New is a powerful word in marketing. People are attracted to new products like magnets. A great way to get attention is by introducing new products regularly. Be cautioned though, while ‘new’ positions a company as dynamic and forward-looking, innovation is challenging – the road is paved with failures.
The main types of product development include new concepts, additions to existing lines and modifications to existing products. Additions and modifications make up 90%. Product improvements are more easily accepted than new concepts. The more conceptually new the product, the riskier it can be, which is why many companies use market research to reduce risk.
Market research can unleash potential for new products, as well as rejuvenate existing products, delivering a high return on investment.
The importance of market research
Many new and successful products arise by accident, not as a result of hours of focused R&D or significant financial investment. The telephone, X-rays, bubble gum, Velcro, Viagra and Post-it notes were all invented by accident. However, research can provide invaluable insights into unmet needs and a thorough understanding of the environment where the new product would be sold.
Market research is not an exact science, though. It would be unreasonable to expect researchers to predict the precise demand for a new concept. There are numerous variables that can impact demand. It takes years to get a product to the commercialization stage, let alone to get it established in a marketplace.
Market research can explore the underlying needs of the market, making a judgement as to how well a new product meets these needs. It is the researcher, not necessarily the potential buyer, who makes the connection between the unmet needs and the new product development opportunities. Key questions in concept testing research include: ‘Is the purpose of the concept clear and can the users be persuaded of benefits?
In getting a product off the ground, there are three crucial questions to be answered: Where does the product/company stand now? Where does it wish to go? How can it achieve its goals?
Market research is highly effective in providing answers to all of these questions, providing an assessment of the size of the market, growth prospects, distribution routes, market segments, and factors influencing the purchasing decision. It can guide product design, price points, packaging design, promotions and service.
Conducting market research in-house can result in political conflict, delaying product adoption. Using an independent market research supplier speeds up the process and ‘being early’ can pay off tremendously.
Market research can explore optimum price points, determining market share and market size, and for gauging attitudes towards the consumption of the product. Views on the product can be compared to the perceived strengths and weaknesses of competitors’ offerings used, and along with unmet needs, the research can uncover potential product development opportunities even at this stage of the product life cycle.
It is vital not to neglect products at this stage in the life cycle. Continual product improvement is required to retain customer satisfaction. Most companies lose 45% to 50% of their customers every five years. Winning new customers can be up to 20 times more expensive than retaining existing customers.
Typical market research studies include customer satisfaction research (in order to retain existing customers and hopefully attract potential customers), segmentation research (to determine how to tailor an offering to meet the needs of different segments) and pricing research (to determine optimal price points so as to achieve maximum profits).
The final stage in a product’s life cycle comprises the product’s decline, new innovations gradually eclipsing the product. Not all products die, though. There are often opportunities for modifications and improvements resulting in a rejuvenation of the life cycle. Such opportunities for revitalizing a product can be uncovered through market research.
Market research can help a company seek new markets for its aging products. Typical research studies conducted at this stage of the product life cycle include needs-based assessment studies and market assessment studies.
Product development research does not just examine the product alone. It explores everything surrounding it – packaging, service, brand, company reputation, etc. Research should encompass the whole customer value proposition, and improvements to packaging, delivery, or any aspect of service support could have just as big an impact as improvements to the physical product itself.