Product
In simple words, the term,
“Product” means an article which satisfies our wants. It is defined as a set of
attributes, tangible, intangible & physical assembled in an identified
manner.
Philip Kotler, defines the
term product as “anything that can be offered to the market for consumption
that might satisfy a need”.
Features of a Product
- It has many utilities
- It can either be tangible. Ex: soap, or intangible Ex: Insurance policy.
- It is a combination, package, brand, etc
- It is purchased because of its satisfying power.
New Product Development:
Introducing a new product is
a difficult task, there is no guarantee that the new product developed is
accepted in the market; hence, the risk if high. It is better to adopt a
scientific approach for the development of new products. The following are the
different stages of a new product development:
1) Idea Generation - New product
development starts with an idea. The idea may come from any source. Ex:
Competitors, Newspapers, Government, Research & Development, Department,
etc.
2) Screening Analysis - Here the
company evaluates all ideas. The intention here is to avoid unnecessary
expenses by stopping further processing of unwanted ideas, which do not suit
the company’s requirements. An idea is evaluated with reference to various
factors such as consumer needs, investments, profitability, technology, etc.
3) Concept Testing - In the stage
the concept of the new is tested. The company evaluates whether the concepts would
suit the company requirements.
4) Business Analysis - Here a
detail financial analysis is done. It is carried out to find out the financial
marketing competitive & manufacturing viability usually, they analysis is
done by the experts. The task of the management is this step is to identify the
product features, estimate the market demand & the products profitability. Those
ideas, which promise more profits with minimum payback are selected.
5) Product Development - In this
stage, product on paper is converted into a physical product. This is done by
the engineering department or by the research & development department.
Proper care must be taken while developing the product, so that the new product
does not become a waste. For this purpose, research reports, company’s budget,
product features, etc have to be studied carefully. Undue haste in developing a
new product results in the premature death. On the other hand, if the time
taken is to long, the company may lose the opportunity to the competitors.
6) Test Making - After developing
the product, the next stage is to test its commercial viability. This process
is known as test making.
Test marketing is defined as
“developing a temporary Marketing Mix & introducing the new product to a
market called, the sample market to verify & analyze the market reaction
for the new product”. This is one of the most important steps because for the
first time, the information on the new product acceptance by the market is
collected.
While, test marketing, the
company changes the Marketing Mix namely, Product, Price, Promotion &
Physical Distribution depending upon the test marketing results. If it is accepted,
it chooses the best marketing mix for the product, otherwise the project is
rejected.
Advantages of Test Marketing
- It helps to understand the market reaction to the new product.
- Customers perception on the marketing mix is understood.
- It avoids costly error of manufacturing, unwanted products. It reduces, the uncertainties relating to the new product.
- It helps in developing suitable marketing mix
- It helps in developing proper marketing strategies.
- Test marketing also highlights the weakness of the new product, which can be rectified before launching on a large scale.
- Test marketing gives better coordination between the company, intermediaries & the customers.
- It also helps to understand the intermediaries view on the new product.
- It brings down the overall cost of new product development by eliminating wastage.
- It should be remembered that the market chosen for test marketing must be proper in the sense that is should represent the entire country so that biased results are not considered.
7) Commercialization - When once
is successful in test marketing, i.e., when the market accepts the new product,
it is launched in other markets on a large scale in a wider market is known as
commercialization. It is from this stage that a new product is really born from
the customer’s point of view.
Product Life Cycle
Product also has various
stages of life as human beings. From the time a product is introduced, till it
is withdrawn from the market, it goes through 5 stages. Analysis of these
stages for the purpose of re-positioning the product in the market is called
Product Life Cycle management. The following are the stages in a product life
cycle.
- Introduction Stage
- The Growth Stage
- The Maturity Stage
- The Saturation Stage
- The Decline Stage
Life Cycle Stages are :-
1) Introduction Stages - In this
stage, a new product is introduced on a large scale for the first time. Market
reacts slowly to the introduction. In other words, consumers take time to
accept the new product. Initially, the company may suffer losses, sales
improves gradually. Most of the products fail in this stage itself.
Following are the
characteristics of this stage:
- Consumers do not have the knowledge of the product
- Consumers may or may not be strongly in need of the new product.
- If there is a need for the product, the company gets readymade demand. Otherwise, it increases slowly.
- Sales are minimum
- The competition is less, in fact the company, which introduces new product is called as a Market Pioneer.
- The cost of it is very high because the company spends money heavily on Research & Development, Sales, Promotion, etc.
Marketing Strategies during
the Introduction Stage - A company has to prepare the policies very carefully in
the stages because it has a great impact on the image of a new product. Even a
minor mistake results in the premature death of a product.
The following are the
strategies that the company may adopt in this stage -
It may spend heavily on
promotion & fix high price. This meets two objectives.
- Firstly, heavy promotion creates large demand & high price, brings immediate profits. This strategy also helps to create brand preference in the minds of the consumer. It is normally followed when there is a great need for the product, when the product belongs to the richer class & when products are consumer specialties.
- This second strategy is to fix high price but to spend less on promotion. This is preferred when the product has limited market, in which people have knowledge about the product & the competition is completely absent.
- Another strategy is to charge low price & spend heavily on promotion. This is preferable when consumers are sensitive to the price & market is wide enough. This strategy brings good returns in the long run.
- The company may charge low price & spends less on promotion. This is preferable when the consumers are informed about the product, market is very large & there is no competition for the time being.
In the introduction stage,
the competitors are very cautious. They do not enter the market immediately.
They study the strategies of a company & watch the reaction of the
consumers. This helps them to find out the defects of the company’s strategy.
2) Growth Stage - It is called
the market acceptance stage. Following are its features:
- Consumers & traders accept the product
- Sales & profit increase
- More competitions enter the market
- The focus of competition is on the brand rather than the product
- Competitors may introduce new features to the product
- Distribution network increase
- The price will be reduced marginally.
Marketing Strategies in the
Growth Stage:
- The company tries to impress upon the consumers that its brand is superior
- It may introduce new models or improve the quality
- It may enter new market & sell its products with new distribution channels
- To attract more buyers, it may reduce the price.
3) Maturity Stage - This stage
indicates the capacity to face the competition, sales increases at a decreasing
rate. Competition becomes severe. It is reflected in various ways such as
offering discounts, modifying products etc.
Marketing Strategies during
Maturity Period/Stage - In this stage, the manufactures have to take
responsibility to promote his product. This strategy aims at creating brand
loyalty.
4) Saturation Stage - This is the
stage when the sales reach the peak point. Competition intensifies further
& profit begins to decline. Small competitors may withdraw from the market
because of their incapability to face the competition.
Marketing Strategies - This is
the stage where the marketing manager must try to re-position his product. Most
of the strategies in this stage are offensive in nature. Each manufacture tries
to cut down his competitor’s market share by aggressive promotion policy. The
objective of marketing in this stage is to retain the present sales level.
5) Decline Stage - For all
products, sales invariably declines as new products enter the market. In this
stage, there is a sharp decline in the profits, cost increases & market
share comes down. Most of the manufactures withdraw from the market. Some may
reduce production & concentrate only on a limited market
Marketing Strategies - This
stage offers one of the greatest challenge to the marketing manager. He has to
decide whether or not to continue with the product. The main task of marketing
manager is to revitalize the demand instead of discontinuing the product
immediately. It is better to withdraw gradually. Those channels of
distribution, which are costly & unproductive maybe removed. In the
meantime, the weak points of the marketing mix maybe identified & altered
as required.
Reasons for the Failure of New Product:
- Poor marketing research
- Not using the up-to-date technology
- High price or to costly products
- Poor design
- Inefficient marketing
- Non-cooperation from the middlemen
- Improper promotional techniques
- Improper timing of introduction of the new product.