3 steps to take a new product idea from ambition to reality
The moment that results in a new product is a big step for any business. To launch your idea from solid ground, follow our strategic plan.
At some point in the life of any small business there comes a realisation full of potential for growth – “As well as my existing product, I can offer my customers something new!”
It’s a powerful feeling when you realise you can expand your existing product line. Not only does it feel good to offer loyal customers something ‘new’, expanding your business will also hopefully expand your profits. And it can increase your business longevity – as existing products mature and possibly reach the end of their lifecycle, your new products will be growing and delivering fresh revenue.
Another benefit of new product development? It can boost your market share by appealing to existing customers and attracting new ones. The offer of more products can also help you reach a wider audience, increase your credibility with your existing market and reduce your production costs, through the resulting increase in the volumes you order from producers and with supply chains. One further benefit is the increase in your profit margins that comes from cross-selling or upselling your new product to your customers.
However, before you take steps to launch a new product or line, you first need to ensure your existing business is solid. So, how exactly do you develop Y while still keeping X profitable?
1. Deciding whether to expand
It might start as a ‘gut feeling’ that your customers would respond well to a new offering, but eventually you need to conduct some solid research to figure out where your gaps are and if there’s an extended target market for the new product.
First, look at how you sit alongside your competitors using a SWOT analysis (that’s your Strengths, Weaknesses, Opportunities and Threats). Do your competitors offer a similar product and, if so, what need is it fulfilling for their customers? How will your product be superior and why are you the company to deliver it? Are there any gaps where you are all falling short that your new product will fill?
Next, talk to your existing customers.
Start by asking your regulars what they think of the new product opportunity you’ve identified. Ask them if it’s something they’d be interested in buying from you and under what circumstances. You might expand that conversation into gathering data via a short survey. This doesn’t have to be expensive – use free survey sites like SurveyMonkey or Typeform – especially if you’ve already been building a customer database.
2. Securing funding to expand
Once you’ve determined that your existing customers are interested in your new product idea, you need to ensure you can afford to develop it. You’ll need capital to research, design, develop and distribute your new product line. There are several ways to secure funding.
- Self-funded If you can fund the new product development yourself, it makes sense to do so. Just ensure that you’re not risking your existing portfolio – keep an eagle eye on your cash flow.
- Government grants and programs This area is often overlooked by existing businesses, but there are several grants and programs offered by the federal and state governments that are tailored for business growth. There’s a handy finder tool offered here – just fill out your relevant details and the grants you’re eligible for will be listed.
- Small business loans Your bank should be your next port of call. Business loans generally offer competitive interest rates and remain an affordable option for most business owners. They’re also an uncomplicated, flexible and secure way to borrow the money you need.
- Crowdfunding If you have a loyal customer base, this may well be your best option. Pitch your product idea to your customers (and friends, family and the guy at the dog park – everyone and anyone needs to hear about your opportunity) and ask them to get in on the ground level. A couple of good places to start with crowdfunding are Kickstarter and Fundable.
3. Identifying and analysing market needs
Once you’ve secured funding and you’ve got enough positive feedback from your customer base, it’s time to move into extensive market analysis. Be warned: market analysis can be expensive if you don’t keep your parameters tight. Narrow your analysis down to key variables to keep a lid on costs. Your focus might be on:
- Potential customer base How much will you rely on upselling your existing customer base versus the number of new customers the product will add to your base? How will your new line add value to these customers?
- Vertical or horizontal product expansion Will you offer a variation on an existing product (vertical) or an add-on that complements an existing line (horizontal)? How scalable are each of these approaches?
- Emerging trends What are the current trends in your industry? How likely is it that someone else will launch a similar product to your new offering? Why are you the best business to offer this product?
- Revenue projections Include cash flow and when you can expect profitability.
- Key performance indicators How will you measure the success of your product? This is not just about profitability – increasing your overall market share, creating new customer leads and increasing existing customer spend can be just as valuable.
- Marketing optimisation Where will your marketing budget be directed? What current marketing programs can your new product fit into?
- Testing strategy You don’t have to launch full-tilt into the marketplace; instead, you can test a small part of your customer base to determine whether your new product has legs.
If your research and testing result in a green light, it’s time to develop your new offering.
Always keep your existing customer base front of mind and check in with them regularly. Developing a product line is exciting and your customers will want to be part of it. Share your journey step-by-step on your social media channels and you’ll have your new product’s marketing campaign underway before you even receive a prototype.