Consider the three major categories of new products: “really new” products (ones that create new product categories like iTunes for digital music), new products in existing product categories, and line extensions which are just new varieties of existing products (such as new flavors). How does the job of the marketing manager differ for these three kinds of new products? How does a marketing manager forecast product demand each of these categories?
How does the job of the marketing manager differ for these three kinds of new products?
Some of the steps in any new product launch are common. Such as identifying a new idea, then selecting the feasible one, R&D department to come up with the prototype, business analyst team to find target segment and price, a testing phase where the customer acceptance is measured and then finally launch. We will highlight the part where the marketing managers job differ based on the type of new product.
Marketing manager for “really new” products have one critical task of creating awareness for the upcoming product. If a customer is not aware of a product the product will never be sold. Although promotion attracts competition it is essential. So marketing team uses print media, online media, TV and radio to introduce the product to the customer base. So in this case marketing managers has to first identify the need and then create a product ( with the help of R&D team) to meet the need of the customer and deliver the value. Then creating awareness about the product, making sure target customers understand the benefit and value proposition of the product. In this case, educating customers and extending support to them becomes critical for the success of the product. And lastly, the price should be what the target customer are comfortable paying for the product. The marketing managers must bear in mind that some product launches are time sensitive, the success of the product depends on when it is introduced, based on that the product can gain first mover advantage over competition or simply be used. And this is where the product enters growth phase in PLC after a successful launch. Once the product gains maturity, the competitors might have caught up and introduced similar products for the lower price.
New category entries is another type of “new product” for a company when the company decides to add already existing products from the market in their own portfolio. In this case, the marketing manager has to reach out to target segment and find out the customer need. In this instance defining the products value proposition would be essential. Since there are already similar products available in the market and from competitors. Defining the value proposition is absolutely critical for the marketing manager since target segment needs to know why this product is different and better. Few other areas would quality and price. The customer would be pleased to see a better quality for a cheaper price too. And a marketing manager will have to be mindful of that, what the target segment prefers and what is the price they are willing to pay. The business analysis, testing and concept development will be played in a similar manner. During commercialization, the marketing manager has to play a most critical role to create the buzz, presenting the value proposition to increase interest in target segment and then reaching to maximum possible customer base would be important. In this case, the product team can use the Target costing approach since the product is already available from the competitors so getting feedback from the customer would be easier.
For line extension, all the procedures are almost similar to the introduction of a new product. But I believe the marketing manager needs to run more surveys or testing to make sure the product is well liked by the potential customers and for the price. Since the value proposition for the product is already proven, and there is a reference to price point acceptable for the customer, developing and launching this kind of product should be easier. The R&D department can create the prototype after selecting an idea. And then business analysts can evaluate the demand. Once the product is proven to be liked by target segment for the price the marketing manager can work on creating awareness of the product using different online, print or electronic media.
How does a marketing manager forecast product demand each of these categories?
The business analyst teams perform branded and unbranded test to find out the potential sales and to determine the actual formulation respectively. There are essentially 3 different types of use tests for different new products. Let us discuss those –
There is a type of test (Winer, 2011, Pg no 229) usually performed with employees and focus group to determine if it is liked, this sort of test helps remove any serious problem in the product and helps the testers determine if this product is better or worse than the competition. And help the testers understand how the product will be used by customers and based on these finding they can shape up the value proposition for a bigger audience. This kind of test can be performed while introducing new category entry or line extension, to forecast product demand of the product.
The next type of test (Winer, 2011, Pg no 230) is when a sample size of users are given the product to use it for a certain number of days. And after the end of that period, they are asked if they are going to buy the product. This kind of test can be helpful for “really new” kind of product launch or for the line extension products. This could help forecast the demand, popularity of the new product in the market.
The 3rd type of test (Winer, 2011, Pg no 230) is essentially bit extended version of the 2nd type. In this situation, the product is given to home or business for an extended period of testing to find out users experience with the product. Testers get data from before and after questionnaires. Find out usage of the product and the usage pattern can be compared with competitive products too. And this way actual usage for the product can also be found out. This type of test can be used for really new, new category entry or line extension products.
Winer, R., & Dhar, R. (2011). Marketing management (4th ed.). Boston: Prentice Hall.