Product Policy, Development, and Market Factors
Product Policy
The company should clearly define the markets it will operate in and determine its costs. It should also define the size of the company to adopt a strategy of segmentation and differentiation. It’s uncommon for firms to cater to everyone; a more typical approach is “all for some.” Ultimately, stakeholders must establish the product’s quality and life cycle.
Research and Development
In this phase, investigations are carried out in production, technology, and the market to determine whether the product has the potential to be consumed by the customer.
Product Launch
This involves selecting the best ideas using various methods to ensure an optimal product. Ideas can come from clients, employees, distributors, suppliers, and researchers. Several tests are crucial:
- Product Testing: Consumers try the new product.
- Market Testing: The product is tested in a real, but reduced, market.
- Laboratory Testing: A representative sample of consumers views several commercials, including the one for the product of interest.
The cannibalization effect may occur, where buyers transfer from existing products to the new one without increasing total sales. Management can use multiple strategies to launch the product:
- Introduce the product with a high price and a large advertising campaign.
- Launch the product with a high price and minimal publicity.
- Set low launch prices and conduct a significant advertising campaign for rapid, widespread market penetration.
- Spend very little on advertising and offer the product at a very low price.
Positioning
The positioning technique reveals how potential buyers perceive the product and what motivates them to choose it among existing options. Product positioning maps measure this positioning.
Expansion
- Rapid sales increase.
- High profits.
- Increased competition.
- Increased communication.
- Optimization of distribution channels and the marketing mix.
- Expanding the consumer circle.
Maturity
This is a more or less prolonged phase of stability.
- Longer phase.
- Market stabilization.
- Stable profits, though potentially stagnant.
- High competition.
- Lower prices.
- Companies seek to differentiate the product with accessories.
- Distribution channels are very effective.
- Advertising campaigns remind consumers of the product’s benefits and persuade them.
When the company faces stagnation, it may react in the following ways:
- Actions at the Point of Sale & Extension:
- Improved decoration.
- Enhanced animation (videos, music, etc.).
- Actions on Price:
- Discounts.
- Discount vouchers.
- Direct price reduction.
External Factors: The Market
Market heterogeneity necessitates market segmentation to reach consumers more effectively. Demand is the quantity of goods or services that consumers are willing to purchase at a specific price and time. It generally has a negative slope. Elasticity is the degree of change in demand due to price changes.
Cross-elasticity occurs when there is substitution or complementarity between products; it is negative between complementary products and positive among substitutes. Demand can be classified as:
- Elastic Demand: As the price decreases, the quantity demanded increases proportionally more than the price.
- Unit Demand: When the price decreases, the quantity demanded increases in the same proportion.
- Inelastic Demand: When prices change, the increase in demand is less than the proportional price reduction, thus decreasing income.
The expectation effect is when prices are expected to fall, and people postpone purchases. A product or service can be fashionable, born and conditioned for an ephemeral existence. This can be a competitive advantage for the company. Conversely, fashion can be negative and result in business losses.
Jurisdiction, whose actions require monitoring, includes:
- Consortium: A legal agreement between firms in the same sector for joint action against the Public Administration or individuals.
- Cartel: Companies seek to reduce competition, harming the end consumer.