Product development is the process of creating and bringing new products or services to the market. It involves a series of steps, from ideation and conceptualization to design, testing, and launch.
This crucial process plays a vital role in the success of businesses across various industries.
By continuously innovating and introducing new products, companies can stay competitive in the ever-evolving market landscape. Product development allows businesses to meet changing customer needs and preferences, seize new opportunities, and differentiate themselves from their competitors. Moreover, it enables organizations to expand their customer base, increase market share, and ultimately drive revenue growth. In today's fast-paced business environment, where consumer demands are constantly evolving, product development has become an essential strategic tool for businesses aiming to thrive in the marketplace.
For most seasoned business owners and aspiring entrepreneurs, the product development process is usually one of their favorite tasks; and when you hear the origin stories of other great ecommerce businesses, it's often clear the journey to a finished product rarely resembles a straight line.
Effective product development requires many things: market research, product management, and testing your idea to name a few.
What is product development?
Product development refers to the complete process of taking a product to market. It also covers renewing an existing product and introducing an old product to a new market. This includes identifying market needs, conceptualizing the product, building the product roadmap, launching the product, and collecting feedback.
New product development (NPD) is a core part of product design. The process doesn’t end until the product life cycle is over. You can continue to collect user feedback and iterate on new versions by enhancing or adding new features.
There’s no one role that does product development. In any company, whether an early-stage business or an established corporation, product development unites every department, including design, engineering, manufacturing, product marketing, UI/UX, and more. Each group plays an essential part in the process to define, design, build, test, and deliver the product. As you'll see in this guide, the complexities of the product development process makes product management all that more important.
The product development process
New product development (NPD) is the process of bringing an original product idea to market. NPD can benefit greatly from agile software development principles as well.
Although the product development process differs by industry, it can essentially be broken down into seven stages:
ideation,
research,
planning,
prototyping,
sourcing,
costing, and
commercialization.
Use the following development framework to bring your own product idea to market.
Idea generation
Many aspiring entrepreneurs get stuck on the first stage: ideation and brainstorming. This is often because they’re waiting for a stroke of genius to reveal the perfect product they should sell. While building something fundamentally “new” can be creatively fulfilling, many of the best ideas are the result of iterating upon a product already in the wild.
The SCAMPER model is a useful tool for quickly coming up with product ideas by asking questions about existing products. Each letter stands for a prompt:
Substitute (e.g. – Colored glass for gemstones)
Combine (e.g. – Coffee and a cake)
Adapt (e.g. – Dog toy that can be filled with treats)
Modify (e.g. – Change in design of a product)
Put to another use (e.g. – Duvets that can be worn)
Eliminate (e.g. - Selling directly online rather than through stores)
Reverse / Rearrange (e.g. Changing the menu in a restaurant every week)
By considering these prompts, you can come up with novel ways to transform existing ideas or even adapt them for a new target audience or problem. Using insights from business analysis can also be helpful to better understand the opportunities in the market.
If you’re still looking for your aha moment, we also put together a list of sources for coming up with your own product ideas, from analyzing online marketplaces and product descriptions for inspiration to reinventing historical trends.
Market Research
With your product idea in mind, you may feel inclined to leapfrog ahead to production, but that can become a misstep if you fail to validate your idea first.
Product validation ensures you’re creating a product people will pay for and that you won’t waste time, money, and effort on an idea that won't sell. There are several ways you can validate your product ideas, including:
Sharing your idea with your target market on online forums etc.
Sending out an online survey to get feedback
Starting a crowdfunding campaign
Test marketing, releasing your idea to a very small group of your target market to get initial feedback.
Researching market demand using Google Trends
Launching a product launch roadmap to gauge interest via email opt-ins or pre-orders
Asking for initial feedback on forums like Reddit
However you decide to go about validating your idea, it is important to get feedback from a substantial and unbiased audience as to whether they would buy your product. Be wary of overvaluing feedback from people who “definitely would buy” if you were to create your theoretical product—until money changes hands, you can’t count someone as a customer. Asking advice from your family and friends (unless they have prior experience) is also something to avoid.
You may want to run a feasibility study or an assessment of whether your proposed idea is worth investing in—or not.
Product validation
Validation research will also inevitably involve competitive analysis. If your idea or niche has the potential to take up market share, there are likely competitors already operating in that space.
Visiting your competitors’ website and signing up for their email list will allow you to understand how they attract customers and make sales. Asking your own potential customers what they like or dislike about your competitors will also be important in defining your own competitive advantage.
The information compiled from doing product validation and market research will allow you to gauge the demand for your product and also the level of competition that exists before you start planning. Research is a critical part of product development so definitely don't neglect it!
Planning
Since product development can quickly become complicated, it’s important to take the time to plan before you begin to build your prototype. At this stage, it can often be helpful to have a clear product roadmap.
When you eventually approach manufacturers or start looking for materials, if you don’t have a concrete idea of your product’s design and how it will function, it’s easy to get lost in the subsequent steps.
The best place to begin planning is with a hand-drawn sketch of what your product will look like. The sketch should be as detailed as possible, with labels explaining the various features and functions.
You don’t need a professional quality drawing since you won’t be submitting it to a manufacturer at this stage. However, if you are not confident that you can produce a legible diagram that will make sense of your product, it is easy to find illustrators for hire on Dribbble, UpWork, or Minty.
Try to use your diagram to create a list of the different components or materials you will need in order to bring the product to life. The list does not need to be inclusive of all potential components, but it should allow you to begin planning what you will need in order to create the product.
For example, a drawing of a bag design could be accompanied by this list:
Silver clasps;
Leather straps;
Protection pouch;
Embossed label;
Interior pocket.
Along with the components, you should also begin to consider the retail price or category your product will fall into. Will the product be an everyday item or for special occasions? Will it use premium materials or be environmentally friendly? These are all questions to consider in the planning phase since they will help guide you through not only your product development process but also your brand positioning and marketing strategy.
The packaging, labels, and overall quality of your materials should be considered as well before you continue to the sourcing and costing stages. These will have an effect on how you market your product to your target customer, so it’s important to take these aspects of your product into consideration during the planning phase too. Again, having a clear product roadmap can help ensure you're moving forward towards your goal os releasing your product into the world.
Prototyping
The goal of the prototyping phase during product development is to create a finished product to use as a sample for mass production.
It’s unlikely you will get to your finished product in a single attempt—prototyping usually involves experimenting with several versions of your product, slowly eliminating options and making improvements until you feel satisfied with a final sample. Minimum viable product is a great standard to hold yourself too.
Prototyping also differs significantly depending on the type of product you are developing. The least expensive and simplest cases are products you can prototype yourself, such as food recipes and some cosmetic products. This do-it-yourself prototyping can also extend to fashion, pottery, design, and other verticals, if you are lucky enough to be trained in these disciplines.
However, more often than not, entrepreneurs will work with a third party to prototype their product. In the fashion and apparel industry, this usually involves working with a local seamstress (for clothing and accessories), cobbler (for shoes), or pattern maker (for clothing). These services usually can be found online by Googling local services in the industry.
Most large cities also have art, design, or fashion schools where students are trained in these techniques. Administrators from these university or college programs can usually grant you access to their internal job board, where you can create a request for prototyping help.
Using UpWork or Freelancer.
The gig economy has revolutionized the way people work, and platforms like UpWork and Freelancer have played a significant role in this transformation. UpWork is an online marketplace that connects businesses with freelancers from around the world, offering a wide range of services such as web development, graphic design, writing, and more. Similarly, Freelancer is another popular platform that allows employers to post projects and hire skilled professionals on a freelance basis. These platforms have gained immense popularity due to their convenience, cost-effectiveness, and access to a global talent pool.
There are also user-friendly online tools such as SketchUp, Tinkercad, and Vectary for founders who want to learn how to create 3D models for themselves.
To get a 3D design turned into a physical model, makers used to have to get molds made for each part. Molds are typically expensive and involve setup fees for things like tools and dies that are used to cut and shape pieces of plastic and other hard materials.
Luckily, with the innovation of 3D printing, designs can be turned into physical samples at a much lower cost with a quicker turnaround time.
You’ll also want to start testing a minimum viable product (MVP) at this stage. The MVP is a version of your product with just enough functionality for early customers to use. It helps validate a product concept early in your product development process. It also helps product managers get user feedback as fast as possible to iterate and make small, incremental improvements to the product.
Startups release the MVP to early customers then run experiments to gauge interest, test price sensitivity and messaging, and more. It begins the feedback process to bring ideas and suggestions based on customer needs. This allows you to create iterations of the product and build something more valuable for your target market.
Sourcing
Once you have a product prototype you’re satisfied with, it's time to start gathering the materials and securing the partners needed for production. This is also referred to as building your supply chain: the vendors, activities, and resources needed to create a product and get it into a customer’s hands. During this stage of product development, project management is crucial.
While this phase will mainly involve finding manufacturers or suppliers, you may also factor storage, shipping, and warehousing into your choice.
When looking for suppliers, there are plenty of resources both online and in person. While it may seem old fashioned, many business owners choose to attend trade shows dedicated to sourcing. Trade shows provide the opportunity to meet hundreds of vendors at once—to see, touch, and discuss materials and build a personal relationship with suppliers, which can be valuable when it comes time to negotiate prices.
During the sourcing phase, you will inevitably come across the decision of whether to produce your product locally or overseas. It is a good idea to compare the two options, as they each have their own advantages and disadvantages.
Buying from Alibaba is one way to do so, as it's the most commonly used sourcing platform for overseas production. Alibaba is a marketplace for Chinese suppliers and factories, where you can browse listings for finished goods or raw materials. A popular way of using Alibaba to find a manufacturer is to look for listings with similar products to your own and then contact the factory to see if they can produce your specific design.
Costing
After research, planning, prototyping, and sourcing is done, you should have a clearer picture of what it will cost to produce your product. Costing is a business analysis process where you take all information gathered thus far and add up what your cost of goods sold (COGS) will be so you can determine a retail price and gross margin.
Begin by creating a spreadsheet with each additional cost broken out as a separate line item. This should include all of your raw materials, factory setup costs, manufacturing costs, and shipping costs. It is important to factor in shipping, import fees, and any duties you will need to pay in order to get your final product into the customer’s hands, as these fees can have a significant impact on your COGS, depending on where you are producing the product.
If you were able to secure multiple quotes for different materials or manufacturers during the sourcing phase, you can include different columns for each line item that compare the cost. Another option is to create a second version of the spreadsheet, so you can compare local production versus overseas production.
Once you have your total COGS calculated, you can come up with a pricing strategy for your product and subtract the COGS from that price to get your potential gross margin, or profit, on each unit sold.
Commercialization
At this point you’ve got a profitable and successful product ready for the world. The last step in this methodology is to introduce your product to the market! At this point, a product development team will hand the reins over to marketing for a product launch.
If you don’t have the budget for expensive ads, don’t sweat it. You can still run a successful go-to-market strategy by using the following tactics:
Sending product launch emails to your subscriber list
Working with influencers on an affiliate marketing campaign
Getting your product featured in gift guides
Enable Instagram Shopping
Run Chat Marketing campaigns
Get reviews from early customers