Product planning

Definition of Product Planning

• Product planning is the process of creating a pro
duct idea and following through on it until the pro
duct is introduced to the market. Additionally, a s
mall company must have an exit strategy for its
product in case the product does not sell. Produ
ct planning entails managing the product throug
hout its life using various marketing strategies, in
cluding product extensions or improvements, inc
reased distribution, price changes and promotio
ns.
Developing the Product Concept

• The first phase of product planning is developing

the product concept. Marketing managers usuall
y create ideas for new products by identifying ce
rtain problems that consumers must solve or vari
ous customer needs. For example, a small comp
uter retailer may see the need to create a compu
ter repair division for the products it sells. After t
he product idea is conceived, managers will start
planning the dimensions and features of the pro
duct. Some small companies will even develop a
product mock-up or model.
 Studying the Market

• The next step in the product planning process is studying the compe
tition. Most small companies will order secondary research informati
on from vendors such as the NPD Group and Forrester Research. S
econdary research usually provides details on key competitors and t
heir market share, which is the percent of total sales that they hold i
n the marketplace. Some companies may also do a SWOT analysis
(strengths, weaknesses, opportunities and threats), according to Net
MBA.com, which will help them compare their strengths and weakne
sses against those of key competitors. The business can then deter
mine places in which it has an advantage over the competition to ide
ntify areas of opportunity. For example, a small company with a high
-quality image may be able to find additional markets for its products
.
 Marketing Research

• A small company should consider doing both qualitative

and quantitative marketing research for its new product.
Focus groups are an example of qualitative information.
Focus groups allow companies to ask their consumers a
bout their likes and dislike of a product in small groups. A
focus group allows the company to tweak the product co
ncept before testing it through phone surveys--a more qu
antitative marketing research function. Phone surveys en
ables a company to test its product concept on a larger s
cale, the results of which are more predictable across th
e general population.
 Product Introduction

• If the survey results prove favorable, the compan

y may decide to sell the new product on a small
scale or regional basis. During this time, the com
pany will distribute the products in one or more c
ities. The company will run advertisements and s
ales promotions for the product, tracking sales re
sults to determine the products potential success
. If sales figures are favorable, the company will t
hen expand distribution even further. Eventually,
the company may be able to sell the product on
a national basis.
 Product Life Cycle

• Product planning must also include managing the produc

t through various stages of its product life cycle. These st
ages include the introduction, growth, maturity and declin
e stages, according to QuickMBA.com. Sales are usually
strong during the growth phase, while competition is low.
However, continued success of the product will pique the
interest of competitors, which will develop products of th
eir own. The introduction of these competitive products
may force a small company to lower its price. This low pr
icing strategy may help prevent the small company from l
osing market share. The company may also decide to be
tter differentiate its product to keep its prices steady. For
example, a small cell phone company may develop new,
useful features on its cell phones that competitors do not
have.
Marketing Tips for a New Produc
t
• Small companies constantly develop new produ
cts as people start businesses, consumer needs
change or a new technology is introduced. Creat
ing new products takes a lot of capital and effort.
Companies must arrange for the production of th
e product, then determine the channels in which
the product will be sold. A number of marketing ti
ps for a new product can improve its chances for
success.
 Conduct Marketing Research

• Marketing research can better help a company determine if consum

ers like the product, or whether the product needs to be modified bef
ore introducing it. Many small companies use focus groups to test th
eir product concept or idea, which entails observing customer respo
nses about the product through a one-way mirror. During focus grou
ps, customers are usually asked what they like or dislike about the p
roduct concept, including features, flavor, size, ease of us and even
the price. Subsequently, marketers can use the information to make
the necessary changes to the product.
• On a larger scale, a company can conduct phone surveys among cu
stomers to test the product concept before its introduction. Phone su
rvey results can be an effective indicator of a product's potential suc
cess because of the large-sample size. One important question to a
sk customers in a phone survey is whether they plan to buy the prod
uct.
 Conduct Beta Test

• During a Beta test, a small company should start selling t

he product in several test markets in different areas of th
e country. The markets should be similar in size to avoid
skewing results. Marketers should run the Beta test just
as they would a full-fledged marketing campaign, with pri
nt, radio and television advertising, sales promotions and
full distribution. The company can then run the Beta test
for several months or longer and evaluate sales and profi
ts. If the Beta tests prove favorable, the company should
start rolling the product out on a more regional or nationa
l level.
 Study Competition

• Once a company introduces the product, it should continue to study

the competition, according to the article titled "Marketing Tips for La
unching a New Product" at Morebusiness.com. Read about competit
ors on the Internet, or locate industry information through secondary
research purveyors, such as Forrester Research or the NPD Group.
• Conduct a SWOT analysis, which stands for strengths, weaknesses,
opportunities and threats, to determine strengths and weaknesses of
the product and company vs. key competitors and their products. Fo
r example, a small company may have a high-quality product, a stre
ngth, but little is know about its brand, a weakness. In a SWOT anal
ysis, a company can take advantage of its strengths by identifying o
pportunities in the market. For example, a small whirlpool manufactu
rer may acquire greater distribution among top kitchen and bath sho
wrooms because of its high-quality products.
 Target Right Customers

• A small company should always target the right

customers. The best way to accomplish this is b
y distributing warranty cards that contain demogr
aphic questions. Warranty cards should be sent
out with each product. The company should then
develop a profile of the typical customer. For exa
mple, information from warranty cards may show
that most customers are men, 35 to 54 years old
with incomes more than $75,000 yearly. The co
mpany can then use the customer profile inform
ation to better target their customers when adver
tising.
Product life cycle
• As consumers, we buy millions of products every year. A
nd just like us, these products have a life cycle. Older, lo
ng-established products eventually become less popular,
while in contrast, the demand for new, more modern goo
ds usually increases quite rapidly after they are launched
.
• Because most companies understand the different produ
ct life cycle stages, and that the products they sell all hav
e a limited lifespan, the majority of them will invest heavil
y in new product development in order to make sure that
their businesses continue to grow.
• Product Life Cycle Stages Explained
• The product life cycle has 4 very clearly de
fined stages, each with its own characteris
tics that mean different things for business
that are trying to manage the life cycle of t
heir particular products.
• Introduction
• The first of the four product life cycle stages is the Introduction Stage. Any
business that is launching a new product needs to appreciate that this initial
stage could require significant investment. This isn’t to say that spending a l
ot of money at this stage will guarantee the product’s success. Any investm
ent in research and new product development has to be weighed up against
the likely return from the new product, and an effective marketing plan will n
eed to be developed, in order to give the new product the best chance of ac
hieving this return.
• Challenges of the Introduction Stage
• Small or no market: When a new product is launched, there is typically no
market for it, or if a market does exist it is likely to be very small. Naturally th
is means that sales are going to be low to start off with. There will be occasi
ons where a great new product or fantastic marketing campaign will create s
uch a buzz that sales take off straight away, but these are generally special
cases, and it often takes time and effort before most products achieve this ki
nd of momentum
• High costs: Very few products are created without some
research and development, and once they are created,
many manufacturers will need to invest in marketing and
promotion in order to achieve the kind of demand that wil
l make their new product a success. Both of these can c
ost a lot of money, and in the case of some markets thes
e costs could run into many millions of dollars.
• Losses, Not Profits: With all the costs of getting a new
product to market, most companies will see negative prof
its for part of the Initial Stage of the product life cycle, alt
hough the amount and duration of these negative profits
does differ from one market to another. Some manufactu
rers could start showing a profit quite quickly, while for c
ompanies in other sectors it could take years.
• Benefits of the Introduction Stage
• Limited competition: If the product is truly original and a business i
s the first to manufacture and market it, the lack of direct competition
would be a distinct advantage. Being first could help an organisation
to capture a large market share before other companies start launchi
ng competing products, and in some instances can enable a busines
s’s brand name to become synonymous with the whole range of pro
ducts, like Walkman, Biro, Tannoy and Hoover.
• High Price: Manufacturers that are launching a new product are ofte
n able to charge prices that are significantly above what will eventua
lly become the average market price. This is because early adopters
are prepared to pay this higher price to get their hands on the latest
products, and it allows the company to recoup some of the costs of
developing and launching the product. In some situations however,
manufacturers might do the exact opposite and offer relatively low pr
ices, in order to stimulate the demand.
• Product Life Cycle Management
• The initial stage of the product life cycle is all ab
out building the demand for the product with the
consumer, and establishing the market for the pr
oduct. The key emphasis will be on promoting th
e new product, as well as making production mo
re cost-effective and developing the right distribu
tion channels to get the product to market.
• Growth
• The Growth stage is the second of stages in the product
life cycle, and for many manufacturers this is the key sta
ge for establishing a product’s position in a market, incre
asing sales, and improving profit margins. This is achiev
ed by the continued development of consumer demand t
hrough the use of marketing and promotional activity, co
mbined with the reduction of manufacturing costs. How s
oon a product moves from the Introduction stage to the
Growth stage, and how rapidly sales increase, can vary
quite a lot from one market to another.
• Challenges of the Growth Stage
• Increasing Competition: When a company is the first one to introduce a pr
oduct into the market, they have the benefit of little or no competition. Howe
ver, when the demand for their product starts to increase, and the company
moves into the Growth phase of the product life cycle, they are likely to face
increased competition as new manufacturers look to benefit from a new, de
veloping market.
• Lower Prices: During the Introduction stage, companies can very often cha
rge early adopters a premium price for a new product. However, in respons
e to the growing number of competitors that are likely to enter the market du
ring the Growth phase, manufacturers may have to lower their prices in orde
r to achieve the desired increase in sales.
• Different Marketing Approach: Marketing campaigns during the Introducti
on stage tend to benefit from all the buzz and hype that surrounds the launc
h of a new product. But once the product becomes established and is no lon
ger ‘new’, a more sophisticated marketing approach is likely to be needed in
order to make the most of the growth potential of this phase.
• Benefits of the Growth Stage
• Costs are Reduced: With new product development and marketing, the Intr
oduction stage is usually the most costly phase of a product’s life cycle. In c
ontrast, the Growth stage can be the most profitable part of the whole cycle
for a manufacturer. As production increases to meet demand, manufacturer
s are able to reduce their costs through economies of scale, and establishe
d routes to market will also become a lot more efficient.
• Greater Consumer Awareness: During the Growth phase more and more
consumers will become aware of the new product. This means that the size
of the market will start to increase and there will be a greater demand for th
e product; all of which leads to the relatively sharp increase in sales that is c
haracteristic of the Growth stage.
• Increase in Profits: With lower costs and a significant increase in sales, mo
st manufacturers will see an increase in profits during the Growth stage, bot
h in terms of the overall amount of profit they make and the profit margin on
each product they sell.
• Product Life Cycle Management
• The standard Product Life Cycle Curve typically
shows that profits are at their highest during the
Growth stage. But in order to try and ensure that
a product has as long a life as possible, it is ofte
n necessary for manufacturers to reinvest some
of those profits in marketing and promotional acti
vity during this stage, to help guarantee continue
d growth and reduce the threat from the competit
ion.
• Maturity
• After the Introduction and Growth stages, a prod
uct passes into the Maturity stage. The third of th
e product life cycle stages can be quite a challen
ging time for manufacturers. In the first two stag
es companies try to establish a market and then
grow sales of their product to achieve as large a
share of that market as possible. However, durin
g the Maturity stage, the primary focus for most
companies will be maintaining their market shar
e in the face of a number of different challenges.
• Challenges of the Maturity Stage
• Sales Volumes Peak: After the steady increase in sales during the Growth
stage, the market starts to become saturated as there are fewer new custo
mers. The majority of the consumers who are ever going to purchase the pr
oduct have already done so.
• Decreasing Market Share: Another characteristic of the Maturity stage is th
e large volume of manufacturers who are all competing for a share of the m
arket. With this stage of the product life cycle often seeing the highest levels
of competition, it becomes increasingly challenging for companies to maintai
n their market share.
• Profits Start to Decrease: While this stage may be when the market as a w
hole makes the most profit, it is often the part of the product life cycle where
a lot of manufacturers can start to see their profits decrease. Profits will hav
e to be shared amongst all of the competitors in the market, and with sales li
kely to peak during this stage, any manufacturer that loses market share, an
d experiences a fall in sales, is likely to see a subsequent fall in profits. This
decrease in profits could be compounded by the falling prices that are often
seen when the sheer number of competitors forces some of them to try attra
cting more customers by competing on price.
• Benefits of the Maturity Stage
• Continued Reduction in Costs: Just as economies of scale in the
Growth stage helped to reduce costs, developments in production c
an lead to more efficient ways to manufacture high volumes of a part
icular product, helping to lower costs even further.
• Increased Market Share Through Differentiation: While the mark
et may reach saturation during the Maturity stage, manufacturers mi
ght be able to grow their market share and increase profits in other
ways. Through the use of innovative marketing campaigns and by of
fering more diverse product features, companies can actually improv
e their market share through differentiation and there are plenty of pr
oduct life cycle examples of businesses being able to achieve this.
• Product Life Cycle Management in the Maturity Stage
• The Maturity stage of the product life cycle presents man
ufacturers with a wide range of challenges. With sales re
aching their peak and the market becoming saturated, it
can be very difficult for companies to maintain their profit
s, let alone continue trying to increase them, especially i
n the face of what is usually fairly intense competition. D
uring this stage, it is organizations that look for innovativ
e ways to make their product more appealing to the cons
umer that will maintain, and perhaps even increase, their
market share
• Decline
• The last of the product life cycle stages is the D
ecline stage, which as you might expect is often
the beginning of the end for a product. When yo
u look at the classic product life cycle curve, the
Decline stage is very clearly demonstrated by th
e fall in both sales and profits. Despite the obvio
us challenges of this decline, there may still be o
pportunities for manufacturers to continue makin
g a profit from their product.
• Challenges of the Decline Stage
• Market in Decline: During this final phase of the product life cycle, the marke
t for a product will start to decline. Consumers will typically stop buying this
product in favour of something newer and better, and there’s generally not
much a manufacturer will be able to do to prevent this.
• Falling Sales and Profits: As a result of the declining market, sales will start
to fall, and the overall profit that is available to the manufacturers in the mar
ket will start to decrease. One way for companies to slow this fall in sales an
d profits is to try and increase their market share which, while challenging e
nough during the Maturity stage of the cycle, can be even harder when a m
arket is in decline.
• Product Withdrawal: Ultimately, for a lot of manufacturers it could get to a p
oint where they are no longer making a profit from their product. As there m
ay be no way to reverse this decline, the only option many business will hav
e is to withdraw their product before it starts to lose them money.
• Benefits of the Decline Stage
• Cheaper Production: Even during the Decline stage, there may be o
pportunities for some companies to continue selling their products at
a profit, if they are able to reduce their costs. By looking at alternativ
e manufacturing options, using different techniques, or moving prod
uction to another location, a business may be able to extend the prof
itable life of a product.
• Cheaper Markets: For some manufacturers, another way to continue
making a profit from a product during the Decline stage may be to lo
ok to new, cheaper markets for sales. In the past, the profit potential
from these markets may not have justified the investment need to en
ter them, but companies often see things differently when the only ot
her alternative might be to withdraw a product altogether.
• Product Life Cycle Management
• Many products going through the Decline stage of the product life cy
cle will experience a shrinking market coupled with falling sales and
profits. For some companies it will simply be a case of continuing to
manufacture a product as long as it is economically viable, but withd
rawing it as soon as that’s not the case. However, depending on the
particular markets involved, some companies may be able to extend
the life of their product and continue making a profit, by looking at alt
ernative means of production and new, cheaper markets. Even in th
e Decline stage, a product can still be viable, and the most successf
ul manufacturers are those that focus on effective product life cycle
management, allowing them to make the most from the potential of
each and every product the company launches.
New Product Development Stage
s
• Before a product can embark on its journey thro
ugh the four product life cycle stages, it has to b
e developed. New product development is typica
lly a huge part of any manufacturing process. Mo
st organizations realize that all products have a li
mited lifespan, and so new products need to be
developed to replace them and keep the compa
ny in business. Just as the product life cycle has
various stages, new product development is also
broken down into a number of specific phases.
• New Product Development
• Developing a new product involves a number of stages which typically center arou
nd the following key areas:
• The Idea: Every product has to start with an idea. In some cases, this might be fai
rly simple, basing the new product on something similar that already exists. In oth
er cases, it may be something revolutionary and unique, which may mean the ide
a generation part of the process is much more involved. In fact, many of the leadin
g manufacturers will have whole departments that focus solely on the task of comi
ng up with ‘the next big thing’.
• Research: An organization may have plenty of ideas for a new product, but once i
t has selected the best of them, the next step is to start researching the market. T
his enables them to see if there’s likely to be a demand for this type of product, an
d also what specific features need to be developed in order to best meet the need
s of this potential market.
• Development: The next stage is the development of the product. Prototypes may
be modified through various design and manufacturing stages in order to come up
with a finished product that consumers will want to buy.
• Testing: Before most products are launched and the manufacturer spends a large
amount of money on production and promotion, most companies will test their ne
w product with a small group of actual consumers. This helps to make sure that th
ey have a viable product that will be profitable, and that there are no changes that
need to be made before it’s launched.
• Analysis: Looking at the feedback from consumer testing enables th
e manufacturer to make any necessary changes to the product, and
also decide how they are going to launch it to the market. With infor
mation from real consumers, they will be able to make a number of s
trategic decisions that will be crucial to the product’s success, includi
ng what price to sell at and how the product will be marketed.
• Introduction: Finally, when a product has made it all the way throug
h the new product development stage, the only thing left to do is intr
oduce it to the market. Once this is done, good product life cycle ma
nagement will ensure the manufacturer makes the most of all their ef
fort and investment.
• Thousands of new products go on sale every year, and manufacture
rs invest a lot of time, effort and money in trying to make sure that a
ny new products they launch will be a success. Creating a profitable
product isn’t just about getting each of the stages of new product de
velopment right, it’s also about managing the product once it’s been
launched and then throughout its lifetime.
 Product Life Cycle Examples

• Most consumers probably aren’t aware of the pr

oduct life cycle stages. Even though they make
a conscious decision to switch from one product
to another, this is more due to personal taste or
simply wanting the have the latest and best, rath
er than an appreciation of which stage of its life c
ycle a product may be going through.
• But if you look at the trends in key markets over t
he last couple of decades, even just the last few
years, consumer demand for particular products
can provide some very good product life cycle ex
amples.
• Product Life Cycle Examples
• The traditional product life cycle curve is broken up into four key sta
ges. Products first go through the Introduction stage, before passing
into the Growth stage. Next comes Maturity until eventually the prod
uct will enter the Decline stage. These examples illustrate these stag
es for particular markets in more detail.
• 3D Televisions: 3D may have been around for a few decades, but o
nly after considerable investment from broadcasters and technology
companies are 3D TVs available for the home, providing a good exa
mple of a product that is in the Introduction Stage.
• Blue Ray Players: With advanced technology delivering the very bes
t viewing experience, Blue Ray equipment is currently enjoying the s
teady increase in sales that’s typical of the Growth Stage.
• DVD Players: Introduced a number of years ago, manufacturers that
make DVDs, and the equipment needed to play them, have establis
hed a strong market share. However, they still have to deal with the
challenges from other technologies that are characteristic of the Mat
urity Stage.
• Video Recorders: While it is still possible to purchase VCRs this is a
product that is definitely in the Decline Stage, as it’s become easier
and cheaper for consumers to switch to the other, more modern for
mats.
• Another example within the consumer electronics sector also shows
the emergence and growth of new technologies, and what could be t
he beginning of the end for those that have been around for some ti
me.
• Holographic Projection: Only recently introduced into the market, hol
ographic projection technology allows consumers to turn any flat surf
ace into a touchscreen interface. With a huge investment in researc
h and development, and high prices that will only appeal to early ad
opters, this is another good example of the first stage of the cycle.
• Tablet PCs: There are a growing number of tablet PCs for consumer
s to choose from, as this product passes through the Growth stage o
f the cycle and more competitors start to come into a market that rea
lly developed after the launch of Apple’s iPad.
• Laptops: Laptop computers have been around for a number of years
, but more advanced components, as well as diverse features that a
ppeal to different segments of the market, will help to sustain this pr
oduct as it passes through the Maturity stage.
• Typewriters: Typewriters, and even electronic word processors, hav
e very limited functionality. With consumers demanding a lot more fr
om the electronic equipment they buy, typewriters are a product that
is passing through the final stage of the product life cycle.