Part V--Product Devleopment
The first thing you should do when forming a marketing plan is define the structure in which it will be presented. The structure of the plan should allow the presentation of strategic information in a logical and progressive manner. This structure should be prepared in a written outline detailing the progression of topics and how they will appear in the marketing plan.
The structure of a marketing plan will usually vary according to the business, its product or service, and the objectives of the marketing plan. Generally, however, each marketing plan will include the following information:
Goals & objectives
As with the business plan, the purpose of the product development section is just what the name implies: to detail the development of the product or service. This requires placing that development in the context of charting development goals, placing timelines upon those goals, and associating costs with the development of the product or service. Another portion of the product development section that needs to be included defines the expertise required in order to develop the product or service and whether it is currently available on staff or you will need to recruit the necessary human resources to produce the proposed product or service.
The first thing you have to detail is the current status of the product or service. Explain exactly what stage of development your product or service is in. You may have a laboratory prototype of the product or a rough idea of what equipment and materials will be required for a service concept, but in terms of ironing out all the "wrinkles," you've saved that until you acquire adequate financing. In this event, the potential investor or lender will want to know just how far along you are in the development of the product or service concept.
After you have provided information regarding the current status of the product or service, you need to detail the goals associated with its development. When forming your goals, it's important not to underestimate time lines, costs, and personnel requirements. If you do, you are really hurting yourself because you may not cover the expenses of production adequately. If you say you can finish the development of a product in three months and it will actually take closer to four months, that raises the costs beyond what you've specified as your requirements, thus jeopardizing the completion of your product.
The goals you set for product development must also meet the technical as well as the marketing aspects of the product, so there is a focused outline from which the development team can work. We stress technical as well as marketing aspects because as the product is developed, it has to be produced with an eye toward marketability. If the product doesn't meet the needs of the target group of customers and if it doesn't meet the key strengths as defined in your competitive analysis, then there is no sense in developing the product.
It is nice to set goals, but in order for them to work, there has to be a certain level of expertise present within the company. For instance, in order to create a biodegradable disposable diaper, you have to have expertise in the realm of natural materials that deteriorate with prolonged exposure to the sun. If that expertise isn't present within the development team, the product may never make it to market.
Your goals must also have a set of procedures attached to them so there are schedules and personnel delegated to each task so the goals can be completed by the specified deadlines. These procedures are usually broad in nature but specific to the completion of the product development goals.
Work assignments also need to be created. The work assignments will break down the procedures into various tasks that need to be completed in stages in order to achieve the goals outlined in this section. The stages of each task usually include a completion date for delivery of the preliminary product, a timeline for preliminary product review and revision, and final delivery of the product.
Within the product development section, you should also produce a development budget. When forming your development budget, you need to take into account all the expenses required to develop the product, from prototype to production. These costs usually include:
*Material -- All raw materials used in the development of the product.
*Direct labor -- All labor costs associated with the development of the product.
*Overhead -- All overhead expenses required to operate the business during the development phase such as taxes, rent, phone, utilities, office supplies, etc.
*G&A costs -- The salaries of executive and administrative personnel along with any other office support functions.
*Marketing & sales -- The salaries of marketing personnel required to develop pre-promotional materials and plan the marketing campaign that should begin prior to delivery of the product.
*Professional services -- Those costs associated with consultation of outside experts such as accountants, lawyers, and business consultants.
*Miscellaneouscosts -- Costs that are related to product development
*Capital equipment -- To determine the capital requirements for the development budget, you first have to establish what type of equipment you will need, decide whether to acquire the equipment or use outside contractors, and finally, if you decide to acquire the equipment, whether you will lease or purchase it.
The last element you need to discuss in the product development section are risks involved in the development of the product or service. Identifying these risks is important because it will help you address these concerns. It will also show any potential investors or lenders that you have thoroughly thought out the development process and have already come up with a plan to solve any problems that may occur.
The design and development effort of Softie Baby Care's biodegradable diaper, Bio-Diaper, will include the development of the product to final version for marketing, a distribution system and sales promotion program to establish a solid customer base, and recruitment of key organizational team members.
1.0 Development of biodegradable plastic
1.2 Development of plastic biodegradable shell in three sizes: small (up to 12 lbs.), medium (up to 24 lbs.), large (up to 36 lbs.)
2.0 Pad development
2.1 Delineation of pad thickness and sizes for production of a thin and thick pad in three sizes: small (up to 12 lbs.), medium (up to 24 lbs.), large (up to 36 lbs.)
2.2 Delivery of raw material
2.3 Development of odor-reducing agent
2.4 Testing of pads for absorbency and odor reduction
2.5 Delivery of the specified pad sizes
2.6 Integration of pads into plastic shell for working prototype
3.0 Package creation
3.1 Creation of imprint designs that will require the recruitment of a marketing director who will oversee the operation
3.2 Integration of imprint designs onto working prototype
3.3 Creation of shelf packaging that will include the design, color scheme, and manufacture
4.1 Component tests of shell, pad, and packaging
4.2 Product test of working prototype
4.3 Alpha test
4.4 Beta test
5.1 Design modification as a result of alpha and beta tests
5.2 Pre-production run
5.3 Cost-reduction check to achieve pricing goal of $8.40 per package
5.4 Manufacturing run
6.0 Final delivery
6.1 Distribution development that will include the recruitment of a sales manager and sales force to obtain purchase orders from five national distributors that service major supermarket and drugstore chains, and enlist the aid of manufacturer's representatives in the 10 major regional territories of the U.S.
6.2 Delivery of initial orders to distributors and retailers
6.3 The implementation of the sales promotion campaign that is budgeted at $15.3 million during the first year of operation and is geared toward raising consumer awareness at the supermarket and specialty-store levels.
The major benchmarks include:
A disposable plastic diaper shell that is biodegradable and available in three sizes: small (up to 12 lbs.), medium (up to 24 lbs.), large (up to 36 lbs.)
Thin and thick pads available in three sizes to fit the plastic shells. They must control odor effectively and be highly absorbent.
Imprinted designs of favorite nursery characters using pastel colors
Attractive pastel-colored package designs
Retail and distributor price points of $12 and $8.42 per package
The development of Bio-Diapers will be spearheaded by the following executives of Softie Baby Care:
Vice President of Production -- Roger Smith
Reporting directly to the CEO, Mr. Smith is responsible for the management of the research and development arm of the company. Mr. Smith has a strong background as a research and development director in the realm of industrial plastics.
Vice President of Operations -- Steve Smith
Reporting directly to the CEO, Mr. Smith is responsible for managing all purchasing and inventory-control operations. Mr. Smith has considerable experience in purchasing and inventory control operations for large manufacturers.
Since the development effort of Softie Baby Care is phased over a period of time, the risks are very few and very controllable. They include:
Product acceptance by consumers: Based on surveys commissioned by Softie Baby Care, Inc., we feel consumer acceptance will be high and present minimal risk.
Technical delays: With the expertise already present within the principal owners of the company, this risk will be greatly reduced.
Increased competition from major competitors: Most of the major players are in the process of developing their own biodegradable diapers. The risk of increased competition will be reduced through superior product quality and consumer recognition of Bio-Diapers as the first biodegradable diapers.
In part VI of our Marketing Plan series, we'll be covering Operations. Tips are updated daily at 5:00a.m. PST.