New Product Development

3. Know What You Are Doing

You need to know the what, when and how much of your new product before you can turn your idea into a project.

3.1 Start by defining a basic specification ('spec') for the product. List the features, and how they translate into specific requirements.

3.2 Make sure you have a unique selling proposition ('USP') - a reason for customers to switch over to your product.

• Ask yourself what will make customers choose your product over a rival's.

3.3 Plan the design of your product. This can be crucial to its success.

• Use in-house or external designers and get them to sign confidentiality agreements if necessary.

3.4 Pencil in a launch date.

• When should the product be ready? If it is delayed, how will that affect pricing, sales volumes and profitability?Unless you and a competitor are racing to launch similar products, hitting a particular launch deadline may not be vital.
• Plan to launch a pilot version of the product with a few favoured customers, to identify and sort out the inevitable problems before the main launch. This also helps you build up your order book before the launch.
• If you need any approvals or certification (eg for any electrical product), book the product tests. Ask if the approvals body can also test your prototype to identify any problems early on.

3.5 Decide on the likely selling price for the product. Based on this, work out what your maximum unit cost of production can be.

• Many new products are based on achieving cost reduction. The aim is to provide the same quality of product at a lower price and with better profit margins.
• Other products rely on superior design or technology to win market share, and can be priced at a premium. But you still need to build to a price, to avoid pricing your product out of the market.

3.6 Estimate volumes and delivery demands.

• How many will you make and sell each month? What will typical order sizes be? How quickly will customers need delivery?
• If you will sell the new product in volume, it is important to achieve a low unit cost of production. To do this, you may have to invest heavily in the development stage.