Market development
Market development is a growth procedure that identifies and grow new market segments for current products. A market development procedure targets non-buying customers in currently select segments. It also targets new customers in new section.
A market development procedure need expanding the potential market through new users or new uses. New users can be defined as: new geographic section, new demographic section, new institutional segments or new psychographic section. Another way is to expand sales through new uses for the product.
A marketing manager has to think about the following questions before implementing a market development strategy: Is it profitable? Will it require the introduction of new or modified products? Is the customer and channel well enough researched and understood?
In high tech, where discontinuous innovation is the norm, a successful market development strategy requires crossing the pass between the early market and the main
The Process of Market Development
Market development is a two-step process. It starts with market research. You need to capture in segmentation analysis to determine which market segments are worth pursuing. A section is simply a small slice of an overall market. You can segment a market along demographic, geographic, psychographic (based on values and lifestyles), and product-benefit lines.
Once you have determined which market segments are worth pursuing, the second step of market development involves creating a promotional strategy to stab the new market. For example, you may decide to engage in an militant television and direct mail campaign. You’ll also have to consider the pricing of your product. If there are competitors in the market, then you may opt for perforation pricing, where you aggressively price your product lower than the competition in order to quickly obtain a large share of the market and customer loyalty.
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Market Development is a 2-step process to tap the untapped market. It begins with market research wherein a company does a segmentation analysis and short ists market segments which are worth pursuing. It is an attempt to use the existing product or service to attract new customers. The goal is to expand the reach or tap into a different segment or unexplored market. A segment is defined as the small sub-group of a larger population. For example, the marketing team of the company can divide the market based on geography, demographics as well as income levels etc. Once the company decides which segment to choose, the next step of market development involves creating a promotional strategy to enter into the market. For that, companies may have to take the support of both audio and visual media to push the product extensive into the market.
Another aspect is the pricing of the product. If there are competitors in the market, you may have to price the product accordingly or come out with a product which belongs to the same segment but differs in features, quality etc. to command higher pricing. To counter competition, the marketing team could look at the piercing pricing where you can aggressively price the product below competitors product to gain market share. The major challenge faced by firms, which want to indulge in market development, is that it is a costly affair. It requires huge capital investment to keep the project going. If the investment in the new segment doesn’t pay off as desired, then the whole exercise turns out to be worthless.
Product development
In business and engineering, new product development (NPD) is the complete process of bringing a new product to market. New product development is described in the literature as the transformation of a market opportunity into a product available for sale and it can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). A good mastery of customer needs and wants, the competitive environment and the nature of the market represent the top required factors for the success of a new product. Cost, time and quality are the main variables that drive the customer needs. Aimed at these three variables, companies develop continuous practices and strategies to better satisfy the customer requirements and increase their market share by a regular development of new products. There are many uncertainties and challenges throughout the process which companies must face. The use of best practices and the elimination of barriers to communication are the main concerns for the management of NPD process.
New Product Development Models
Conceptual models have been designed in order to facilitate a smooth process. The concept adopted by IDEO, a successful design and consulting firm, is one of the most researched processes in regard to new product development and is a five-step procedure.These steps are listed in chronological order:
- Understand and observe the market, the client, the technology, and the limitations of the problem;
- Synthesize the information collected at the first step;
- Visualise new customers using the product;
- Prototype, evaluate and improve the concept;
- Implementation of design changes which are associated with more technologically advanced procedures and therefore this step will require more time.
One of the first developed models that today companies still use in the NPD process is the Booz, Allen and Hamilton (BAH) Model, published in 1982. This is the best known model because it underlies the NPD systems that have been put forward later. This model represent the foundation of all the other models that have been developed afterwards. Significant work has been conducted in order to propose better models, but in fact these models can be easily linked to BAH model. The seven steps of BAH model are: new product strategy, idea generation, screening and evaluation, business analysis, development, testing, and commercialization.
A pioneer of NPD research is Robert G. Cooper. Over the last two decades he conducted significant work in the area of NPD. The Stage-Gate model developed in the 1980s was proposed as a new tool for managing new products development processes. The 2010 APQC benchmarking study reveals that 88% of U.S. businesses employ a stage-gate system to manage new products, from idea to launch. In return, the companies that adopt this system are reported to receive benefits such as improved teamwork, shorter cycle time, improved success rates, earlier detection of failure, a better launch, and even shorter cycle times – reduced by about 30%.These findings highlight the importance of the stage-gate model in the area of new product development.
Over the last few years, the Lean Startup movement has grown in popularity, challenging many of the assumptions inherent in the stage-gate mod.
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