figure out who will be using your new product before you develop it. Are you trying to appeal to a new customer base, for instance, or better serve your current customers? Do you have a target demographic in mind?
Once you pinpoint your ideal customer, start researching their consumption habits, values, and pain points. You might discover, for example, that millennials prefer to buy sustainably made clothing over fast fashion, but don’t want to shop at retail stores. If you’re developing an app for people to purchase clothing, this information can help you improve your product, identify potential issues, and brainstorm ways to stand out from competitors.
Doing your own research is a vital part of the product development process, but it only takes you so far. Once you have a good understanding of your product and customer base, it’s time to consult experts to see whether your idea is feasible and profitable.
Start by consulting your design or production team to discuss product functionality and creation specifics. Can you actually create an electric toothbrush small enough to fold up, for example?
It’s also a good idea to chat with marketing specialists about whether or not the product aligns with trends. You can reach out to experts and fellow business owners in your area for advice or classes using an online resource like SCORE.
Finally, you should talk to your accountant and banker to review your finances and assess whether or not you have enough funding to execute your plans and turn a profit — more on this later.
There are two essential elements to product testing. First, you need to test the creation process to see whether it’s sustainable. How long does it take to make or build your product, inspect it for quality control, and put it out into the world? How much does the production process cost, and how much do you stand to earn?
The second component of testing involves putting the product to use. Gather a group of current or potential customers to try out your product and offer feedback on everything from pricing to branding. The knowledge you get from testing can help you fine-tune your product.
If you can’t promote a new product effectively, few people will buy it. The most successful products aren’t launched haphazardly — they’re bolstered by comprehensive marketing plans and strategic brand positioning.
With the help of internal marketing experts, figure out what your customers care about right now. Do they value the functionality of a product, like the capabilities of a wet-weather running shoe? Or do they identify more with the emotional value behind something, like a lipstick that promises to give its wearers confidence?
Answering this question can help you determine how to position your product, differentiate it from competitors, and execute an effective launch.
If you have a stellar idea for a new product but your working capital is currently tied up, consider applying for a business loan. Funding Circle loans were designed for business owners who need flexibility to innovate and grow at their own pace.
With the right loan, you’ll get the money you need to develop and launch more products, which in turn allows you to maximize sales and better cater to your customers.
Paige Smith is a Content Marketing Writer and Senior Contributing Writer at Funding Circle. She has a bachelor's degree in English Literature from Cal Poly San Luis Obispo, and specializes in writing about the intersection of business, finance, and tech. Paige has written for a number of B2B industry leaders, including fintech companies, small business lenders, and business credit resource sites.