About Product Development
“Custom Product Development” or generally known as “New Product Development” may sound simple, but it is the multifaceted process of designing, prototyping and manufacturing a new product from the scratch. To be honest, the designing and engineering phases involved in product manufacturing are truly complicated and beyond one’s imagination. It refers to a collective team effort among the major departments within the company, including, R&D, Operation, Marketing, and Finance. Under the hood of custom product development, each and every member of a product development company strives to find the set of innovative solutions to customer problems or customer needs.
Factors to Consider Before Initiating the Product Manufacturing
Generating New Ideas
Companies with a higher rate of success in custom product development make a concerted effort to produce a steady stream of new product ideas. All of these ideas undergo a thorough screening process, and many are discarded just before the potential winners are declared. Some ideas are left untouched because in management’s decision the need or problem they solve is not convincing enough to prompt customers to be highly motivated to make a purchase. The ideas that make it through the final manufacturing phase are those that offer customers something that is much more useful than anything offered in the market now. They offer user-friendly, understandable yet potent solutions. These are the products about which people remark: “I wish I’d thought of that!”
The Test of Marketability
For companies, “What will be the price of the product?” is the key point of concern at the time of introducing the product. For example, if you are a company that deals with consumer products, then it can be quite expensive for you to bring your product to the mass market. Additionally, the average length of the sales process affects your product’s marketability, as well.
Now days, for some technology-based business solutions, a series of meetings and presentations are held prior the purchase decision is made. Therefore, for better marketability, companies should make sure that they have distribution channels in place, or can immediately establish them, to get their products in front of potential buyers. Companies that knowingly or unknowingly ignore this step are often frustrated with how difficult it is to get their products on major retailers’ shelves.
Evaluation of Feasibility
A product idea may be left untouched because its manufacturing duration would be too long or there are plenty of design hurdles that can hamper the overall development period. Delaying the launch of a newly developed product equates to lost revenue opportunities. Moreover, the manufacturing cost of the product should be taken into consideration with respect to the size of the market of the product. Spending $6 million to produce a product that will only return $2 million annually doesn’t make economic sense, as it will take years to recoup the basic investment.
One more feasibility issue is whether the company has the in-house team for product development so the gross margin will be ample enough to ensure profitability. If the manufacturing cost is too high, the price charged to the customers may be too high as well, which makes a product less competitive in the market.
The Decision to Proceed
After a thorough research, lots of meetings and hundreds of presentations, a company devises a product plan that forecasts the bottom-line profit the company is expecting to yield from the new product development. In case, if the prospective profit of the product to be developed is not up to the financial performance standard of other products in the company’s line, the judgment may be made not to proceed with manufacturing it. However, there are some strategic considerations as well. Acquainting a product may allow the company to reach a large new market for other products it produces, boosting revenue company-wide. At the end, custom product development can solidify the brand image of the company.
All of the above listed aspects unite together in the final decision of whether to give the new product development the green light and proceed with introducing it.