How often do small companies go out and test their products against competitive products with users of the product? Every five years? Ten years? Never? Even when a direct competitor introduces a new product, most small companies react by introducing a similar or slightly improved version of the same product instead of considering the sales potential and strengths of their entire line.
Lack of time, resources, funds, and awareness of the real market situation prevent small companies from consciously pursuing product development and review of current products. At a minimum, small companies should compare the competitive strengths of their products against those of their direct and indirect competitors' products at least once a year.
For example, many food product companies are reexamining their older product lines for possible improvements in fat reduction, calorie reduction, and ways to feature nutritional values that may not have been considered valuable in the past.
Much of this product development activity is a direct result of consumers' concern with health and nutritional values of food. Consumers' awareness of the food content of fat, saturated fat, sodium, calories, protein, and other values is the result of 1993 legislation mandating nutritional labeling on all food products in companies doing over $100,000/year in sales of an item.
Even companies who are legally exempt from having to provide nutritional labeling may decide to provide it as a preferred feature of doing business with retailers and competing with other companies in their categories.
Preliminary product screening for small companies. Here are some ways that you can reevaluate your existing products, without spending more time and money than you can afford:
- Try out your products with an "expert panel" of internal company personnel (or your family and friends, if you have no employees) plus external product users. Use a written evaluation form to keep track of results from year to year. An expert panel may also consist of industry experts, consultants, and end users.
- Add competitors' products to the evaluation with your expert panel of users.
- Compare evaluations between your company's products and competitors' products, paying particular attention to:
- differentiation of your products' features and positioning compared to competitive products
- ability of the competition to develop similar, stronger products
- cost of pioneering a new product compared to a less-expensive "me-too" introduction
- your ability to introduce products in the marketplace compare to a competitor's ability to defend markets
- Decide if your company needs to make improvements. Key question: will your competitor's improvements in products affect your sales?
- Screen existing products against pre-established company criteria:
- your company's mission, ethics and philosophy, and strategies
- your company's operational expertise and distribution methods
- future company business goals and product categories
- company customer and buyer profiles
- company sales volume, share, and profitability objectives
- company ability to invest in new technology or marketing spending
- Outline an action plan with an affordable budget. Obviously, you won't want to take any action that will not positively affect sales of your products vs. competition.
- Decide if qualitative and quantitative market research is necessary, depending upon the technology and expense to retool and introduce an improved product. In other words, what is the magnitude of risk?
- Conduct a trial market test with product users or key trade contacts for evaluation.
- Retool, retest, rethink, reposition, as necessary.