When a company decides to introduce to the marketplace a range of ‘private label’ products (designed, engineered and manufactured to be sold and branded by another company), it may seek to reduce the early phases of the new product development (NPD) process. For some activities more than others, this might be possible, as we’ll demonstrate with reference to the typical NPD process phases of Discovery, Scoping and Business Case.
The Discovery phase requires an abundance of good quality ideas. Whether they come from internal or external sources is of little importance, but the ideas must align with your business and product strategies. Ideas must also be based on strategically-driven criteria, including–but not limited to–project feasibility, market attractiveness, and the magnitude of the opportunity. The difference during the Discovery Phase, is that you’re not limited by your own technical capabilities, opening new doors and potentially increasing the number and types of ideas for consideration.
Key scoping activities include preliminary technical and market assessments. The preliminary market assessment attempts to answer questions relating to unmet customer needs and estimates of market size and growth rate. With a private label, you still need to determine if the product meets your customer needs, and whether or not there is a market for that product.
Preliminary technical assessment activities may be handled differently. The team needs to determine if they’re confident with the technical approach of the private label product. This is where the workload lessens – the team doesn’t need to address the ability of internal technical resources and suppliers to support product engineering or manufacturability. It is probably a good idea to test out the private label product to make sure it delivers on its promises and adequately supports your brand image and reputation. It’s also worth asking if the manufacturer has sufficient capacity to provide you with the volume you will need today and in the future.
Business Case Phase
Some of the major activities during the Business Case phase include concept testing, and further market and financial analysis. Concept testing remains necessary, to determine if the customer is interested in what the private label product has to offer. In some cases, the private label manufacturer may change features and functionality based on customer input. During concept testing you will also gain a better understanding of customer acceptance and market size, which will assist you in further developing your market study and financial case.
For a private label product you also still need to consider product positioning, distribution channels, pricing, projected volumes, and supply chain solutions. You won’t need to concern yourself with developing detailed technical specifications, vendor selection and management, or manufacturing. However, you will need to adequately assess how the product’s technical specifications translate into performance, and how the capabilities and capacities of the manufacturing group measure up.
What this amounts to is a change in emphasis, from the ability to design, engineer and manufacture, to the ability to effectively monitor the progress of these activities by a third party. In terms of engineering and manufacturing issues, the workload is clearly lighter, but the private label new product development process is far from resource- free. It still takes time for the team to investigate the worthiness of the product. You cannot skip the important early-phase NPD activities, which are essential for assessing the future likely success of the product in the market place. And don’t forget the enormous cost of product launching – a private label product still has the same probability of being a dud as a product that has been developed internally. The message is clear. For private label products, doing all the upfront work will pay off.