Meaning Classifications Of Products Marketing Essay

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Product is any tangible elements that are offered to the public at large, which satisfies a certain need or want. Product is used in different sense according to each sector of operations and industries. In retailing, products are called merchandise. In manufacturing, products are purchased as raw materials and sold as finished goods. Commodities are usually raw materials such as metals and agricultural products, but a commodity can also be anything widely available in the open market. In project management, products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project.

Importance of Product Innovation

Product/service innovation is the result of bringing to life a new way to solve the customer's problem - through a new product or service development - that benefits both the customer and the sponsoring company.

Development of New Products

There are two ways of new product development, the companies can either

Create an entirely new products that adds to its product line, a totally niche product, or

It can update or do modifications on an existing product of the company

For a long term sustenance of the business the company has to look into ways of new product development so that they can keep on competing with the market.

The general process of product development involves idea generation, product design and detailed engineering of the product concept.


The importance of new product development lies with the success and sustenance of the business, as said earlier, for the company to keep growing and face the competition; it has to go for new and improved products in its product line or particularly new product. With the increase in competition the fact of innovate or die has become more prominent. Its is also a fact that as u go on giving new products to the customer, their expectations grow and they demand new products every time.


Once the concept is laid and the basic research and study has been done on the feasibility of a particular product in the market the next step is the final launch of the product into the target market. The successful launch of the product is supported by the advertisements and public relations activities done by the respective agencies. What the company need when it launches a new product is

Well-defined product concept (which is where product-line architecture comes into play).

Provide the agency with background information on its products and goals.

Conduct necessary patent research, applying for new patents as needed.

Have the manufacturing process in place and ready to go, either internally or via outsourcing.

Have a formal business plan in place that defines funding of the project.

Determine who will approve the marketing or advertising plan that the agency creates (the fewer people communicating with the agency, the better).

Determine the proper timing for the launch.


When it comes to new product development in service companies, the important aspect that they need to look into is, they are providing value to the customer along with the price. If the customers feel that they are getting the value for the money they are spending and that they are getting new and improved services, then they are more likely to stick to your company. If the company is able to offer better and new services and various service options then the customers will be loyal to the company. On the other hand if the company is not able to provide the required service and the perceived value with new innovations then the consumers will consider it just as a product and will look only into the price of the product while the decision making process and not the service aspect which may lead to the loss of clients if the product does not provide the perceived value.

Service companies should routinely ask themselves a series of questions:

Could current services be presented in a different way?

Could they be offered to new customer groups?

Are their little things that can be tweaked to freshen or update a service?

Could services be improved or changed?

The reason is that the services are more easy to copy and they face much competitive pressure than the product when it comes to innovation and improvement. By following the above procedures and continually working on these aspects the service companies can fight the competition in the market by making their service clearly identifiable in the market.


The dynamics of markets, technology, and competition have brought changes to virtually every market sector and have made new product development one of the most powerful business activities. These changes that constantly impact commerce have forced companies to innovate with increasing speed, efficiency, and quality. Which has made new product development one of the most complex and difficult business functions. As said earlier, firms must innovate in order to survive. This can be seen from the various studies that has been conducted, that the companies attribute half of their revenue to new product development in the recent years. And many companies achieve approximately one-tenth of their sales from new products.

A company's new product development depends on the size and the nature of industry in which it operates. New products may be defined as any product, service, or idea not currently made or marketed by a company, or which the consumer may perceive as new.

Apart from this it can also be seen that the more the number of new product development the more has been the number of failures. The reasons can be faulty management and planning. Thus it is an important aspect and part of the management to have a healthy organization.


The history can be traced back from the post world war II era. Where the companies were product oriented rather than customer oriented and started producing many products which might or might not find place in the minds and hearts of the consumers.

However, competition increased and consumers became more skeptical and selective about the types of products they purchased. Marketers found it increasingly difficult to rely on persuasive sales techniques to move products. Retailers grew restless when these products did not move off shelves as quickly as planned. Companies had to know more about their target markets. What were the wants and needs of the people who were buying their products? How could their firm satisfy these wants and needs?

Then there was the emergence of the market as the driver of innovation. Instead of just producing what the manufactures felt like producing to more market research oriented and customer centered approach. The new product development process was entrusted to marketers who knew consumers' wants and needs. Customer demand "pulled" the product through the development process.

The present day concept of new product development is based on the above two aspects, the market research and development as well as significant market expertise focusing on satisfying the customer's needs and wants.

The increase on competition and the rapid changes in the market started showing its pressure on the companies to build adaptive capabilities into their organization. Global competition meant that there are more companies who are capable of improved and world class performance. This has made competition more intense, rigorous, and aggressive than ever before. Fragmenting and more sophisticated markets mean that consumers demand more from products in terms of quality, differentiation, and "meaningfulness."

New technologies have had two important outcomes in regards to innovation. First, new technologies are responsible for this new market sophistication in which consumers have more choices and are thus more demanding. Secondly, new technology has increased manufacturers' capabilities for rapid response to shifting market needs.

As a result of the new technologies and faster developments in the market the product life cycle has also shrunk to a greater extent. Where the development of a new product concept, its implementation and commercialization may take one or more than one year, the product to become matured and obsolete may take only a few months.

Therefore, companies have embraced the view that new products are transient, whereas the skills and expertise needed to develop these products are a much more persistent requirement for success. Instead of the technology or markets drive innovation, new product development requires a convergence of various aspects like technology, marketing, product design, engineering, and manufacturing capabilities. Speed, efficiency, and quality in product development are the challenges that new product development faces in today's intense competitive environment.


There are five categories of new products. New-to-the-world products or services are new inventions like in-line skates and health maintenance organizations. New category entries, such as sport utility vehicles, are products or services that are new to a firm. Additions to product lines add products or services to a firm's current markets. For example, when a powder laundry detergent offers a liquid version it is considered a line extension. Product improvements are another type of new product and are common to every product category. Repositionings target products to new markets or for new uses.

Firms can obtain new products internally or externally. External sourcing means the company acquires the product or service, or obtains the rights to market the product or service, from another organization. Internal development means the firm develops the new product itself. This is riskier than external development because the company bears all of the costs associated with new product development and implementation. Collaborations, which include strategic partnerships, strategic alliances, joint ventures, and licensing agreements, occur when two or more firms work together on developing new products.


There are several steps with regard to new product development which will be altered by companies depending on the type of products and possibilities are there that the steps itself get blurred as the companies engage in several stages at the same time. The following are the major levels through which a product development goes through when it is finally available to the consumers.

Idea Generation

The process begins with idea generation and is often called the "fuzzy front end". For every successful new product, many new product ideas are conceived and discarded. Therefore, companies usually generate a large number of ideas from which successful new products emerge.

The ideas for new product development can be generated from the basic market and consumer trend analysis, research and development, by employees, sales persons who are in direct contact with the customers and are aware of the specific demand and preferences of customers in the market. By close watch on the competitors, by focus group discussions, SWOT analysis. All these can give you insights into the new product lines and features.

Idea generation can begin when the company has done its opportunity analysis with regard to the market, and the next stage paves way to support the ideas generated.

Idea Screening

This is the stage in which the ideas are brought together or polled in and screening is done whereby we eliminate the ideas that are likely to fail or will not succeed. The firm should she whether the new idea fits with the companies vision and objectives and also the company's manufacturing, technology, and marketing capabilities with regard to the new idea. The object is to eliminate unsound concepts prior to devoting resources to them.

The screeners must look into the following aspects while the screening process

Will the target market benefit from the product?

Size and growth forecasts of the market segment/target market?

Current or expected competitive pressure for the product idea?

The industry sales and market trends the product idea is based on?

Technically feasibility of manufacturing the product?


Concept Development and Testing

In this stage a formal evaluation of the product concept is done by the consumers through marketing research. The idea which has low scores are discarded or revised. One problem that may affect this process is that there are so many new products coming into the market and lot of research taking place and the consumers may get tired of given responses that they may not be interested and it will affect their final judgment about the product

The following aspects should be taken into consideration while conducting the research.

Who is the target market and who is the decision maker in the purchasing process?

What product features must the product incorporate?

What benefits will the product provide?

How will consumers react to the product?

How will the product be produced most cost effectively?

Prove feasibility through virtual computer aided rendering, and rapid prototyping

What will it cost to produce it?

Testing the Concept by asking a sample of prospective customers what they think of the idea.

Business Analysis

In this stage the marketability and cost factor of the new product Idea is analyzed. Nad based on this analysis the decision is taken to whether to accept the product idea or to discard it. This stage requires the following aspects to be noticed

Estimate likely selling price based upon competition and customer feedback

Estimate sales volume based upon size of market.

Estimate profitability and breakeven point

Prototype Development

This is a stage in which the cost begins to increase compared to the other four stages in the product development process. Because of this reason the companies are seeing to it that the number of product ideas that get to this stage is reduced to nearly 50-20%. This is the stage in which the idea is converted into an actual product, taking into consideration the preferences and need expressed by the consumers.

The company produces a physical prototype or mock-up of the actual product

Test the product (and its packaging) in typical usage situations

Conduct focus group customer interviews or introduce at trade show

Make adjustments where necessary

Produce an initial run of the product and sell it in a test market area to determine customer acceptance

Test Marketing

Test marketing tests the prototype and marketing strategy in simulated or actual market situations. Because of the expense and risks associated with actual test markets, marketers use them with caution. Products that test poorly are pulled back and re-conceptualized or discarded.

New program initiation

Resource estimation

Requirement publication

Engineering operations planning

Department scheduling

Supplier collaboration

Logistics plan

Resource plan publication

Program review and monitoring

Contingencies - what-if planning


Commercialization, the final stage, is when the product is introduced full scale. The level of investment and risk are highest at this stage. Consumer adoption rates, timing decisions for introduction, and coordinating efforts with production, distribution, and marketing should be considered.

Launch the product

Produce and place advertisements and other promotions

Fill the distribution pipeline with product

Critical path analysis is most useful at this stage

Impact of new product on the entire product portfolio

Value Analysis (internal & external)

Competition and alternative competitive technologies

Differing value segments (price, value, and need)

Product Costs (fixed & variable)

Forecast of unit volumes, revenue, and profit

These steps may be altered as needed. Companies complete several steps at the same time to reduce the time taken for the whole process. Most industries see this process as an opportunity.

Because the NPD process typically requires both engineering and marketing expertise, cross-functional teams are a common way of organizing projects. The team is responsible for all aspects of the project, from initial idea generation to final commercialization, and they usually report to senior management. In those industries where products are technically complex, development research is typically expensive, and product life cycles are relatively short, strategic alliances among several organizations helps to spread the costs, provide access to a wider skill set, and speeds the overall process.

People respond to new products in different ways. Pricing process is also an important aspect to reduce risk and increase confidence in the pricing and marketing decisions to be made.


There are lot of factors that influence new product development like Organizational structure, leadership, and team building etc which influence the speed and efficiency with which new products are introduced.

Organizational structure should be such that it facilitates internal information exchange, decision making, and materials flow is essential. A "fast-cycle" structure allows more time for planning and implementing activities to gain competitive advantage. This type of structure also cuts costs because production materials and information collect less overhead and do not accumulate as work-in-process inventory. Autonomy refers to the amount of decision making allowed at lower levels of management. The coordination of the engineering, product designs, manufacturing, and marketing functions in the new product development process is vital.

Clarity and vision are crucial to ensuring that new product ideas are good strategic fits for the company. Management flexibility and responsiveness to change also are needed. Teams provide mechanisms for breaking down functional biases created by a strict adherence to structure. The amount of interdepartmental conflict in the organization, the social cohesion among team members, and the frequency and directionality of interdepartmental communication influence team building. Through shared understanding of the objectives and purposes of the project, as well as the tasks required in the development process, teams can shape the project and influence how work gets done in the organization.


The failure of a product is because of the sudden market shift which leads to missed opportunities and misused channels of distribution, also because the companies miscalculate or underestimate their own technological strengths or the product technological challenges.

Companies are constantly seeking ways to avoid these pitfalls. One solution is new product development maps that chart the evolution of a company's product lines. This historical perspective helps the firm to identify and analyze functional capabilities in a systematic, repetitive fashion that allows for the development of linkages and the identification of resources for new endeavors. These maps can direct the firm to new market opportunities and point out technological challenges.

Aggregate plans for projects offer another solution. Rather than viewing each new product development project individually, they consider all of the new product development projects under consideration by the firm. This is particularly important in firms with hundreds of new product development projects going on at the same time. Projects are categorized according to resources required and contribution to the firm's bottom line. Aggregate project plans enable management to improve the management of new product development by providing greater control over resource allocation and utilization. These plans help to point out where capabilities need to be improved, how sequencing projects may help, and how projects fit with the firm's development strategies.

Return maps graphically represent the contributions of all team members to product success in terms of time and money. Their focus is on the point at which product sales generate sufficient profit so that the firm's initial investment in development is returned. Return maps show team members the time and money needed to complete their tasks in the development process so that they may estimate and re-estimate their investment in the process. In doing this return maps illustrate the impact of their actions on the project's overall success.

Another way to improve the speed and efficiency with which new products are introduced is to involve purchasing in the development process. When purchasing expertise is introduced into the development project team, quality may increase, time to market entry may decrease, investment in inventory may diminish, and costs may significantly decrease.

Technology continues to change and create new opportunities and threats. Customer requirements and expectations continue to shift and create new demands. Old channels of distribution are becoming obsolete and new channels are opening new opportunities. Some competitors are falling by the wayside while others are surging to the forefront by making new and unexpected moves to gain advantage. The very structure of industry is changing. A key to success in this tumultuous environment will continue to be the ability to sustain a competitive advantage through innovation. However, speed, efficiency, and quality in product development will be paramount. Building capabilities in all aspects of product creation and implementation, overcoming uncertainty and facilitating decision-making, ensuring these innovations are strategically linked to the firm's vision, and doing this on a continuous basis is the challenge of new product development in the next century.


Finally, when embarking on the product development process, try to remember in advance what the obstacles to success are. These pitfalls are many and varied, and can include:

Inadequate market analysis.

Inadequate cost analysis.

Strong competitor reaction.

Undue infatuation with your company's own technology and expertise.

Overreaching to make products beyond your company's financial and knowledge grasp.

Technical staff too attached to a project and too proud to admit defeat, even when a project cannot be justified according to pre established criteria.

Problems with patent, license, or copyright issues.

No real criteria for deciding if a project is good or bad.

Changes in strategy at the corporate level are not conveyed to the product development team.

Low product awareness.

Money and staff allocated to a project are hidden in the budget of another project.

Company decision-makers blinded by the charisma or charm of the person presenting the new product idea.

Project accepted on the basis of who gets it first.