New product development (NPD) requires deep understanding of customer needs in order to be successful. It is important for a firm to gather market opportunities before ever starting to design and develop the new product. In fact, lack of customer understanding is often cited as the number one cause of new product failure.
In addition to a broad understanding of customer needs, a firm must also address which partition of a market they will intend to serve. This is called market segmentation.
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Market segmentation essentially means that the company will not try to serve all customers with one product. In fact, the best strategic decision for a firm may be to serve only one segment of a market with just one product. It can be a fatal error to try to serve all customers and attempts to do so generally end very badly.
Market segments should be identified based upon general demographic information (age, gender, income, location, etc.) as well as needs and wants. A product developed to solve a common household problem will serve a different segment than a product developed to bring status to the user. Both markets are logical and eligible for new innovation, yet the development effort should be quite different in each case.
For example, providing a convenience to household customers by developing a pre-packaged laundry solution may rely heavily on technical developments to find an adequate way to contain both detergent and fabric softener in a single pod. In a technology intense development, firms will find competitors fighting to gain market share through their own technical developments as well.
On the other hand, a product designed for status will focus on different parameters of the development process, such as marketing over technology. The advertising campaign to increase milk consumption attempted to link product usage to status by featuring famous movie and sports stars, like pro basketball’s Steve Nash, with milk moustaches.
Segmenting a market, therefore, depends on understanding of the customers’ needs as well as fully understanding the product’s capabilities. This is just one reason why NPD teams must be cross-functional. Market segments may be addressed by different technical solutions or the technology needs for the product may be interpreted differently by astute marketers for the unique segments.
Market segmentation can make a huge difference in successful NPD. Products should be developed according to broad market opportunities but should be optimized during concept evaluation to fully appreciate the target customer’s needs.
To learn more about best practices in new product development processes and market segmentation, please attend an innovation workshop. Contact us at email@example.com or by phone at 281-280-8717 for more information.
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