Part V--Product Devleopment
The first thing you should do when forming a marketing plan isdefine the structure in which it will be presented. The structureof the plan should allow the presentation of strategic informationin a logical and progressive manner. This structure should beprepared in a written outline detailing the progression of topicsand how they will appear in the marketing plan.
The structure of a marketing plan will usually vary according tothe business, its product or service, and the objectives of themarketing plan. Generally, however, each marketing plan willinclude the following information:
Executive summary
Product description
Market analysis
Competitive analysis
Product development
Operations
Goals & objectives
Marketing tactics
Financial projections
Summary
Product Development
As with the business plan, the purpose of the productdevelopment section is just what the name implies: to detail thedevelopment of the product or service. This requires placing thatdevelopment in the context of charting development goals, placingtimelines upon those goals, and associating costs with thedevelopment of the product or service. Another portion of theproduct development section that needs to be included defines theexpertise required in order to develop the product or service andwhether it is currently available on staff or you will need torecruit the necessary human resources to produce the proposedproduct or service.
The first thing you have to detail is the current status of theproduct or service. Explain exactly what stage of development yourproduct or service is in. You may have a laboratory prototype ofthe product or a rough idea of what equipment and materials will berequired for a service concept, but in terms of ironing out all the"wrinkles," you've saved that until you acquireadequate financing. In this event, the potential investor or lenderwill want to know just how far along you are in the development ofthe product or service concept.
After you have provided information regarding the current statusof the product or service, you need to detail the goals associatedwith its development. When forming your goals, it's importantnot to underestimate time lines, costs, and personnel requirements.If you do, you are really hurting yourself because you may notcover the expenses of production adequately. If you say you canfinish the development of a product in three months and it willactually take closer to four months, that raises the costs beyondwhat you've specified as your requirements, thus jeopardizingthe completion of your product.
The goals you set for product development must also meet thetechnical as well as the marketing aspects of theproduct, so there is a focused outline from which the developmentteam can work. We stress technical as well as marketing aspectsbecause as the product is developed, it has to be produced with aneye toward marketability. If the product doesn't meet the needsof the target group of customers and if it doesn't meet the keystrengths as defined in your competitive analysis, then there is nosense in developing the product.
It is nice to set goals, but in order for them to work, therehas 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 thatdeteriorate with prolonged exposure to the sun. If that expertiseisn't present within the development team, the product maynever make it to market.
Your goals must also have a set of procedures attached to themso there are schedules and personnel delegated to each task so thegoals can be completed by the specified deadlines. These proceduresare usually broad in nature but specific to the completion of theproduct development goals.
Work assignments also need to be created. The work assignmentswill break down the procedures into various tasks that need to becompleted in stages in order to achieve the goals outlined in thissection. The stages of each task usually include a completion datefor delivery of the preliminary product, a timeline for preliminaryproduct review and revision, and final delivery of the product.
Within the product development section, you should also producea development budget. When forming your development budget, youneed to take into account all the expenses required to develop theproduct, from prototype to production. These costs usuallyinclude:
*Material -- All raw materials used in the development ofthe product.
*Direct labor -- All labor costs associated with thedevelopment of the product.
*Overhead -- All overhead expenses required to operatethe business during the development phase such as taxes, rent,phone, utilities, office supplies, etc.
*G&A costs -- The salaries of executive andadministrative personnel along with any other office supportfunctions.
*Marketing & sales -- The salaries of marketingpersonnel required to develop pre-promotional materials and planthe marketing campaign that should begin prior to delivery of theproduct.
*Professional services -- Those costs associated withconsultation of outside experts such as accountants, lawyers, andbusiness consultants.
*Miscellaneouscosts -- Costs that are related toproduct development
*Capital equipment -- To determine the capitalrequirements for the development budget, you first have toestablish what type of equipment you will need, decide whether toacquire the equipment or use outside contractors, and finally, ifyou decide to acquire the equipment, whether you will lease orpurchase it.
The last element you need to discuss in the product developmentsection are risks involved in the development of the product orservice. Identifying these risks is important because it will helpyou address these concerns. It will also show any potentialinvestors or lenders that you have thoroughly thought out thedevelopment process and have already come up with a plan to solveany problems that may occur.
Sample Product DevelopmentSection
The design and development effort of Softie Baby Care'sbiodegradable diaper, Bio-Diaper, will include the development ofthe product to final version for marketing, a distribution systemand sales promotion program to establish a solid customer base, andrecruitment of key organizational team members.
Product/Market Development
1.0 Development of biodegradable plastic
1.1 Research
1.2 Development of plastic biodegradable shell in three sizes:small (up to 12 lbs.), medium (up to 24 lbs.), large (up to 36lbs.)
1.3 Testing
1.4 Delivery
2.0 Pad development
2.1 Delineation of pad thickness and sizes for production of athin 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 workingprototype
3.0 Package creation
3.1 Creation of imprint designs that will require therecruitment of a marketing director who will oversee theoperation
3.2 Integration of imprint designs onto working prototype
3.3 Creation of shelf packaging that will include the design,color scheme, and manufacture
4.0 Integration/Delivery
4.1 Component tests of shell, pad, and packaging
4.2 Product test of working prototype
4.3 Alpha test
4.4 Beta test
5.0 Manufacturing
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 perpackage
5.4 Manufacturing run
6.0 Final delivery
6.1 Distribution development that will include the recruitmentof a sales manager and sales force to obtain purchase orders fromfive national distributors that service major supermarket anddrugstore chains, and enlist the aid of manufacturer'srepresentatives in the 10 major regional territories of theU.S.
6.2 Delivery of initial orders to distributors and retailers
6.3 The implementation of the sales promotion campaign that isbudgeted at $15.3 million during the first year of operation and isgeared toward raising consumer awareness at the supermarket andspecialty-store levels.
The major benchmarks include:
A disposable plastic diaper shell that is biodegradable andavailable in three sizes: small (up to 12 lbs.), medium (up to 24lbs.), large (up to 36 lbs.)
Thin and thick pads available in three sizes to fit the plasticshells. They must control odor effectively and be highlyabsorbent.
Imprinted designs of favorite nursery characters using pastelcolors
Attractive pastel-colored package designs
Retail and distributor price points of $12 and $8.42 perpackage
The development of Bio-Diapers will be spearheaded by thefollowing executives of Softie Baby Care:
Vice President of Production -- Roger Smith
Reporting directly to the CEO, Mr. Smith is responsible for themanagement of the research and development arm of the company. Mr.Smith has a strong background as a research and developmentdirector in the realm of industrial plastics.
Vice President of Operations -- Steve Smith
Reporting directly to the CEO, Mr. Smith is responsible formanaging all purchasing and inventory-control operations. Mr. Smithhas considerable experience in purchasing and inventory controloperations for large manufacturers.
Risks
Since the development effort of Softie Baby Care is phased overa period of time, the risks are very few and very controllable.They include:
Product acceptance by consumers: Based on surveys commissionedby Softie Baby Care, Inc., we feel consumer acceptance will be highand present minimal risk.
Technical delays: With the expertise already present within theprincipal owners of the company, this risk will be greatlyreduced.
Increased competition from major competitors: Most of the majorplayers are in the process of developing their own biodegradablediapers. The risk of increased competition will be reduced throughsuperior product quality and consumer recognition of Bio-Diapers asthe first biodegradable diapers.
Financials
Item--Budgeted Amount
Materials--$7,133
Direct Labor--7,254
Overhead--9,992
G&A--1,088
Equipment--806
Miscellaneous--300
Total--$26,573
In part VI of our Marketing Plan series, we'll becovering Operations. Tips are updated daily at 5:00a.m.PST.
