Developing New Products

By its nature marketing requires new ideas. Unlike some organizational functions, where basic processes follow a fairly consistent routine (e.g., accounting), successful marketers are constantly making adjustments to their marketing efforts. New ideas are essential for responding to changing demand by the target market and by pressure exerted by competitors. These changes are manifested in decisions in all marketing areas including the development of new products.

In addition to being responsive to changing customer tastes and competitive forces, there are many other reasons why new product development is vital. These include:

• Many new products earn higher profits than older products. This is often the case for products considered innovative or unique which, for a period of time, may enjoy success and initially face little or no competition.
• New products can help reposition the company in customer’s minds. For instance, a company that traditionally sold low priced products with few features may shift customers’ perceptions about the company by introducing products with more features and slightly higher pricing.
• Fierce global competition and technological developments make it much easier for competitors to learn about products and replicate them. To stay ahead of competitors marketers must innovate and often create and introduce new products on a consistent schedule.
• Companies with limited depth in a product line may miss out on more sales unless they can add new products to fill out the line.
• Some firms market seasonal products that garner their highest sales during a certain time of the year or sell cyclical products whose sales fluctuate depending on economic or market factors. Expanding the firm’s product mix into new areas may help offset these fluctuations. For manufacturing firms an additional benefit is realized as new products utilize existing production capacity that is under-used when seasonal or cyclical products are not being produced.
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  Categories of New Products

  New products can fall into one of several categories. These categories are defined by the type of market the product is entering (i.e., newly created, existing but not previously targeted, existing and targeted ) and the level of product innovation (i.e., radically new, new, upgrade).
  

  • Creates New Market with Radically New Product or Product Line – This category is represented by new breakthrough products that are so revolutionary they create an entirely new market. Recent examples include digital music players, such as Apple’s iPod, that have spawned new delivery methods (downloadable music) and new media (podcasting). Highly innovative products are rare so very few new products fall into this category.
  • Enters Existing But Not Previously Targeted Market with New-Product or Product Line – In this category a marketer introduces a new product item or product line to an existing market which they did not previously target. Often these products are similar to competitors’ products already available in the market but with some level of difference (e.g., different features, lower price, etc.). Microsoft’s entry into the video gaming system market with their Xbox is an example.
  • Stays in Existing and Previously Targeted Market by Enhancing Existing Product or Product Line – Under this development category the marketer attempts to improve its current position in the market by either improving or upgrading existing products or by extending a product line by adding new products. This type of new product is seen in our earlier example of Procter and Gamble’s Tide product line which contains many product variations of the basic Tide product.

  New Product Development Process

  Because introducing new products on a consistent basis is important to the future success of many organizations, marketers in charge of product decisions often follow set procedures for bringing products to market. In the scientific area that may mean the establishment of ongoing laboratory research programs for discovering new products (e.g., medicines) while less scientific companies may pull together resources for product development on a less structured timetable.
  

  In this section we present a 7-step process comprising the key elements of new product development. While some companies may not follow a deliberate step-by-step approach, the steps are useful in showing the information input and decision making that must be done in order to successfully develop new products. The process also shows the importance market research plays in developing products.
  

  We should note that while the 7-step process works for most industries, it is less effective in developing radically new products. The main reason lies in the inability of the target market to provide sufficient feedback on advanced product concepts since they often find it difficult to understand radically different ideas. So while many of these steps are used to research breakthrough ideas, the marketer should exercise caution when interpreting the results.