What influences the development of new products?
- Technology - New technology, or better technology than rivals, can give firms a competitive edge or enable production costs to be lower thus enabling a lower price.
- Competitors Actions - It is very popular to copy successfil products by launching a 'me too' product at a slightly cheaper price.
- Entrepreneurial skills of owners/managers - The skills and initiative of owners/managers can help firms to come up with better ideas or move forward more effectively again giving a competitive edge.
- Financial Situation - Can they afford to make a new product?
What is product differentiation?
Product differentiation is the extent to which customers consider your product/service to be different to rivals. The feature that is different or unique is called the U.S.P which stands for unique selling point
How can product differentiation be created?
Actual Differences e.g.
- Unique Design.
- Unique Features.
- Superior performance.
Imagined Differences e.g.
- Persuasive adverts.
- Feel good factor.
- Celebrity endorsements.
Business tools that can help improve the product p
- Product portfolio analysis e.g. the boston matrix.
- Product life cycle - The stages that a product passes through during it's lifetime.
Product development: changing aspects of goods and services to meet the changing needs of existing customers or to target a different market.
Product line: a set of related goods or services.
Product mix: the full range of products offered by a business, also known as product portfolio.
Product portfolio analysis: analysing the existing product mix to help develop a balanced range of goods and services.
There are 5 stages of the product life cycle.
- Development. - Lots of money is being invested into this new product.
- Introduction. - Sales are low, profits will be negative, product may be unknown.
- Growth. - Sales increase rapidly, profits will reach highest at the end.
- Maturity & Saturation. - Sales reach it's peak, rate of growth slows.
- Decline. - Sales start to fall.
The use of PLC
- It illustrates the broad trends in sales revenue.
- Identifys points at which the business may need to consider launching new products as older ones are in decline.
- It helps businesses identfy when and where spending is required for advertising etc.
Extention Stratagies is when a product is in its decline stage, the business may seek to prolong the product's life.
Extention stratagies include:
- Re-styling the product, changing it's appearance and packaging.
- Finding new uses for the product, and hence stimulating demand.
- Finding new markets for the product, this may involve exporting the product to foreign markets.
Benifits Vs Limitations of a PLC.
- It helps firms to realise that marketing decisions need to be changed at different stages of a products life.
- It can help managers to plan for different levels of sales and costs.
- You cannot always predict exactly what is going to happen to a product over time.
- Falling sales may not mean that the product is entering the decline phase. There may be other reasons e.g. new competitors or maybe a recession.