Product Development

Product development is the process of technical development in the laboratory, on test-rigs, in pilot plant, or whatever is necessary in the particular circumstances. Depending on the product, safety tests, quality tests, servicing and maintenance routines, and many other factors may need to be worked out. It is most important to keep clearly in the mind of everyone concerned the needs of the ultimate users, so as to avoid developing a product which either does not in one respect or another meet the requirements of the marketplace, or which does so superbly but at so high a cost that competition cannot be met or that profits cannot be made.

Test Marketing

A full launch on the national scale of a new product is (a) very costly, and (b) potentially dangerous. As an interim stage, it is often sensible to launch the product initially in one carefully selected part of the country only. It is then often possible to check whether all aspects of the marketing mix are fully effective. If the optimum has not been struck, changes can be made in the national launch. In particular, if further product improvements need to be made in response to customer reactions, this can be done without too much damage to the company's reputation or too great a loss of future sales. A national launch of what turns out to be an imperfect product (or a wrongly priced or promoted one) can be an irrevocable and disastrously costly affair.

Launch and Commercialization

Only when all signals are green so far does it normally make sense to launch the product fully, although there may well be situations where it is wise to skip the test-market stage. According to the 'law' of the product life cycle its is known that each stage has produced a larger and larger loss. Only at some time, possibly a very long time, after the launch does revenue, and eventually profit (if all goes well), begin to be generated.
A further significant point is that even after the launch we may well still need to think in terms of a series of stages. The life-cycle concept suggests this, and a useful further concept is that of 'adopter categories'. Especially with innovative products, some people will adopt the new ideas quickly and eagerly, whereas others will be slower to take to them. Five distinct groups can be identified in this respect:
1. Innovators or the venturesome 3 per cent who are willing to take the risk of trying something out first. They tend to be younger, of higher social status and more affluent than the other categories;
2. Early adopters or about 13 per cent of the market, including more opinion leaders than the other groups. They tend to be younger, more creative, more mobile than the groups below;
3. Early majority or about 34 per cent of the total market. A bit above average in social and economic standing.
4. Late majority or another 34 per cent, more sceptical than the previous group. Adopt only under economic necessity or pressure from their peers. Older, worse educated, below average in social and economic status;
5. Laggards or the tradition-bound 16 per cent. Suspicious of innovation. They tend to be older than the rest and at the lower end of the social and economic scales.

While the innovators and early adopters are considerably influenced by promotion and by the apparent advantages of a new product, the later groups will tend to wait for the situation to develop until they feel virtually forced to follow suit. This is one reason for the slow and gradual development of the product life-cycle, and why a long-term, carefully monitored development plan with financial targets is essential.