Getting a product to market is a big moment for any business. Whether or not you can successfully launch the new product determines how long it takes for the product to become financially viable, if it ever does, as you can see in the graphic below. The longer the introduction stage when profits are negative, the more of a financial drain the product is on the firm.
Getting a product to market effectively allows you to recoup your investment quickly, which increases the chances of success for the entire firm. Here, we’re going to look at a few tips that can help you get that product out more cost-effectively.
Getting a product to market
1, Build the right product
Not every product will generate success., so finding the right new product is the first step in getting it to market in a way that meets your goals. Marketers over the years developed a set of tools to help you identify which products fit your brand, the needs of your customers, and match your expertise. Chief among these is the product/market grid or Ansoff Matrix.
The notion behind this matrix is that it’s less risky to develop a new product when you have experience with the market (product development) or with the product (market development). For instance, selling your product overseas often involves less risk than the other types of new products. Market penetration is just regular marketing where there’s no new product involved. This strategy represents the lowest risk.
2. Budget your product
Building a new product involves a lot of expense from product development to design to marketing the new product. Carefully budget for every step in the process and reduce costs by outsourcing as much of the process as possible. For instance, outsourcing production makes sense until you have sufficient demand to make your own facility feasible.
When budgeting, consider the different steps needed prior to launching the product, from designing, prototyping, testing, manufacturing, marketing, and then launching, and do your research to work out how much each step will likely cost. If there are some parts of the budget that look high, you can do research to figure out how to save money in those areas directly. It’s also important to make sure that you leave a little room in the budget for extra costs, as sometimes a part of the process might take a little extra time or work and this usually translates into costing more, as well.
3. Ensure you have the funding you need
If you want to make sure that you have the resources you need, then you might consider alternatives to self-financing with retained earnings. While a lot of businesses seek out funding when they first launch, many businesses also look for funding while they grow their business. Launching a new product is an essential moment of growth for your business so you might consider platforms like Funding Circle that can help you find the money you need to get your new product off the ground. Aside from the budget as mentioned above, you’re likely to need a business plan showing how you plan to pay off the loan and a timeline showing your breakeven point and estimated profits at each stage of development.
4. Work out how much you should produce
Determining demand is a critical piece of any effort at getting a product to market yet this element of your planning is fraught with challenges. Ask your target market how much of Product X they plan to buy, and you get garbage answers. I once worked with a team of undergraduates to determine the demand for a new aquarium in Tampa. Our study results showed sufficient demand but those visitors failed to show once the aquarium was built at great expense.
Others take the size of the proposed target market and cumulative demand in the product category to assume they’ll capture some portion of that demand. That often fails, as well.
Over the years of judging business plan competitions and listening to entrepreneurs’ pitches, I found this was the weakest element in their plan. Many just fudge in demand so it justifies expenses.
An experiment is the best tool for determining demand. Set up a simulation as close to real buying situations as possible then watch what real customers do. I once worked for a firm that created a simulated card store to watch which wrapping paper products customers purchased to help the firm determine anticipated demand for each new design.
5. Streamline your manufacturing process
Aside from being careful to make sure that you’re not spending more money on producing more products than you need to, you should also look at the manufacturing process itself to find ways to save money. Making your process more efficient and avoiding downtime is one strategy, but a lot of businesses outsource manufacturing to services like Royal Power Solutions, at first. By outsourcing some or even all of your manufacturing process, you don’t face the high set-up costs associated with buying or leasing manufacturing equipment or the labor that is required to use it until you have proof of concept.
At some point, you might want to bring operations in-house once you prove your product has a sufficient demand, as owning your production process is more cost-effective in the long run and offers more control.
6. Test internally and rigorously
Aside from designing and manufacturing the product, you want to make sure that it’s going to meet all your customers’ needs and expectations, meets your quality standards, and is easy to use. To that end, you must test it rigorously at each stage of development both internally and with your target market. This is often an iterative process of design, testing, redesign, retesting …
However, rather than outsourcing the testing, you might perform testing more cheaply in-house. Envision looks at a variety of ways that you can test demand for your product.
7. Use cost-effective advertising
After the product is made, you must market it, of course. Marketing isn’t optional if you want to succeed but it’s often one of the most expensive elements in the process, at least in the beginning.
Advertising is highly effective for driving short-term sales, but it is also expensive, so it’s worth considering a more balanced approach to marketing. By comparison, tactics such as email marketing, digital marketing, and search engine optimization don’t cost as much, and they tend to produce more long-term benefits. One of the tips for making your product promotion more cost-effective is to do as much of it in-house as you can, as marketing agencies can be very expensive.
8. Price it correctly
You must think carefully about your pricing strategy if you want your product to succeed. Offering your product at a lower price isn’t a sustainable strategy unless it costs you much less to make the product than your competitors, as the price is easily matched. Offering your product at a lower price might also make consumers think your product isn’t as good.
Offering your product at a higher price also means you have marketing headaches. Customers might not pay extra for your product even if it has more features than your competition. Selling at a price that allows you to recoup the production costs also doesn’t meet customer needs in many cases, so don’t use your cost as the starting point in your pricing strategy.
Instead, customers want value which means offering benefits at a reasonable price, so use value as your starting point.
You might consider making a product a loss-leader to generate interest at the beginning, something we call penetration pricing. If your product has distinct benefits over existing products, you might use price discrimination where products start at a high price then become less expensive over time.
Sites like Mailchimp go over the details of how to price your products in a way that makes a profit.
Getting a product to market is challenging, as such, you need to ensure you’re ready to put more money in where the scope outgrows the plan. However, with the tips above, you may find you can better manage your costs while ensuring you’re getting a product to market effectively.
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