Reasons for Developing a New Product:

A new product, may be called innovation, seems to be necessary due to an enormous

number of factors. The dynamic nature of business environment offers only two options
– be innovative, or die. Marketer has to search for superior ways to meet increasing
expectations.
Those companies fail to respect or respond the need of time have to withdraw from the
market. Innovation or new product development directly concerns with firm’s survival,
growth, and development. A marketer continuously tries to offer superior product to his
consumers.
He desires to offer more satisfaction than competitors. He also attempts to match goods
and services with changing needs and wants of the target market. As per change in the
fashion, preference, habits, and attitudes of consumers, a company must change its
offer/product. New products are primarily developed to meet market expectations.
However, there are some other dominants factors forcing a marketer to go for
developing new products.
Main factors or reasons for developing a new product have been described as
follows:
1. Changes in Market:
Today’s market is much dynamic as compared to the past. Due to increased education,
borderless marketing, severe competition, and availability of a number of substitutes
have posed tremendous challenges for today’s marketers. Market fashion, preference,
and habits are constantly changing and marketer finds no option except to respect such
market changes, by positive response in terms of innovation. Thus, consumer behaviour
is one of the dominant reasons for innovation.
2. Changes in Technology:
Due to continuous technological development, new production methods are invented.
Old technology and production methods are replaced by newer ones. A company
spends a large amount of money for technological research. To match the technological
changes, new products are developed.
3. Increasing Competition:
Increasing competition is one of significant reasons leading to go for innovation. Every
company struggles to attract and maintain consumers by offering superior products. To
offer more competitive advantages and to satisfy consumer more effectively and
efficiently, the product innovation seems to be necessary.
4. Diversification of Risk:
In many cases, a company develops new products just to diversify risk. Existing products
may not be capable to match with market needs and wants. By offering more varieties, a
company can minimize the degree of obsolescence. Thus, the need for continuous
innovation arises because older products are thrown out of market.
5. Reputation and Goodwill:
To create image and reputation as an innovative and dynamic firm, the innovation is
adopted. Company wishes to convince the market that it tries seriously to meet
consumer’s expectations. Obviously, a company developing new products periodically
has more reputation, and can attract consumers easily.
6. Utilization of Excess Capacity:
Excess capacity may be in form of production capacity or human skills. To utilize
maximum plant and material capacity, a company may go for developing a new product.
Sometimes, excess managerial or human capacity may also tempt the company to opt
for innovation.
7. Seasonal Fluctuations:
Sometimes, new products are developed just to minimize seasonal fluctuations in
demand. By producing new product, a company can meet seasonal requirements of
market. Market is satisfied due to matching products in each of the seasons, and
company can get attractive business.
8. Growth and Development:
Innovation is an effective way to win more market share or sales. Marketer can exploit
emerging opportunities by innovative products. When it is not possible to accelerate
growth rate by the existing products, a company prefers to develop new products to
expand its market, maximize sales, and earn more profits.