Every business, big or small regardless of its size, deals with the production, manufacturing, development, and sale of the product. After producing the product, the management works on the strategy that how to make the product development strategy. That’s what we’re going to discuss today, product development strategy, its functionality, types, along with examples.
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What is a Product Development Strategy?
The product development strategy is one of the parts of the corporate strategy and its focus on the development of the new product. It outlines goals and funding for the new product. However, the objective of the product development strategy is to offer the new product in the best possible in order to achieve a competitive edge in terms of profit, revenue, or sales growth.
The product development strategy allows you to amplify the sale of existing products with new features, revamp the product line, create a link between the market and the product, and reduce the risk factor in the initial product developing stage.
It’s no doubt market strategy and market research play a significant role. However, other factors like technology, platform, and branding also important in the product development strategy. They allow you to launch a series of creative offers to surprise customers and distract the competition.
Product Development Strategies
Different companies follow development strategies, some work on innovation, and the others focus on adapting the current product development. Whatever strategy they follow, it should be clear. While launching a new product in the market, some of the main product development strategies that you should are as follows;
Upgrading the Existing Product
As the name implies, you create a new product by modifying the existing product and motivate your target market to buy your upgraded offer. It focuses on adding those updates and features that are influencing the target customer market. Most importantly, you look for those features that customers want in the updated product.
Amplifying Product Value
The reason customers buy the product is because of the value they receive and the product offers. The company could amplify the product value by offering premium features, customer support, and increasing the quantity of the product. The additional value features would attract new customers, and the existing customers would like to have a better deal.
Offering a free sample of the product would help you to persuade customers to buy your product. Here the target customer wants to check the quality of the product, and the free sample would convince them to purchase the premium and paid version of the product. The free trial offer shows customers what they would receive from the product.
Customize & Specialize
You can customize some products and make them special in order to target a specific set of target customers. In fact, you can go one step further by offering them personalized products relevant to their needs and lifestyle. It would encourage them to buy your product over competitors.
Launching a new package deal would attract the attention of customers. You can offer them a variety of products, bundles, discounts, or free samples to choose your product. The package deal is such an offer that the customers won’t get it otherwise, and the limited-time offer is a great marketing strategy.
New Product Line
It’s when you develop a new product in the product line that is relevant to your product line. When you’re creating a new product, then you should be careful with your development and offer them only the product that the customers want. The new product should complement the features of the existing product in such a way that would increase the sale of your products.
It means that you change the definition and idea of the product. For instance, you created a new product and the target market isn’t responding to the new offers. Now, you conduct market research and find out the exact needs and wants of the customer, and give a new idea to your product relevant to the market requirements.
There are different types of products and they sell in different markets. It’s also a very good product development strategy that you sell your existing product in different markets and geographies. In fact, here you could also change the demographic and target market, and shift your focus from customers to businesses.
Benefits and Risks of a Product Development Strategy
Some of the main benefits of the product development strategy are as follows;
- Locating Risks. The product development strategy allows you to identify and locate the risks at the commercial assessment stage and also asking customers for feedback at the prototype phase.
- Lowering Cost. Cost reduction provides the company a number of benefits to taking advantage. Product development could do it by redesigning the product or the manufacturing processes, decreasing features, or changing the material.
- Quality Reputation. If you launch a product development strategy in order to improve the quality of the existing product and keeping launching a better version of the product. It would not only increase the sale but also send a positive perception of the company in the market.
- Improving Performance. The product development strategy not only improves the quality of the product and market goodwill and reputation, but it also helps the company to win the trust of investors. The improved performance would help the company to raise more funds for future projects.
- Managing Success. It’s no doubt product development strategy is a risky step. However, you can reduce the risk factor by putting the product development team’s focus only on meeting the needs and wants of customers. You should avoid tech product development or launching such features that have no use for customers.
Examples of Product Development Strategy
Some of the main examples of product development strategy are as follows;
McDonald’s Product Development Strategy
McDonald’s is a giant fast-food multinational company. Some of the steps of McDonald’s product development strategy are as follows;
- Seasonal Dishes: sometimes McDonald’s offers seasonal dishes to the customers and they appear annually, and the other dishes come only a few weeks and gone forever. The reason McDonald’s follows this strategy is to satisfy the needs of those customers that want to try something different.
- Traditional Dishes: McDonald’s has a large database of loyal conservative customers. The company offers them Big Mac, Cheeseburger, hamburger, etc., and McDonald’s doesn’t change these traditional dishes.
- Localization: along with traditional and seasonal dishes, McDonald’s also offers different dishes in different regions. For instance, the company offers Big Mac without cheese in India, and McKroket in the Netherlands.
Ikea Product Development Strategy
Ikea used to follow the strategy of providing a quality product at a lower cost. The great number of parts required the company to have a network of the worldwide supply chain. When the furniture company became an international brand, the company re-arranged its supply chain by managing suppliers and vast geographical distance.
Microsoft Product Development Strategy
Microsoft is one of the top 5 tech companies and the company is operating its business quietly without making any headlines. Microsoft works in three major areas;
- Personal Computing
- Intelligence Cloud
- Business Processes & Productivity
Microsoft follows these steps;
- Business Analysis
- Marketing Development Strategy
- Testing & Concept Development
- Screening Ideas
Microsoft is familiar with the fact that its strategies won’t always be successful. For instance, the company invested a lot of resources in Microsoft Mixer Services, but the company couldn’t keep up with Twitch.
Google Product Development Strategy
Google has always followed the product development strategy by launching new services and gadgets over the years. Some of them became successful and the others failed.
- Google has developed a smart culture that promotes innovation and people work without any job title.
- Whenever Google launches services, it asks for customers’ feedback rather than focusing on improving profit.
- Google simultaneously works on various projects, and every 2 projects out of 5 become successful.
How to Decide Make-or-Buy Decision
When it comes to scaling and product development strategy, a very important question arises that how much they should rely on the M&A (merger and acquisition) strategy or the organic tech development strategy. Whether they should go outside the box, or they should use the existing development team, or they should consider investing in the completely new product line. The product development consultant usually asks these questions.
The purchase decision involves many factors to consider, but the main thing you should keep in mind is production cost and the strategic value of technology. You should ask yourself a question; how the technology you’re developing or buying important for the success of your company. You should also rate its strategic value, whether it’s low or high.
The make or buy decision involves many considerations, one of the most important factors is the cost of developing with your team and the strategic value of technology. Most importantly, it also considers the operations of the manufacturing organization that are involved in the process of new product development.