Reading: Commercializing New Products

Introduction

The final phase of the new-product development process focuses on commercializing the new product. This phase includes:

• Stage 6: Test Marketing
• Stage 7: Launch
• Stage 8: Evaluation

At last the product is ready to go. It has survived the development process and is now, you hope, on the way to commercial success. How can it be guided to reach that marketing success?

The different stages in this phase include a common set of activities performed on increasingly larger scale. In all three stages the marketer is implementing, evaluating, and improving the marketing plan, which includes the full marketing mix.

Test Marketing

The goal of test marketing is to improve the success of the product launch. The marketer will launch the marketing plan to a smaller subset of the market, quickly analyze how the plan can be improved, refine the plan, and then launch to the full market.

Test marketing provides a wonderful opportunity to get feedback from buyers in a realistic buying situation in which they experience the full marketing mix—but it’s a challenge to do it right. Because of the special expertise needed to conduct test markets, and the associated expenses, many large manufacturers employ independent marketing research agencies that specialize in test marketing. Among the challenging decisions are the following:

• Duration of testing: the product should be tested long enough to account for market factors to even out, but a long test cycle delays the broad launch and may diminish the impact of the product announcement.
• Selection of test markets: the test market should reflect the norms for the new product in such areas as advertising, competition, distribution system, and product usage.
• Sample size determination: the number of markets and tests must account for the different variables in the market, while allowing for the fact that each test market adds cost to the launch budget and time to the product release cycle.

The test data drives evaluation and refinement of the marketing plan. Even after all the test results are in, adjustments to the product and other elements of the marketing mix may still be made. Additional testing may be required, or the product may be canceled.

The Launch

The product launch is truly the beginning of the implementation of a sustained marketing plan—a plan that will be analyzed, evaluated, and adjusted throughout the product life cycle. That said, there certain marketing techniques that figure more prominently during the launch phase.

Press Strategies

Often companies issue press releases about new products in order to increase visibility through earned media. The press release can be sent to targeted press outlets, posted on the company Web site, sent as an information message to customers, and distributed to industry influencers. The goal of the press strategy is to build broad visibility for the product, backed up by the credibility of the media outlet.

Price Discounts

Companies will sometime offer a price discount during a product launch. When we cover pricing in more detail in the next module, we will discuss when this can be an effective strategy.

Channel Partner Incentives

If the company depends on a partner to sell or distribute the pricing, it might choose to offer pricing discounts and incentives to the distribution partner. A new product carries some risk, and an incentive at launch can encourage channel partners that might be reluctant to add the new product or to sell it aggressively.

Evaluation

Though we are identifying “evaluation” here as the final stage of the development process, it should be clear that product evaluation is a recurring activity that begins with the idea-screening stage. Careful, objective evaluation of the product at every stage leads to better investment decisions and better products. The difference in this final stage of the process is that the marketer has the benefit of significant market data for the evaluation, which can help improve the marketing plan going forward. It is only at this stage—after the product launch—when the marketer can see which buyers purchase the product, how competitors respond, and how the new product interacts with the company’s other products in the marketplace.