I was fortunate over the weekend to run a brain storming session on new product development for a client, a well respected association whose members work with post secondary students. As part of this session, I presented several considerations for an association/company when developing a new product. Given the reception of these considerations by the client and his board, I thought I'd share them with you today.
Do your customers/members want it? I realize this sounds a bit silly, but in truth it should be your first consideration. This product should also support the association's Mission as it will not only serve as a revenue source but also support the association's member value proposition and potentially impact your relationship with the member.
Can the product be profitable? I realize this may be a bit obvious, but there are products developed that are considered 'loss leaders' where an association/company will produce a product and sell it at a loss to support a larger initiative, say the association's Mission or driving sales of more profitable products.
Here you have serveral considerations: the goal of the product, the size of the market, costs associated with production and pricing.
First, in many cases you would be well served to make your product a 'continuity product,' like a subscription, insurance or membership. Here you can amortize the acquisition cost over the long term receipt of revenue (Lifetime Value). This also gives you a base market from which you extend the product line to new products and further driving revenue (how many NCIS' are there now, 3?).
Second, make sure you consider your staff's time in developing and maintaining the product. Needless to say, if your staff's time is taken up servicing a $19.95 product sale and they can't service the $250 product sale, you're loosing money.
Finally, can you identify your market? Not just outline who you think they, but actually get lists of them or clearly identify where they congregate (conference, webinare, seminar, list serve, websites, etc.). This will impact the cost of your product and, of course, your sale-price.
I would like to thank my dear friend and mentor, Tony Rossell, who provided me much of the material presented here.
Thanks Erik. I am glad you were able to put the material to use in facilitating the new product development session. Adding new product lines can be an important way to grow revenue for a membership organization. It is what I call a “share of wallet” strategy. I think more groups would benefit from having you facilitate this type of discussion.
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