Monday, October 01, 2012

What is a New Product?

Product managers are responsible for driving new product development. In the world of product management, there are several types of new products.  There are many different types of new products.  New products fall into six major types:

1. New to the world products

These are really revolutionary products that breaks new ground in terms of innovation. For example Sony Smart Watches, Instagram, Yahoo Search, Hotmail, Apple iPad, Garage Band etc. These products create a new markets for the product. Today, such new products constitute ~10% of all product releases.

Developing such new products are extremely risky and only 4 or 5 out of 100 will survive the first two years in market.

2. New to the company products.  

These are products that helps company enter new market segments. The market For example,  Blackberry Storm was the first touch phone for Blackberry.  These new products are often seen as me-too products, and if the new product does not offer value to the customer  & does not distinguish from the current market leader then it will fail in market place.  So companies spend lots of money/efforts on market research and product development to create truly differentiated products.  E.g.: Gmail, Google search, Android - are all new to the company when introduced and Google spent a lot to make these products better than the current market leader.

On the other hand, there are companies that try to draft behind the market leader by creating a lower cost, imitation products that typically follows a me-too market strategy. This typically happens if the entry barriers are low and  the products does not have strong differentiating features.  E.g.: Rediff Email, ZTE cell phones, etc.

3. Additions to existing product line

Companies often add new products to existing product line to address needs of adjacent markets - the markets that is currently not being served by the current range of products. For example, Samsung Galaxy Note was a product like extension, but it addressed the needs of business users of Smart Phones.  Another example is Amazon's Glacier storage service - which is an extension of Amazon's Simple storage Service.

4. New SKU's

Companies can create new products by introducing newer SKU's of existing products.  For example, Software companies such as Microsoft sells software packages based on number of users, so there will be different SKU's for 50 user license, 100 user license 1000 user license etc.  By creating new SKU's companies create product differentiation in terms of pricing. Typically a smaller SKU will have a lower price, which attracts newer sets of customers.

5. Improvements and Revisions to existing products 

When a company introduces its first version of its product to the market, it may not have all the features or functions needed, Often times the first version of the products may not even succeed in the market. But companies can keep improving the product and release several revisions to the existing product and succeed.

For example, Samsung's Galaxy S line wasn't an overnight sensation. But the company coupled steady improvements to its flagship Smartphone line with a steady drumbeat of commercials, billboards, banner ads, and other promotional effort to build up its reputation. Now, it's second only to the iPhone in its ability to draw the attention of consumers.

Product revisions are done to all products - software, hardware, automobiles etc.

6. Cost reductions or Price revisions.

Once a product is proven in the market,  the seller may redesign/rebuild the product such that it costs less to manufacture. A part of this cost reduction could be passed on to customers - thus lowering the price and changing the market segment into which the product could now be sold to. For example, the price of laptops have dropped steadily - this with every drop in selling price, the laptop computers gained more market share from the desktop users. Large Screen Televisions: LED/LCD/Plasma TV's from Sony or Samsung have also followed this price skimming strategy - where the price of the TV drops steadily and with every drop, it attracts customers from a newer and a bigger market segment. Large screen LED TV prices have dropped from $15,000 to $1000 in last 7 years. In the process, the large screen TV's moved from a niche luxury product to mainstream product.

Closing Thoughts 

Introducing new products is one of the major roles of product management. But new products may not always mean developing new technologies. Often times it could just mean a product revision or a product extension or new pricing or new packaging. All these activities must be planned by product managers and direct its execution.

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