Product Development
Product development involve seven steps
- Establishing whether there is a customer ‘need’; can the company afford to respond and can it do so profitably?
- Generation of ideas. This is likely to come from the research and Development department, but may come from anywhere in the company, from the Chairman (as did the Walkman) down to the product line worker.
- Screening new ideas. This must be done systematically and take account of, for example, raw material or component availability, production capacity, distribution and the effect on existing product line.
- Business analysis. This involves establishing whether the company can afford any required capital investment and find sources and whether it can afford the necessary variable costs like labour. Can it carry the product to the break-even point?
- Product development. Producing and testing Prototypes
- Test Marketing. This follows, rather than precedes, the decision to go ahead.
- Commercialisation. Developing the marketing strategy
Pricing
Penetration pricing is appropriate when the seller know that demand is likely to be elastic. A low price is set in order to attract customer to the Product. Penetration Pricing is normally associated with the launch of the new product for which the market needs to be penetrated. Because a price starts low, even though a product will developing market share, the product may initially make a loss until consumer awareness is increased.
Skimming involve setting a reasonably high initial price in order to yield initial results from those consumers willing to buy the new product. At the launch of a new product the wound be very little competition therefore the demand of the product may be relatively inelastic. Customers would have very little knowledge of the product; therefore the initial price needs to be reasonable.
Once the first group of customers has been satisfied, the seller can then lower the prices to make sales to new groups of customers. This process can be continued until a larger section of the total market has been created for. When the business operates this way it can remove the risk of under pricing the product.
Promotion
The promotional mix describes the procedures and policies adopted by the marketing department of an organisation. The element within it may be combined in various ways and must be kept within the agreed budget. The promotional mix is made up of the following: advertising, sale promotion, Merchandising, Packaging, Personal selling, and Public relation.
Above the line promotion is direct advertising through consumer media such as press, TV, cinema and radio.
Advertising is a method of communicating with groups in the marketplace in order to achieve certain objectives. Advertisements are message sent through the media that are intended to inform or persuade or reassure the people who receive them.
Place
Place simply refers to how you will sell your products to your customers. Depending on what it is you are selling will directly influence how you distribute it, and it affects mainly those businesses that are in production. If for example you own a small retail outlet or offer a service to your local community then you are at the end of the distribution chain so and will be directly supplying a variety of products directly to the customer.
However, if you are a producer, the method of distribution is extremely important as it could effect how their product is received and how it sells.
Direct Supply / Direct Sale
Direct selling involves selling directly to your customer; retailing, door-to-door, mail order and ecommerce all directly sell to customers. The advantage of deciding to directly sell would mean you are in direct contact will your customers and can easily detect the subtle changes which are occurring and adapt to the changes; i.e. demand for price changes or overall demand for your products. You also have complete control over your product range, how it is sold and at what price.
Direct to retailers
If you don't want the expense of opening and running your own retail outlet to sell to your customers, then you might consider selling to existing retail outlets. This would obviously save your company a lot of money setting up a variety of retails outlets to cover areas regionally or nationally.
However, the administration behind running a system like this would be considerable. Firstly you would have to have a sales teams to consult with the retailers on new products, price and promotion. You would also have to have a method of distributing to many small outlets in which ever region of the country you are selling to: this would cost a small business quite a lot of money and effort. The financial side also needs to be considered as you will have to administer a number of small accounts at the same time.
