You would think that a “new product” would be an easy definition, but the term can mean different things. In fact, there are five different categories of new products, each one unique: new-to-the-world products, new-to-the-firm products, additions to the existing product lines, improvements and revisions to existing products, and repositioned products.
IN CONTEXT
Let’s look at these new product categories in more detail.
New-to-the-World Products: New-to-the-world products essentially are new inventions that create new markets. Some examples from products recently introduced include biomagnetic ear stickers for weight loss, cat self-groomers, and portable blenders.
New-to-the-Firm Products: These are products that are new to a company but not to the world. It’s likely that marketers have seen a gap in the market and their product line and attempted to fill that void by adding a “me-too” type of product to their product line. For example, Nature Valley originally only made granola cereal but later introduced granola bars that could be eaten “on the go.” There’s a perfect example of a company that saw a gap in the market and added a product that wasn’t new to the world, but it certainly was new to Nature Valley.
Additions to Existing Product Lines: Recall that a product line is a group of related products marketed under a single brand. Additions to existing product lines are simple product line extensions, designed to “flesh out” the product line. During its 130+ years in business, Coca-Cola has launched a number of product line extensions. The next time you’re in a supermarket, look on the shelves in the soft drink aisle. You’ll likely see a number of different flavors and styles of Coca-Cola varieties, such as Coca-Cola Cherry, Coca-Cola Cherry Vanilla, Coca-Cola Vanilla, Coca-Cola Zero, and more.
Improvements and Revisions to Existing Products: This is when existing products are improved. Think about how many times you’ve seen “new and improved” on the packaging of a product that you’ve been using for a while, like laundry detergent. As a concrete example, Meta (formerly Facebook) released its Oculus Quest 2 VR (virtual reality) headset and controllers late in 2021, which was simply an updated version of its original Oculus Quest.
Repositioned Products: These are products that are retargeted for a new use or application. For example, Bayer repositioned its aspirin from treating headaches, fever, and inflammation to also safeguard against heart attacks.
You’ve probably watched at least one episode of the popular television show Shark Tank, where budding entrepreneurs pitch their business plans to a panel of investors in return for funding. To date, over 1,000 sales pitches have been made on the show—some forgettable, others memorable—and some pitches have resulted in wildly successful businesses. Some of Shark Tank’s most successful products include the Squatty Potty (over $200 million in sales since appearing on Shark Tank), Bombas Socks (over $225 million), and Scrub Daddy (over $330 million).
With idea generation, you are working to create as many ideas as you can. The purpose of this stage is to focus on the products that are more likely to turn a profit so you can reduce the product development expense later in the process and develop profitable products. As we look at the new product development process, let’s discuss a potential product idea (a new product that a company could potentially offer to the market) and follow it through all the steps of the process. Imagine that you’re a marketer for a food processing company, and you believe there is a gap in the market for a high-protein freeze-dried yogurt powder that can be added to juice to make a nutritious, low-fat, fruit-flavored smoothie. This idea may have been generated by internal sources in a business such as research and development (R&D), market research, or employees who are not part of R&D. On the other hand, the idea may have come from external sources such as customers, suppliers, distributors, or even competitors. Marketers typically participate in a process of generating as many ideas as possible, called brainstorming.
Idea screening and evaluation is the process of filtering through the ideas brought to the table by your team, picking the ones that are most likely to turn a profit, and dropping the less favorable ones.
EXAMPLE
With our high-protein freeze-dried yogurt powder, the team would create numerous product concepts that they then sift through to reach the best idea.In the concept development and testing stage, a product idea can be turned into several product concepts—the description of a new idea or innovation. The product team will consider who will use the product (e.g., children, athletes, or adults), what benefits the product will provide (e.g., meal replacement, a snack, nutrition, or energy), and when consumers would typically consume the product (e.g., for breakfast, as a midmorning or afternoon snack, or after a workout or exercise).
EXAMPLE
Your product team may come up with the following product concepts for our yogurt powder:It’s important to develop these product concepts because each concept defines the product’s competition. For example, Concept #1 would compete against other breakfast foods such as cereal, breakfast bars, toast, and bacon and eggs. Concept #2 would compete against juice, soft drinks, and plain milk. Concept #3 would compete against protein shakes.
Once you’ve developed your product concept, it’s time to test that concept with consumers in what you believe to be your target market. This is what’s known as concept testing. Concept testing is a market research method in which customers are presented with a description of a product or service.
Let’s assume that the product concept we’ve chosen is the instant, on-the-go breakfast drink. Customers in the target market would be presented with a description of the product that may read something like: “Our product is a high-protein powdered yogurt mixture that is added to juice to make an instant breakfast smoothie that provides nutrition, good taste, and convenience. The product will be offered in individual packages, six to a box, priced at $3.49 per box.”
Quite often, these (and other) questions are scored using a five-point Likert Scale. For example, the last question might be scored on the basis of these five options: definitely would purchase; likely would purchase; may or may not purchase; unlikely to purchase; and definitely would not purchase. The answers to these questions suggest whether the product will likely be successful in the market or not. If the answers are generally positive, the product concept will move to the next stage; if the answers are less than positive, the product concept will likely be rejected.
Once concept testing has been completed and the decision has been made to proceed further, it’s time for the product team to develop a preliminary marketing strategy plan.
Armed with the preliminary marketing strategy plan, the company now needs to assess the new product’s business appeal. For example, the company will want to know if sales will be sufficient for the company to make the desired profit. The company will need to understand the costs involved in the new product development in terms of research and development, manufacturing, and marketing.
IN CONTEXT
There are a couple of different analyses that can be done:
These analyses are performed so that management can now determine if anticipated profits from the sale of the breakfast drink mix will satisfy company objectives. If the answer is yes, the product concept moves on to the next stage, product development. If the answer is no, the product concept is shelved.
- Payback: This simply refers to the timeframe within which the company can expect to recover the investment it made in the product development process.
- Break-even analysis: This analysis determines how many units must be sold before the company recoups its costs and starts making a profit.
Remember that, until now, our product concept has existed only as words or perhaps a drawing. If our breakfast drink mix has passed the business analysis test, it will now move into the product development stage, and engineering will develop a physical version of the product, called a prototype. It’s important to note that sometimes the company realizes in this stage that the product concept simply can’t be translated into a commercially feasible product. For example, through market research, Maxwell House determined that consumers wanted a coffee that was “bold, vigorous, and deep tasting.” However, after working with coffee blends for four months, the company determined that it was too expensive to commercially produce the formula, so Maxwell House changed the blend to meet its targeted manufacturing cost. Unfortunately, the taste of the new blend didn’t meet consumers’ expectations, and the new product flopped. The prototype is then put through functional and customer tests to see how well it performs.
If the product team is satisfied with how the prototype performs functionally, the product concept is then test-marketed to determine its viability before it’s launched on a large scale. Typically, the product is introduced in a limited number of stores or in a few geographic regions in order to gauge customer acceptance. In controlled market testing, the company arranges for a certain number of stores to carry the new product. The new product is delivered to the store, and marketers manage shelf position in the store, pricing, point-of-purchase displays, and more. The company then measures sales results through the scanners at checkout. Of course, the best (but also the most expensive) way to test a product concept is with full-blown market testing in which the company will select a few representative cities (markets that closely resemble the target customers) and introduce the product with a full advertising and promotional campaign. In essence, the company is measuring the success of the new product on a smaller scale before launching it on a national or even global scale. Curious to know the top cities to test-market a national product? They are Nashville, Tennessee; Cincinnati, Ohio; Indianapolis, Indiana; Charleston, South Carolina; and Jacksonville, Florida.
In the commercialization stage, the company launches the product, complete with full-scale production, distribution, advertising, and sales promotion.
It’s important after commercialization for the company to review the marketing performance of the new product.
EXAMPLE
Some questions marketers might ask include: Is the new product accepted by consumers? Is there sufficiently high demand, sales, and profits? Are there competitors who are introducing a similar new product in the market?Depending on the answers to these questions, savvy marketers will closely monitor the performance of the new product and make changes as needed in both the marketing plan and the marketing mix strategy.
Source: THIS TUTORIAL HAS BEEN ADAPTED FROM OPEN STAX’S PRINCIPLES OF MARKETING COURSE. ACCESS FOR FREE AT https://openstax.org/details/books/principles-marketing. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.
