The new product planning manager must now develop a marketing strategy plan for introducing this product into the market. This is a design that is based on the product concept. It covers description of the size, structure and behaviour of the target market, the intended positioning of the new product in this market and the sales, market share and profit goals being sought in the first few years.
This strategy is aimed at identifying the elements such as the target market pricing, product portfolio, channel of distribution, choice of channel members etc. The marketing strategy will undergo further refinement in subsequent stages.
Product Testing and Test Marketing
Hughes (1996) defined testing marketing as one which helps the firm to obtain marketing support of people to its new product by eliciting detail of consumer reaction to the product sample. When the firm has been satisfied with the product’s functional performance, the product is moved into testing marketing. It is the stage where the product and marketing program are introduced into more consumer settings to learn how well the product will do before it is launched.
At this stage, the product is put into full production. The organization starts by fashioning out effective promotional strategy required to create awareness for new product or service. It is essential that a company considering the introduction of a new product should test the “product concept”. Product concept can be defined as the marketer’s perception of a product that will satisfy specific consumer need.
The marketing research group evaluates the product. Testing stage is the information gathering stage. The marketing research group involved in different marketing research asks questions such as “How many consumers, client, or businesses are likely to purchase the product?”. “How do we reach our buyers?”, and “what is their buying behaviour?’ Not only does test marketing help in making sales forecasts, it can also be used to identify flaws in products or promotional plans.
Poolton and Barclay state that test marketing strategy enables a company to test the waters” of the market before launching the product. As a result of test marketing, the marketer will determine whether to go ahead with a full product launch, which target markets to emphasize and the relevant marketing mix elements to use, among other considerations.
The marketers try to measure the reactions/attitudes of the consumers (target market) toward the real new product. This will indicate how the product will be accepted by the overall market. It depends on the technical aspects of the product whether it is doing what it is supposed to do.
Commercialisation
The firm has enough information to make a final decision as to whether to launch the product or not. This is where the product (business) is fully commercialized for profit making i.e. when it has been introduced to yield profit. At this stage the product is put into full production. The organization starts by fashioning out effective promotional strategy required to m create awareness for new product.
Distribution network for the new product is decided so that the product will be available to the desired target market. The product is finally positioned in the various markets. This makes it to start its life in the market. The birth of this new product is celebrated by promotional campaign to create its awareness and enjoy rapid patronage.
All other marketing strategies are applied to make the product have a good share of the market. Finally, efforts should be made to protect the whole process from being stolen by smart competitors.
List the stages of new Product Development
- Idea generation
- Idea screening
- Concept development and testing
- Business analysis
- Product development
- Marketing strategy development
- Product testing
- Test marketing and commercialisation.
Why new Products Fail
As a warning, it is not every new product that succeeds as investigations have revealed that the rate of product failure in the market is high. A lot of reasons could be m adduced for product failure:
Inadequate Market Analysis
This includes over estimation of potential sales of the new product, inability to determine buying motives and habits and misjudgment of what product the market wanted.
Product Deficiencies
Poor quality or poor performance, especially when the product does not offer any significant advantage over competitive products that are already in the market. Technical problem may occur in the new product’s design or in its production or the product is too complicated for consumers to use.
Lack of Effective Marketing Effort
Failure to provide sufficient follow up after the introductory stage and also failure to train marketing personnel for new products and new markets.
Competitive Strength and Reaction
Speed and ease of copying an innovation soon dominate the market. Keen competition can lead to market fragmentation.
Higher Cost of Production
Higher cost than anticipated leading to higher price which in turn leads to low sales volume than anticipated.
Poor Timing of Introduction
Delays in bringing the product to the market, or conversely, rushing the product too quickly to the market at the time consumers do not need the product or when they have just purchased competing products.
Technical or Production Problem
This might prevent sufficient production (quantities) to meet demand, hence a more efficient competitor may seize the advantage.
Inadequate Competitive Analysis
New product fails because firms often appear to make blunders in m estimating competitive reactions.
Capital Shortage
Some companies with good ideas cannot raise the funds needed to research them.
Social and Governmental Constraints
Existence of social and governmental constraints where new products have to satisfy public criteria such as consumer safety and ecological compatibility.
Fragmented Market
When a new product is successful, rivals are so quick to copy it, the effect is that the new product life cycle is considerably shortened. Where the markets are fragmented due to keen competition, companies distribute their new products to smaller market segments rather than the mass market and this means lower sales and profit for each product.
Absence of Good Marketing Management
According to Busari, Olannye, and Taiwo, other causes of new product failure include absence of good management and attitudes that encourage innovation, resistance to new idea, non-recognition of potential, shortage of resources, lack of market and poor or inadequate technology. In addition, lack of a well defined new product strategy, lack of strong, long-term commitment by top management to new product development can result in failure.
Capital-intensive Production
The new production requires a high sales turnover and repeat purchase for the product to recover its investment and to achieve profitable returns. If this requirement is not met, the product faces a severe problem.
Packaging
Sidney posits that the key reasons for the failure of new products is the inability of the m marketer of that product to come out with good packaging decisions. Evidently no consumer will walk into a store and ask or demand for a product that is wrongly packaged as this will make him get more skeptical about quality of the contents of the package.
The Product Life-cycle
Butler states that in any market, new products are constantly being introduced, older ones become obsolete and recently introduced products establish a firm share of the market for themselves. This process of the product life-cycle has four phases: Introduction, growth, maturity and decline.
Orenuga states that the life-cycle of a product refers to its sales history over its life span. Every product has a certain length of life during which it passes through certain identifiable stages. This shows that each stage present the marketers with certain opportunities or problems. Marketers use the product life cycle as an important tool for planning and analysis of the marketing programmes for their products. It also indicates the trends in sales and profitability of products. There are four main stages of product life-cycle (PLC) which are introduction, growth, maturity and decline.
Introduction Stage
This stage begins with the emergence of the product in the market. The product is newly launched or just fully commercialized. This stage is usually over burdened with high production cost as well as marketing cost. Because the product is new in the market, there is the need to inform potential buyers of its existence, uses, benefits and relative advantage. Therefore, this stage is usually accompanied by heavy promotional activities. In launching a new product, management can set a high or a low level for each marketing variable such as price, promotion, contribution and product quality. Three strategies are available to management:
A High Profile Strategy
This consists launching the new product with a high price and high promotional level. The firm charges a high price in order to recover as much gross profit per unit as possible and at the same time spends a lot on promotion to convince the market of the product’s merit even at the high price level.
A Pre-emptive Penetration Strategy
This consists launching the new product with high price and heavy promotion. It promises to bring about the faster rate of market penetration and the largest market share for the company.
A Low Profile Strategy
This consists of launching the new product with a low price and low level of promotion. The low price will encourage the market’s rapid acceptance of the products
Growth stage
This stage indicates the acceptance of the product in the market. The first symptom of the appearance of the growth stages is therefore a rapid increase in sales volume. Because of the improvement in sales volume, some of the cost-will now be absorbed and so there will be the emergence of profit. The profit stage will equally witness the moving up on the curve of the product in terms of sales and profit. It is equally marked by the appearance of competitive firms who will quickly come up with identical products. There is an increase in the number of distribution outlets to take care of increase in demand while demand creation activities will now center on “buy-my-brand”. The firm tries to sustain rapid market growth as long as possible. This is accomplished through:
i. Improving product quality and adding new product features and model
ii. Searchin’ out for new market segments to enter.
iii. Keeping eyes open to new distribution channel to gain additional product exposure.
iv. Deciding when the time is right to lower prices to attract the next layer of price-sensitive buyers into the market.
The firm in the growth stage thus faces a tide between high market share and high current profit by spending a lot of money on product improvement, promotion and distribution. It foregoes maximum current profit in the hope of making up for this in the next stage.
Maturity stage
The emergence of this stage is usually accompanied by increased and decreased sales and profit. The sales and profit figures will increase but if the growth rate is compared it will be discovered that it is decreasing. By this stage, a large number of competitors have entered the market and profits decline as competition intensifies.
In this stage, differences among competing products have diminished as competitors have discovered product and promotional characteristics most desired by the market. Heavy promotional characteristics outlay emphasizes subtle differences among competing products and brand competition intensifies.
The maturity stage can be divided into three phases. The first phase is called growth maturity. Here, the total sales continue to grow slowly. The second phase is stable maturity or saturation. Here, sales maintain a constant level and the third phase is decaying maturity. Here, the level of sales now starts to decline. Three basic strategies are very important in this phase and they are:
Market Modification
This is the process of finding new buyers for the named product. Some of the possibilities are:
The manager looks for new markets and market segments that have not yet tried the product.
The manager may consider repositioning the product or brand.
Product Modification
The managers do initiate talented changes in the product characteristics that will attract new users or more usage for current users. The methods that can be used here are a strategy of quality improvements which aims at increasing the functional performance of the production such as durability, reliability, speed and taste. Another strategy is feature improvement which aims at adding new features that expand the products’ versatility, safety or convenience.
Marketing Mix Modification
This aims at stimulating sales through the alteration of the elements of marketing mix. All the avenues may be used to modify the marketing mix to increase sales.
Decline Stage
In the final stage of the product’s life, new innovations or shifting consumer preference bring about an absolute decline and total industry sales. A continuous decrease in sales and profit are the two major symptoms of the appearance of this stage in product life-cycle.
Since the product is making a very minimal or no contribution to profit, weak competing firms will be left in the market. The rapid decrease in sales will push up cost, thereby eliminating profit either entirely or to very low level. Some distribution outlets will be phased out to reduce cost while minimal expenditure will be directed towards advertisement. However, the following efforts can be directed at salvaging a declining product (1) finding new use (s) for the product, (ii) finding another market for the product and (iii) embarking on production development
Summary
1. You have learnt in this module that new product development is collection and transformation of data on marketing opportunities into useful products.
2. Sources of the new product come from chance discovery, identification of unmet needs and extensive research.
3. Stages for new product development includes new product ideas generation, ideas screening, concept development and testing, business analysis, product development development of marketing strategy, product testing and test marketing, and finally commercialization.
4. Product life cycle was discussed and four different stages identified and discussed in relation to marketing programmes that fit into each stage
5. New product fails for many reasons among which are competition, poor quality, government constraints, poor timing, inadequate market analysis before placement of new product into the market.