What Is Research and Development and Why Is It Important?

By Indeed Editorial Team

Published 23 October 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Research and development (R&D) typically help businesses improve, upgrade and innovate new products or services. Proper R&D strategies help the company achieve higher customer satisfaction, boost sales revenue and increase its competitive edge against industry competitors. If you're looking to explore these strategies, it's important to understand the various methodologies, identify suitable methods for a company's situation and learn how an R&D process works. In this article, we define research and development, highlight its importance, share various methods and outline a typical R&D process.

What is research and development?

Research and development (R&D) refers to the process of a company studying their target audiences' preferences, gathering new knowledge, identifying suitable products or services or improving on existing ones to sell to their customers. This is usually the first step in a company's product development process. Smaller companies may ask employees to execute small-scale R&D duties, whereas larger companies may set up their own R&D development to lead bigger R&D projects or outsource to R&D companies instead.

R&D processes can take a long time to complete. It can also be highly costly, which may require investors to fund these R&D projects. This depends on the level of difficulty and type of industry. For example, complex projects like inventing new medicine or transportation tools can take years to fine-tune and troubleshoot every aspect to ensure consumer safety when using the product.

Importance of R&D

Here are reasons R&D is important for businesses:

Develop new products or services

Businesses typically use this strategy during the review phase to help them with existing product offerings and improve or develop new ones. Successful research involves studying the target market's buying behaviour, understanding current industry trends and adapting them to existing or new product lines. This helps them to continue meeting customer demands, attain customer satisfaction and achieve more sales with better products.

Related: What Does a Product Developer Do? (Definitions and Examples)

Improve marketing tactics

R&D helps companies refine their marketing department's strategies and makes it a more targeted approach through their research findings. That can help them understand the consumer market more specifically and cater marketing activities or content to consumers' preferences. This allows you to reach your marketing goals more effectively, such as store membership sign-ups or website click-through rates.

For example, through R&D efforts, you notice that your target audience prefers pastel colours rather than bolder tones. You can thus opt for pastel colours when designing your marketing collateral to attract these customers. The marketing and R&D team works closely together to guide both sides in understanding customers more successfully.

Related: What Is Market Research? Definition, Types and Examples

Increase customer loyalty

When companies conduct R&D to develop new products or services, they're more likely to correctly identify what customers require and address their concerns. It also helps the customers remember the company as they continuously come up with new and attractive offerings that customers like. These repeat purchases from customers and interest in the brand boost customer loyalty in the long term.

Gain competitive advantage

With the power of technology and social media, new trends and information can disseminate quickly. It's vital for companies to keep up with the latest industry developments. The R&D department focuses on updating the company with evolving changes and sharing research insights to improve the company's operations or products. That's one way the company can stay relevant to consumers and also attain a stronger competitive edge against industry competitors, thereby allowing the company to build a larger market share.

Boost productivity

Companies can also use R&D methods to improve existing operational procedures or software. It allows you to learn more about the current industry processes, operational tools and systems other similar businesses use. You can compare them with current business operations and make improvements by finding ways to cut costs and save time on these procedures. This helps you better delegate resources and labour to improve operational efficiency. It also improves staff productivity as their workload eases and it allows them to focus on other tasks too.

Related: Top 15 Digital Transformation Strategies for Businesses

Expand the business

Focusing on R&D efforts can help the business expand its operations or product offerings more successfully. It helps the company discover potential business opportunities to capitalise on and increase sales or market share. If there's a big innovation, it can attract more investors to invest in the business and help fund future R&D projects, too. Also, you might gain attention from overseas customers and further broaden your customer base.

3 types of research and development methods

Here are three types of R&D methods:

1. Basic research

A basic research method is the first step to building a company's knowledge of a certain subject or objective. It serves as a basis to explore further R&D projects. Usually, companies start basic research to educate themselves on a topic or understand a target market's behaviour before embarking on more specific R&D initiatives like finding new service solutions or sourcing materials for new products. After gathering enough data, they present their findings and relevant insights for management to advise them on the next step in the product development process.

2. Applied research

After gaining a strong understanding of the product, target market or industry phenomenon, companies decide on projects to plan and execute. They start conducting applied research methods to study how to apply their knowledge in the product development and design phase. Usually, there's a specific objective to achieve through applied research. This can be researching materials to use or creating new product concepts.

Related: Basic Research vs. Applied Research (Including Examples)

3. Development research

Development research is the last phase of R&D where they use the knowledge and findings from previous R&D phases to start developing new products. This can be to design new service features, create new prototypes or build new software systems. Development research helps companies refine the products or services they're developing and go through testing to determine the final product design. It also allows companies to identify potential problems that may surface during usage, which helps them rectify these problems or provide necessary warnings and risk labels before launching the product.

How to conduct an R&D process

Here's how to conduct an R&D process in six steps:

1. Brainstorm ideas

The first stage involves discussing and brainstorming new directions for the company's product lines. This includes sharing about the latest industry phenomena or developments and discussing how the company may be affected by these changes. From there, they think of possible areas of concern or opportunities to capitalise on. Then, they choose some ideas to conduct further research on and determine their feasibility.

2. Develop product prototypes

After conducting enough research, the R&D team starts conceptualising the product features and designs. This may include choosing key ingredients or materials to use or deciding on the product's primary colours. For more complex R&D projects, it may require combining different departments' efforts at this stage to either source materials or design new features.

3. Conduct testing

When there's a product prototype, the R&D team tests the product's ease of usage and practicality. Some products may require testers to try out the product for a certain amount of time. Another alternative is to conduct market surveys to gather more information from your target audience, especially their level of acceptance of the new product or service.

Related: How to Create a Prototype in 6 Steps (Plus Benefits)

4. Finalise product details

After conducting research and testing, the R&D team now has a deeper understanding of the potential problems in the product and the target audience's preferences. They can start finalising the product's main designs and features. Then, the company can start production, logistics planning and product pricing.

5. Plan promotional and marketing strategies

Marketing strategies are vital in elevating an R&D project's success. The findings and analysis the R&D team gathered earlier can assist the marketing team to devise effective promotions and campaigns that attract the target audience. This involves a strong knowledge of the target audience's purchasing habits, age group, income level or other relevant factors. A good grasp of timing can make your campaigns more impactful too, like knowing when to share marketing campaigns or launch discounts during peak seasons.

Related: 9 Marketing Campaign Examples (Types, Objectives and Tips)

6. Launch products

During the product launch stage, the R&D team monitors feedback regarding the product. They may continue revising and testing different product aspects using this information. This helps ensure that the product is constantly improving to suit customers' demands or to keep up with industry changes.

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