Business analysis of new products

A new product idea that survives the screening stage of new product development (NPD) requires a more sophisticated and detailed business analysis. A business analysis will help you determine the costs involved in your proposed NPD, and forecast the profits you may make from the product in future financial years. The costs of developing a product are substantial.

Your business analysis will also help you eliminate inappropriate ideas and avoid unnecessary costs.

Carry out the following steps to assess the viability of your new product.

Estimate your product price

Review your market and competitor research and your feedback from customers to determine the selling price of your product, and the profit you are likely to make.

Identify your product's market potential

Review your market research and the sales performance of existing products in your range. Use your recent sales figures and industry sales figures to help you identify the current level of market activity and interest in products in the same line as your new product.

Forecast your sales volume

Estimate the volume of the product sales you anticipate based on your research into customer needs, the size of your existing customer base and your market.

Identify your break-even point

Estimate the profitability of your product, and determine your break-even point – the amount of product you need to sell to cover your fixed costs (such as rent, electricity and wages).

Determine your minimum sale price

Project your returns based on your anticipated discounted product price to identify your lowest sales figure per item.

Consider the long term

Forecast the lifespan of your product in the market. How long will it be relevant to your market's consumers? How long will it take you to realise a decent return on your investment? What market share percentage does it have the potential to realise?

Scope your marketing strategy

Your marketing strategy will help you determine how to position your new product in the marketplace. The information you gather, next, in your market testing will help you identify which market segments to target and how. At this stage, however, you can use the data you have gathered in your business and market research to start shaping your marketing strategy, identifying relevant market and product information, as well as approaches that will be important in your product marketing.

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