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Importance of New Products

Today's accelerated rate of change and information growth means small companies will inevitably face increased competition in their market niches. Small companies need to embrace and seek out change, rather than avoid it or wait until change is forced upon them by competitors.

Sadly, continuous new product development is often a hit or miss program in smaller companies. New products are introduced as a reaction to meet competitive challenges or because of a fortuitous development of proprietary technology or patents.

Today, more than at any time in history, small companies must innovate or be left behind by competition! The good news is that small companies are usually more nimble and responsive than large companies. They can do things faster, at less cost, and less risk than larger competitors.

Change is accelerating. There are two primary product risks in small business development:

  • introducing a product that people won't buy
  • not introducing new products often enough

Change in consumption patterns, buyer wants/needs, competitive entries, product technology, economic patterns, pricing, features/benefits, distribution, advertising spending, promotion, and marketing/sales strategies can significantly affect the need to develop and introduce new products in a category.

One thing is certain: the rate of change is accelerating. The world's knowledge base doubles every few years with a consequent increase in buyer sophistication and demands. And small businesses are the first to be affected by changes in their marketplace. The majority of new consumer products are not patentable and thus are easily duplicated by other competitors. And many small companies do not have the resources to spend heavily to protect a new product idea from copycat competitors. Their only advantage is to saturate available categories of buyers and retailers as quickly as possible.

Small businesses are nimble. In larger companies, new product development may take two to five years before a new product is rolled out nationally. In smaller companies where managers may be closer to their customers, buyers, and suppliers, and where endless meetings are not required in order to get approval of new ideas, faster development and testing of new product ideas may occur. It is not unusual for smaller companies to develop a prototype new product and introduce it nationally within six to 12 months. How? And at what risks and costs?

Smaller companies often let the real marketplace do the development and refinement of new products. For example, in the food business, small companies may take prototype samples to a few key wholesale customers for initial evaluation and comments. If the wholesale buyers love the product and insist on buying and selling it, a new business is born.

Refinements in product, packaging, pricing, positioning, advertising, and unit counts may be made with each production run, with initial test-marketing done in one or two locations prior to rolling out in a larger geographic region. For the purposes of this discussion, we consider product refinement (e.g., a restaurant continually upgrading menus and adding new dishes) the same as introducing a completely new-to-the-world product or service.

The bottom line. As small businesses discover a unique service or product niche to fill, they must continually be alert for changing customer needs, wants, and interests, along with competitive changes in product and service which affect them.