The market is oversaturated with consumer products, yet the pursuit of developing and releasing new product innovations remains a widespread business objective for both startups and established companies.
Businesses need to develop products that can meet demand while providing customers with a solution to their problems or give them something that they need. There’s an irrefutable connection between market research and developing successful customer-facing products.
Product development provides a competitive advantage for businesses and helps determine how to successfully price products, how to produce them in a cost-efficient way, identifies gaps in the market, and offers a means to achieve these goals through an effective product lifecycle.
Agencies need to use market research for product development to visualize market opportunities and reduce associated risks in releasing a product.
There are a few types of product development:
- Altering Existing Products:Modifications are added to existing products in response to changing customer needs, or to improve its performance.
- Additions to Current Product Lines:Products are added to already established product lines, such as augmenting a product line with a new product that can add a solution or make it better.
- New Concepts:An entirely new product that has been created due to a drive to innovate, and which might create a whole new market.
Purpose of Market Research in Product Development
Market research has a purpose for every stage in a product lifecycle, as can be seen in the diagram above. From recognizing and establishing needs, to testing products and improving their performance, to identifying its place in the near and distant future, market research is the most crucial component in solidifying an approach to product development.
Companies apply significant portions of their budget to research:
- Electronics companies average an R&D budget that matches about 15% of their sales because of the quickly changing nature of the market.
- A majority of companies spend between 2% and 5% of sales on R&D, such as Honda, Siemens, or Boeing.
- More than 90% of all product innovations that are truly successful actually start as a failure and are considered happy accidents, such as Velcro, Post It Notes, the telephone, and x-rays.