Developing new products can be capital and labour intensive. At one end of the spectrum, you have big pharma, AI and energy companies investing billions. At the other end, you have SMEs looking for new revenue streams with minimal investment. A slight variation on what you currently produce may be quick and cheap to develop. A complete redesign may be complex, with a long lead time and significant capital investment in new facilities, equipment and materials. Today, we are focused on consumer products from paint to furniture and business-to-business products from software to high-tech equipment. So, let’s discuss when developing new products, should you build and sell or research and develop?
Developing new products that we can make today
Of course, it goes without saying that a product we already make is much easier as a starting point. A paint product can be tweaked for colour, finish and even simple additives to give it a different feature, such as mould resistance. A shower gel can be put into different packaging with natural ingredients added to the base formula. In business, a piece of equipment can be given a new connector, a new add-on kit or a new feature. Similarly, a sports video game can be built on the same engine, updating for seasonal changes. Your CRM system may have paid add-ons developed to enhance the capability, for example. In many cases, development is incremental because it is relatively low risk and low cost. However, this is only when we start with existing products as the foundation.
When engineers lead developing new products
Sometimes, just sometimes, the engineers come up with a bright idea. Call them inventors or pioneers, but sometimes your engineers design something different. For example, today you only sell power tools but your engineers have designed a power supply unit. Another example might be that you sell large pieces of equipment but the engineers have designed a moveable one. Assuming that management thinks that there is a market for it, it may get the go-ahead. For entrepreneurial minds, this is an opportunity to grow, disrupt, move into adjacent markets and innovate. On occasion, this does work out and the new product sells well. Unfortunately, we know that about 4 in 5 product launches fail. Given that we also know that developing the new product is not free, your time and capital are consumed on a bet.
When you need to develop a new product breakthrough
Another aspect of developing new products is when a ‘breakthrough’ is sought after. A breakthrough is defined as an important discovery or event that improves a situation or solves a problem. For example, when vying for market share, it may be that a step change in energy efficiency could really help you stand out. If products are barely improving, a sudden 25% reduction in energy consumption could step up your fortunes. Similarly, it may be that you are racing to integrate AI into your software, removing the hard work for customers. If none of your competitors has done this yet, the first to market may gain an advantage.
As with all products, sometimes the development falls on deaf ears and wallets don’t fly open. For example, integrating Augmented Reality (AR) into your shopping app may not increase sales. Similarly, increasing processing power by 10% with a 30% increase in energy consumption may be seen as a step backwards, even if your performance is superior.
Developing a product that addresses a customer need
Surprisingly, a lot of product research and development is internally-focused in business. That is, R&D that focuses on what we want to develop. But what about products that customers actually want? What about products that solve an as yet unknown need? What about products that boost performance in areas that customers care about?
We hear all the time that organisations are ‘customer-centric’, yet they develop products that nobody wants. Sometimes, they fade without a trace. Sometimes, they limp on for a while until the replacement comes along. Often, they increase the number of choices for customers, which is not always a good thing. So, what is the solution?
Developing products that customers love
It may sound simple, but research is key to understanding market opportunities. Just to be clear, we do not mean testing 10 products that you have already developed to see which one prospective customers like best in a focus group. No, we mean working out what things that customers would like to see. Since our perception is fluid, they don’t necessarily see our brand, advertising, packaging and products as we expect. For example, we might think that customers buy from us because of our high quality. However, research may tell us that there is nothing currently better at this price point. Similarly, customers may say that they want sustainability but then proceed to ignore it if price is the determining factor.
There are solutions via customer research and product testing. Sure, we can interview customers and see what they tell us with anonymised results. We can also survey a target audience, controlling where possible for bias, to gain valuable insights. For example, one client wanted us to verify that customers viewed a new product as a ‘game changer’, when not required in their eyes. We can also scour the market itself for opportunities, finding weaknesses in competitor offerings and spotting upcoming trends. Furthermore, we can prepare faster for changes in regulation, changes in supply chains and geopolitical risks. However, we can also go a step further.
Using neuroscience in new product development
Since neuroscience is a combination of a number of scientific disciplines, it is a helpful tool to understand customers. You use it to understand associations with your brand, perceptions of your current products and even the response to new concepts. Many brands do not fully understand why people buy from them today. Since we are emotional creatures that think, most purchases are based on emotion. An instinctive and intuitive feeling, often below our consciousness, drives us to make a choice. We also attach emotions to experiences, leaving us with memories tagged with emotions. In summary, we may not remember the exact details, but we may remember how we felt about something.
As a result, we can use neuroscientific techniques to measure responses to changes in UI/UX, changes in CX/EX, changes in features and changes in advertising and packaging. Sure, we may think that customers want a new look, but they may just want a more responsive interaction. Similarly, we may think that customers want IoT when we are missing a basic feature. We often fail to understand the impact of changes, such as launching a new game, app or system that does not work as it should. Crashes, poor optimisation and slow interfaces can cause frustration, anger and lost customers. Furthermore, we often fail to analyse responses to competitor offerings versus our own. There is significant insight in developing between the gaps, as long as customers value it.
Identifying the technological or scientific uncertainty to overcome
This article is in no way attempting to offer tax advice (for that, you should consult a tax expert). However, though the market research or feasibility study is not a qualifying expenditure for R&D tax purposes, the initial work on a resolution to that uncertainty may be, such as prototyping. For example, improving the commercial aspects of a current product may not count, such as developing a new UI. However, if the technological solution were to represent an advance at the time of development, that may qualify for R&D relief.
Identifying the market opportunity and the challenge to overcome is where the research and feasibility stages do add value. Ultimately, where is the sense in pursuing a technological advance for the sake of it? Perhaps neuroscience can help you to identify a problem that requires an advance to overcome an uncertainty.
Developing new products is never easy
In conclusion, developing new products is never easy. The motto, “Build and they will come”, rarely works in reality. Remember, only about 20% of products succeed in the market. Additionally, changes to existing products may not ‘excite’ customers if they don’t value it. Entirely new products come with large risks, investment and also the potential for high reward. Let’s try to remember that ‘research and develop’ is not exclusively in a laboratory or a workshop. Sometimes, it is in the market, via customer and competitor research.
There are ways to gain insights, test concepts and unsettle the competition if we can measure it. Interviews, surveys and neuroscience are three primary research options that we offer to support you in finding what customers value. We also offer competitor research, industry insights and market sizing as three secondary research options to find those gaps.
If you would like to speak to someone about your product development, simply email us and we will be in touch. Alternatively, why not complete our webform with your service request.
Finally, why not read a related article about product launch marketing.
To find out more about science-based studies, check out our page of neuroscience services.