New Product Launch Strategy: 3 Ways to Ensure Success

If your small to midsize business is ready to grow, you may be considering new product development. When done well, new products are valuable opportunities to address real customer needs and demands. They can also help you differentiate your business from competitors, diversify your customer base and achieve significant growth. 

However, there’s a reason that up to 95% of product launches fail. Without a valid market need for a new product, it’s unlikely to give your business a return on investment and enable growth. Unforeseen supply chain and manufacturing issues can also affect a successful launch, while insufficient funding can sink a business before a new product has a chance to gain traction.

Whether you are new to product development, have acquired a business or are expanding an existing product line, here’s how to approach a new product launch strategy.

1. Research the marketplace

Lack of product-market fit is one of the top reasons that new products flop, so it’s critical to research the market thoroughly before investing in product development. This can be performed either internally or through a third-party market research company. Regardless of your approach, a comprehensive analysis involves both primary research (insights that you or a third party investigate) and secondary research (insights that are already publicly available).

Government industry statistics, commercial agency research, and internal sales and marketing insights can offer valuable objective data on your target market. Businesses also use interviews, focus groups, surveys and product testing to gather more nuanced qualitative market fit information. 

While researching market needs with existing customers is useful, it’s also important to engage with prospective customers and internal stakeholders — such as executives, sales teams and product developers. This expands your research sample and offers a more accurate depiction of customer pain points, market needs and potential risks. As a baseline, you should come away from this process with a good understanding of:

• Similar products on the market. Google image and patent searches can help you quickly identify existing products and determine how unique your idea is. Does your new product have benefits that existing offerings lack? What is trending? What are the existing pricing models? And what are customers saying in reviews?
• Your target buyers. Who will buy your new product? Establish buyer personas that describe buyer demographics, goals, how the buyers make purchasing decisions, pain points and other relevant information. It’s also helpful to create a list of specific target buyers you can pitch to.
• Market gaps. Your target market may express pain points that aren’t addressed by current offerings. Understanding these gaps is crucial for ensuring a good market fit and developing a unique product.
• Industry-specific factors. Investigate whether your product idea entails risk factors such as material shortages, supply chain disruptions or short product development cycles. 

2. Explore financing options for your product launch strategy

Even a unique product with significant market demand can’t succeed without sufficient funds. Developing and launching a new product takes a significant amount of time, energy and resources. For most small to midsize businesses, launching new products requires some form of financing.

When exploring financing options, the first step is to estimate product launch costs. This typically covers research and development, intellectual property protection, materials, manufacturing, production, testing, pitching, marketing and sales. For many businesses, these efforts necessitate additional staff and may take months or years before a product hits the market.

Next, estimate sales projections for years one, three and five. Include a best-case, worst-case and midrange sales scenario, factoring in risks such as material shortages, changes in market demand or an economic downturn. Once you’ve forecasted costs and returns, you can calculate the projected net profit, again in years one, three and five. If you anticipate lengthy payment cycles, account for additional funding needed to operate before your first round of payments clears accounts receivable.

This will give you a sense of how long it will take to break even on the product, when you’re likely to start seeing returns and how much working capital you’ll need to support the launch while maintaining your existing business.

Traditional business loans are often the first options that businesses consider for financing. However, there are several alternatives if you need additional funds or can’t meet traditional loan requirements:

• Business line of credit. A business line of credit is a form of revolving credit that functions similarly to a credit card. Lines of credit are useful for protecting your business against cash flow issues, helping cover everyday expenses as a complement to a loan.
• Asset-based loans. If your business doesn’t have the credit history or financial standing to qualify for traditional loans, asset-based loans can be more accessible. These loans use your assets as collateral, making them less risky for lenders.
• Peer-to-peer (P2P) lending. P2P lending offers business funding through a lending network rather than a traditional banking institution. These solutions typically have more flexible requirements than those offered by banks and can even have more affordable interest rates.
• Investment. If you don’t mind distributing the ownership of your business, one option is to seek investors to fund a new product idea. 
• Early payment programs. If you already sell products, consider leveraging an early payment program to boost cash flow for new product development. These programs enable you to engage with your existing buyers, offering them small discounts in exchange for early invoice payments. 

3. Engage with buyers

Do your current buyers make up your new product’s target market? Even if you already work with a potential buyer, pitching a new product can be just as challenging as engaging with brand-new customers. 

It’s a good practice to identify key buyers and communicate regularly with them. Are they satisfied with your products? Are there unmet customer needs they are trying to address? Over time, these conversations can build trust, generate new product ideas and lead to collaborative new product development. If you’ve established strong buyer relationships, developing buyer-specific products is often less risky than pitching products to new buyers.

Whether you are targeting new buyers or engaging with existing ones, you can increase your chances of success by:

• Investigating buyers’ contract and supply chain processes. What payment terms or other stipulations does the buyer follow with its suppliers? Before pitching to potential buyers, make sure there are no red flags that could roadblock product development or deplete your cash flow down the road.
• Looking at buyers’ track records with suppliers. Buyers that have a history of investing in small to midsize suppliers and innovative solutions are more likely to show interest in your product ideas. If you qualify as a diverse business or have a sustainability-minded product, consider pitching to buyers that prioritize environmental, social and governance (ESG) initiatives.
• Prioritizing buyers that use supplier payment programs. Many large enterprises now use early payment programs such as C2FO’s Early Pay. These programs allow suppliers to request early invoice payments in exchange for a discount, increasing supplier cash flow. The faster you get paid for new product sales, the sooner you’ll see a return on your investment.

Product launch strategy: The bottom line

At its core, a successful product launch strategy relies on two things: product-market fit and adequate funds. Before investing any money in new product development, do your due diligence. Research the market and validate that there is a real need for your idea. Be realistic about the costs associated with the product launch, and stay open to both traditional and alternative financing solutions for the venture.

When it comes to making sales, consider the needs of your existing buyers and prioritize businesses that are more likely to invest in small to midsize supplier relationships. This will not only boost sales and enable growth but also strengthen your buyer relationships in the long term.

Learn more about how early payment programs can help fund business growth and support your product launch.

This article originally published September 2017. and was updated August 2023.