171 Reading: Developing New Products
The second phase of the new-product development process focuses on the actual development of the new product. This phase includes the following:
- Stage 4: Business Case Analysis
- Stage 5: Development
Making the Business Case
The business case is often the most challenging screening process in the new-product development process. It is not uncommon for a product team to get excited about an idea, get positive feedback on the concept from target buyers, and then fail to make the numbers work in the business case. Usually, the business case review results in a “go, no-go” decision for the product concept.
The business case doesn’t only need to answer the question “Can this product make money?” It’s also trying to answer a more complicated question: “Will the product provide the greatest total return out of all the potential strategies we could pursue?” In addition, the business case is looking at the expected performance of the product—financial and otherwise—over the entire product life cycle. For these reasons, the business case takes into account a broad range of factors.
One common tool for presenting a summary of the business case is called the “business model canvas” (see Figure 1, below). The canvas doesn’t cover all of the analysis that must be done, but it does provide a nice structure for identifying the different components that are important to the success of the product or business.
You will notice that the center of the canvas focuses on the value proposition of the product, whereas the lower segments specify the costs to create value and the revenue earned by delivering the value. In the analysis of the business case, the key questions are the following:
- Does the product provide sufficient unique value to the target customer?
- Can that be achieved at a cost that supports the value?
- Does that value appeal to a large enough target market to generate sufficient revenue?
If the product development team can demonstrate satisfactory answers to these questions, without introducing other objections, then the product will move into development.
Developing the Product
Regardless of the type of product—a tangible good, a service, a business-to-business product—someone needs to define the marketing requirements for the product. This is the role of a product marketing manager. Product marketing isn’t usually tasked with the technical specifications for the product but is focused on specifying the needs of the target buyer. Product marketing addresses the following question: “What problem does this product solve for the target buyer?” The answers to this question are typically presented in a marketing requirements document, which also includes a full buyer persona. (Recall that a buyer persona describes the needs, experiences, feelings, and preferences of a specific buyer.)
Defining Market Requirements
Let’s say your new product is a packaged meal item, and you’re the product marketer. Your marketing requ