New Product Developments
Why Develop New Products For Your Business
Every business needs to innovate to stay ahead of the competition. No business can continue to offer the same unchanged product; otherwise sales would decrease and profits reduced. In this article we will explore some of the reasons why a lack of product development can affect sales and profit.
The diagram below illustrates the reasons why firms develop new products.
Consumer Needs and Wants Change
Consumer "needs and wants" continuously change. Firms should respond to these changes through their products and services. Otherwise consumers will switch to competitor products that satisfy their "needs and wants". For example consumers are becoming more health conscious, this is forcing companies to introduce low sugar, salt and fat products. Coca-Cola Zero which contains no sugar is a classic example of new product development even though Coca-Cola's existing product range already contained diet coke. Both diet coke and Coca-Cola Zero contain no sugar but they taste different.
Product Reaches The End Of Its Product Life Cycle
The product maybe at the end of its Product Life Cycle, so the company may introduce new and improved updated versions. Microsoft has done this by moving from the Xbox to the Xbox 360 and now Xbox 360 limited editions allow Microsoft to refresh the product through small changes.
Product Is At The Maturity Stage Of The Product Life Cycle
The product might be at the maturity stage of its Product Life Cycle and need modifications to stimulate an increase in sales. Nintendo have replaced its DSi console with the 3DS console which contains additional features such as an extra camera so that you can film in 3D, a 3D screen which doesn't require glasses, a joystick and motion sensors.
There may be environmental changes which the company wants to capitalise on. Music companies are now selling more music via internet downloads than through traditional retail shops. Record companies were pushed into selling music through the internet following the success of the internet site Napster, which offered illegal music downloads. In April 2006 the song "Crazy" by Gnarls Barkley made history by becoming the first song to achieve the number one spot in the UK charts through music download sales only. In March 2011 Mercury Records stopped releasing singles on CD as by then 99% of single sales were through downloads.
Competitors may force change. This is very apparent in the technology market, where new products are constantly being introduced to a target market that welcomes change and innovation. Technology consumers are not afraid to try new products, in fact they often want the latest gadget to show to friends and colleagues. If a product is successful then competitors will attempt to develop similar products. In fact Google say that they developed the Android operating system to prevent the technology market for products such as mobile phones and tablets being dominated by one supplier.
All Products Experiencing Problems
If all of your products are experiencing poor sales or suffering from a negative reputation it is time to change your product offering. In 2001 the introduction of the Pod MP3 player reversed the fortunes of Apple Computers. Since then Apple has introduced the successful iPhone and iPad and increased its share price from $9.07 per share (Oct 2001) to over $400 per share.
New product development is an essential activity for all businesses. It helps you stay ahead of the competition. If you do not develop new products someone else will and steal all of your customers. The number of businesses that have gone into administration during the current world recession demonstrate the importance of change management.