Product development
1. Generate ideas
2. Select the best ideas for further research: Need to decide which
ideas to abandon and which to research further. Some products may
be too expensive to manufacture; other products would probably
not sell well.
3. Decide if the company will be able to sell enough for the product to
be a success: The Marketing department now looks in detail at the
remaining ideas. It assesses how large it thinks the sales would be
and the likely size of the market share. A break-even analysis (see
Chapter 19) is carried out to see how many sales would be needed
to cover costs. Development costs should also be included.
4. Develop a prototype: A prototype allows the Operations department
to see how a product could be manufactured. It also allows them to
foresee any problems with the manufacturing process. Many large
companies use computer simulations for part of this process.
5. Launch the product in one area to test the market: The product is
launched on to one small part of the market. This allows the
company to see how well the product sells without committing large
amounts of money for a national launch. If the product does not sell
well, it can be altered or scrapped without too much harm to the
company.
6. Go to a full launch of the product to the whole market: The product
is launched on to the main market. This will probably be the national
market to begin with. Later it could be exported.
The costs and benefits of developing new products
There are various benefits for the business when developing new
products. These are as follows:
» Unique Selling Point (USP) will mean the business will be first into the
market with the new product.
» Diversification for the business, giving it a broader range of products to
sell.
» It allows the business to expand into new markets.
» It may allow the business to expand into existing markets.
However, there are also costs for the business when developing new
products.
These are as follows:
» The costs of carrying out market research and analysing the findings.
» The costs of producing trial products, including the costs of wasted
materials.
» The lack of sales if the target market is wrong.
» The loss of company image if the new product fails to meet customer
needs.
The importance of brand image
Selling a product directly to the customer makes it easy to inform the
customer of the product's qualities and good points. The salesperson can
persuade the customer to buy the product. If a small business produced
handmade jewellery and sold it on a street stall, the business owner could
explain to customers how the jewellery was made and why it was a good
product to buy.
Today, the manufacturers of most products do not sell directly to the
customer - products are sold to other businesses or retailers, who sell
them on to the customer. This means that the product's unique features
and the reasons for buying it must be conveyed in a different way. This is
done by creating a brand for the product. It will have a unique name, a
brand name. Advertising and other promotions will constantly refer to this
brand name and will make consumers aware of the qualities of the
product to try to persuade them to buy it. Branded products are normally
sold as being of higher quality than unbranded products. It is the
assurance of a standard quality that makes consumers confident in buying
branded products.
Businesses use brands for their products to encourage consumers to keep
buying their products and not those of their competitors. Consumers may
have brand loyalty, which means they will keep buying the same brand of
a product instead of trying other similar products.
Brand image is important. The brand is more than just an assurance of
quality.
By careful use of promotion and public relations, a business will try to
create a complete image for the product based around the brand name.
Coca-Cola, for example, is sold throughout the world and has an image of
being a superior quality cola drink which tastes better than its rivals'
drinks. Advertising shows people having fun when they drink it and
emphasises that it is a fashionable drink for young people.
The role of packaging
Getting the packaging right is just as important as getting the other parts
of the marketing mix right. The packaging has two functions to perform.
It has to be suitable for the product to be put in. Packaging has to give
protection to the product and not allow it to spoil. It also has to allow the
product to be used easily. It is no good having hair shampoo in a tin which
will not allow the liquid to pour out easily. It has to be suitable for
transporting the product from the factory to the shops, so preferably the
packaging should not be too delicate, or the product could easily get
damaged.
Packaging is also used for promoting the product. It has to appeal to the
consumer; therefore, the colour and shape of the container is very
important. It is the packaging that catches the customer's eye, not usually
the product inside!
The brand image will be reinforced by the packaging in which the product
is sold.
An expensive product will have a luxurious-looking container, often a gold
colour.
A low-cost product may have basic simple packaging with plain colours.
The labels on some products must, as a legal requirement, carry vital
information about the product. For example, most labels on food products
sold in supermarkets must explain how to store it and for how long, and
what ingredients it contains.
