Product Innovation
Product innovation is the creation and subsequent introduction of a good or service that is either new, or an improved version of previous goods or services. This is broader than the normally accepted definition of innovation that includes the invention of new products which, in this context, are still considered innovative.
Product innovation is defined as:
The development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products.
Numerous examples of product innovation include introducing new products, enhanced quality and improving its overall performance. Product innovation, alongside cost-cutting innovation and process innovation, are three different classifications of innovation which aim to develop a company’s production methods.
Thus product innovation can be divided into two categories of innovation: radical innovation which aims at developing a new product, and incremental innovation which aims at improving existing products.
Advantages of product innovation
(i) Growth, expansion and gaining a competitive advantage
(ii) Brand switching
Businesses that once again are able to successfully utilize product innovation will thus entice customers from rival brands to buy its product instead as it becomes more attractive to the customer. One example of successful product innovation that have led to brand switching are the introduction of the iPhone to the mobile phone industry (which has caused mobile phone users to switch from Nokia, Motorola, Sony Ericsson,etc. to the Apple iPhone).
Disadvantages of product innovation
(i) Counter effect of product innovation
(ii) High costs and high risk of failure
When a business attempts to innovate its product, it will inject lots of capital and time into it, which requires severe experimentation. Constant experimentation could result in failure for the business and will also cause the business to incur significantly higher costs. Furthermore, it could take years for a business to successfully innovate a product, thus resulting in an uncertain return.
(iii) Disrupting the outside world
For product innovation to occur, the business will have to change the way it runs, and this could lead to the breaking down of relationships between the business and its customers, suppliers and business partners. In addition, changing too much of a business’s product could lead to the business gaining a less reputable image due to a loss of credibility and consistency.
These are the few stages that a business has to undergo when introducing a new product line into the market:
- Market research
This may be done by doing both primary and secondary market research, during which the company will strive to learn as much as it can about the current likes and preferences of its prospective customers as well as the gaps in its specific sector. Secondary market research entails compiling information that has previously been gathered by another party and is mostly reliant on data from earlier studies. One benefit of secondary market research over primary market research is that it is less expensive, allowing the company to devote more time to other crucial tasks and prospective new business opportunities.
Data collection for primary market research is done by the company itself, and it may be done using a variety of sample techniques. Focus groups, interviews, questionnaires, and other methods of primary market research are available. Primary market research offers many advantages over secondary market research, including the fact that it produces considerably more precise findings and is solely accessible to the firm itself, as opposed to secondary research, which is made publicly available since the data has already been gathered.
- Product development and testing
This stage involves creating a test product called a prototype. The prototype ensures the business that its product is functioning properly, and all the necessary arrangements are made to enhance the product as much as possible. After the prototype has been devised, the business can now use test marketing where the business introduces a product to a small group of individuals to give the company insight into the effectiveness of the product from the views of their potential customers.
- Feasibility study
The business will now look at the legal and financial restrictions of launching the product into the market. This is where the business will create sales forecasts, establish the price of the product, the overall costs of production and profitability estimates. The business also has to consider legal aspects in terms of safety and Intellectual Property Rights (IPR).
After all these stages have been successfully run through, then the business can officially launch the product.