Every product begins life as an idea. This idea will influence the entire product development process. The success of the idea will always be judged on how well it solves a problem or improves the day-to-day life of consumers. The key to creating a successful product is to follow the seven steps of product development.
However, the research and development process is an expensive one. You can save money on these expenses by applying for the R&D Tax Credit. Our specialty tax professionals here at Tri-Merit will help you maximize the amount you save on research and development costs!
The Seven Steps of Product Development
- Idea Generation
- Filtering of Ideas
- Prototype Development and Testing
- Marketing Strategy
- Product Development
- Market Testing
- Commercialization
Step One: Idea Generation
In this stage, the object is to produce ideas that have the potential to become marketable products. Companies typically generate these ideas through brainstorming sessions where nothing is ruled out, and everything is fair game.
In this stage of the product life cycle, the emphasis is on generating raw, untested ideas that can later be reviewed for practicality and usefulness.
All ideas should focus on solving a problem that consumers have. Once you have come up with a list of ideas, they should be judged by using the four Us…
- Unworkable Does the idea address an actual consumer problem?
- Unavoidable Is the problem so significant that you have to address it?
- Urgent Is the problem in dire need of a solution?
- Underserved Are there any existing products that already solve this problem?
Step Two: Filtering of Ideas
In this step, each product concept will be evaluated. Hopefully, at least one or two ideas will be selected. Each idea will have to be considered by experts, and products that are infeasible will have to be discarded.
One of the best ways to filter through ideas is to consider each one’s strengths, weaknesses, opportunities, and threats (SWOT). If every idea is subjected to the SWOT criteria, then it will be easy to determine which ideas are superior to the others.
Step Three: Prototype Development and Testing
This phase of the production process emphasizes concept development. You need to determine any problems with the new product so that changes can be implemented. Start by creating a picture of the product from the perspective of the user. This will help you identify what benefits the product offers, as well as how much effort is required to use it.
Next, you will conduct an analysis of the competition. Determine whether similar products already exist in the marketplace and what their shortcomings are. Then, you need to identify the major features of your product and how it is going to solve a problem consumers have.
It may help to produce a value proposition chart that visually depicts all the benefits your product will provide. Doing this makes it easier to describe the benefits to potential customers. Finally, once the value proposition has been prepared, a prototype of the product needs to be presented to a group of customers for testing.
Step Four: Marketing Strategy
In this step, you will conduct market research and develop a marketing strategy. This will help you reach out to your target audience. The best way to accomplish this is to utilize the Four Ps of Marketing.
- Product focuses on the finalization of the product after the prototype has been tested.
- Pricing involves the estimation of what profit margins will be.
- Promotion will emphasize the advantageous features of your product.
- Placement identifies how your product will solve the pain points currently being experienced by your target audience.
Step Five: Product Development
This phase is the actual development of the product, which should be approached from an iterative and incremental standpoint. In the past, the Waterfall Approach was traditionally used. Nowadays, product development typically adopts the Agile Approach. This approach is superior, because it speeds up the entire process, while also promoting collaboration and communication.
Step Six: Market Testing
In this step, you will eliminate any uncertainty regarding the introduction of the product into the marketplace. This can be achieved by using two basic strategies. These are alpha testing and beta testing.
Alpha testing calls for company engineers to use the product and evaluate its performance. They will make any adjustments before the next phase of testing.
Beta testing puts the product in the hands of consumers and seeks their feedback on its performance and usefulness. Any problems or issues are then referred back to the development team for modification.
Alpha testing generally comes before beta testing. This is so any bugs can be identified by in-house personnel before you bring the product to users for testing.
Step Seven: Commercialization
Commercialization is effectively the product launch. It is a broad step that includes production, distribution, marketing, sales, and customer support. While all of these stages are important, marketing may be the most important of all. Effective marketing informs consumers how your product will make their lives better.
Tri-Merit Can Help Your Company Save Money on Product Development!
Most companies that develop new products are eligible for the Research & Development (R&D) Tax Credit. Applying for the R&D Tax Credit can save you a ton of money. It is a complicated process, trying to understand all the subtleties of this entitlement, which is why Tri-Merit is here to help.
We can simplify the process and determine the size of your potential tax credit, as well as prepare a solid justification for the claim you make. This will always ensure that you get the largest possible entitlement and that your claim is well-supported, should the IRS question any part of your documentation.