Tuesday, January 19, 2010

Product Development

Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to introduce the product. As the product progresses through its life cycle, changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities.

Introduction Stage

During the introduction stage, the primary goal is to establish a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage:

• Product - one or few products, relatively undifferentiated
• Price - Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly.
• Distribution - Distribution is selective and scattered as the firm commences implementation of the distribution plan.
• Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product.

Growth Stage

The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted.

During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows:

• Product - New product features and packaging options; improvement of product quality.
• Price - Maintained at a high level if demand is high, or reduced to capture additional customers.
• Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.
• Promotion - Increased advertising to build brand preference.