Develop products in a targeted manner

What is a product?

A product is a tangible or intangible item that can be offered for sale on a market. This product may have been produced by one or more enterprises.

A distinction is generally made between different types of products, according to their market:

  • Mass product
  • Mass-produced product
  • Small series product
  • Niche product
  • One-off production

The production process follows the nature of the respective product and its market.

According to their intended use, products are divided into different types:

  • industrial goods
  • consumer goods

Industrial goods are differentiated into components and systems. Consumer goods are differentiated into consumer goods and durable goods.

According to their tangible or intangible character, products are divided into:

  • material goods
  • and services.

Some products – both tangible goods and services – are sold to different customers in individual transactions, others as part of ongoing supplier contracts with specific customers.

Product benefits

What is the product benefit?

The benefit of a product results from the advantage perceived by the customer through the use or consumption of the product.

This benefit of products must not only be given, but companies must also communicate it to their target customers. Often, the benefit perceived by customers only results from marketing communication. This applies above all to products in the fashion and cosmetics industries, but also to other branded products such as mobile phones or cars. In some cases, the product itself is even a result of marketing; otherwise the product would not have existed.

How is the value of a product determined?

The benefit and value of standardisable products can be estimated relatively well. For example, we know exactly what we will receive when and for what price when we configure a BMW 5 series. With a plant that is to be designed and built for a specific application, we no longer know this so precisely. We have to rely on contracts in which the specifications and delivery conditions are agreed.

Assessing the benefits and value of services is even more difficult, especially when it comes to services that cannot be standardised. Consultancy services are an example. Clients agree to pay for information whose benefits and value they cannot know in advance. The reputation of the service provider, perhaps also comprehensible references or the trust that clients have in the people who offer them the services, stand in for the quality of the service to be provided. In order to find a way out of this information dilemma, game theory useful approaches.

Product benefit, price and cost of a product are very different concepts. Some companies, not knowing exactly the benefits of their products as perceived by customers, price their products on a cost basis. They could charge higher prices for their products, but they don’t know it. So they lose contribution margin. Other companies do not realise that their products do not trigger a perception of benefit in their customers that is as high as the estimated price. Therefore, these companies sell their products poorly. The cause may lie in the product itself or in its marketing.

What is product development?

Product development is understood as the process of improving existing products and developing new products. This process includes market, application and product-related market research, the creative phase of generating ideas for improved or new products, the decision-making process for certain ideas and against others,

In addition to marketing, sales and capacity, sales depend significantly on innovation, product management and finally on the product itself. Any market-oriented strategy must produce suitable products or services that deliver the expected benefits to customers, from which the willingness to pay for the market performance and thus its value result.

Forms of product development

In the case of series products, the product development process itself is divided into the creation and assessment of product designs, the production, testing and further development of functional prototypes and the finalisation via pre-series products to series products and their further improvement and differentiation into variants. More development effort can be invested in mass products than in niche products, because the development effort must be amortised with the prospective number of units.

The development process is usually shortened for one-off products. Customised products are not developed as intensively as series products with regard to their weight reduction and durability. In the case of one-off products, the practical experience of the product developers is correspondingly more important.

Developing products digitally and virtually

In the past, all products were developed physically. Nowadays, many products can be digitally designed using CAD and CAM. The moment when “material removal” is performed can be further delayed through digital product development in the process. Furthermore, digital product development allows access to standard components that have already been designed. This makes product development more cost-effective, and a modular product structure becomes economically feasible.

Moreover, intangible digital products can also be developed: software, digital applications and infrastructures, as well as web-based platforms with digital offerings. Digital products can be traded in individual transactions, but the trend is towards the Software-as-a-Service (SaaS) model. The Software-as-a-Service concept relies on web-based applications for which customers pay based on usage. Customers can rely on the service, and providers retain rights to the offered applications.

Integrated product development

It is already a challenge to develop individual products that are tailored to the market. The crucial point is that products are developed with market relevance. For this purpose, an outside-in approach is necessary instead of an inside-out approach. Product development should align with guidelines from rigorous product management, which in turn connect to relevant insights from market research.

Various departments should be involved in product development, including marketing, sales, procurement, work preparation, relevant production areas and suppliers, logistics, work preparation, after-sales service, and especially the company’s controlling division. This approach enables the development of products that contribute to efficiency and do not present surprises along their value chain and marketing process.

Another aspect is the integration of new products into a company’s product portfolio. This aspect should also be a component of product development from the beginning. Make sure not to cannibalize well-performing products with new ones, unless you are an innovation leader and are creating secure successors for existing “runners,” thereby always staying state-of-the-art.

Another challenge is brand management. Products should not stand in a stand-alone position but should be well integrated into the company’s brand portfolio.

Innovative product development

Product development can occur incrementally, but it can also take place in bursts of innovation. Depending on the visionary ambition and strategy of the company, both approaches can lead to success.

Innovative product development doesn’t necessarily start with existing products. The connection would be too close to generate truly innovative products. Instead, innovative product development focuses on emerging future customer needs derived from macro trends and conversations with customers. Creative sessions are used to explore approaches to meet future needs with fitting, innovative product offerings. This process often draws inspiration from entirely different industries and technologies. Innovative product development is characterized by industry and technology convergences. Engaging with experts from other disciplines who can contribute input to new products leads to genuinely novel outcomes. Revolution often emerges at the intersections of different disciplines and rarely at the core of one’s own work.

Conclusion: How to Successfully Develop Products

Products become successful when they are market-oriented, meaning there is a natural demand for them. Therefore, product development should always be based on reliable data from market research. Product management should derive functional specifications for product development from this data. There should be sufficient room for creative ideas in the product development process to fulfill the requirements set by product management. It’s especially important to involve all relevant operational functions in product development to avoid misalignments and ensure the buy-in of all stakeholders. Particularly, the approval of the sales department is essential if the new product is to be successfully introduced to the market.


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