In today’s world business moves fast and always tries to stay at the front of society. Research, development, and innovation have become necessary in order to assure an ever-increasing margin of profit and market share. The development of a new product is always welcomed within companies but it also generates “fears”. It is the uncertainty of the future, if this product will, or will not, be a success and thus generate more revenue and a better market positioning than the previous ones. This is part of the risk process a business has. This is why the Research and Development Departments inside the companies have become so important.
But here one has to take into account different perspectives. The first one is that the market is keen to learn what is underway. Customers like to be informed of developing projects a company has. But these projects attract the interest of other rival companies and investors as well. Competition is keen to know what are you developing in order to respond with their own strategies and product development. Investors, on the other hand, like to know what are you developing in order to make their decisions on whether to invest their money in your enterprise or not. This, the situation leaves the managing board of a company with the dilemma: to make a public information campaign of the new product being developed in order to serve as marketing for it or not to release much information, if not any information at all, about it in order not to let competition respond to this new product.
In either case, there will be an effect on the sales and image of the current products the company offers. If the company undertakes an “aggressive” marketing campaign of the product being developed it will undermine the public image of the current production line. This is because customers may decide to wait for this new product and prefer not to spend on the current products the company already has in the market. And this is a natural reaction because you are marketing it as a new, improved, version of the existing ones, or even a totally new product that will replace completely the existing ones. In this case, some authors argue that the company should direct its entire resources on the new developing lines of products in order to give a clear message to the customers and to the competition that this new product is higher in quality and value than previous ones. This sort of message will help build up confidence for the new product even prior to its launch (Taylor, 2006, p. 14). Of course existing products will suffer market loss and retreat until extension maybe but the company will benefit more from the revenues generated by this new line of products.
On the other side, there are those who believe that such a strategy will damage the company and it can even harm it fatally. They point out that it is a mistake by a company to put much of its resources into the development of a new product because one cannot be sure of the consumer response. If a company has good brand recognition for the actual products it offers, it should keep its status as long as possible even after the launch of the new products.
This way the company can figure out a strategy to have a smoother transition from the existing products to the new ones. This smoother transition will protect the company from possible market ‘shocks’ that might happen if it were to direct much of its efforts in the new product development.
But here one has to take into account different perspectives. The first one is that the market is keen to learn what is underway. Customers like to be informed of developing projects a company has. But these projects attract the interest of other rival companies and investors as well. Competition is keen to know what are you developing in order to respond with their own strategies and product development. Investors, on the other hand, like to know what are you developing in order to make their decisions on whether to invest their money in your enterprise or not. This, the situation leaves the managing board of a company with the dilemma: to make a public information campaign of the new product being developed in order to serve as marketing for it or not to release much information, if not any information at all, about it in order not to let competition respond to this new product.
In either case, there will be an effect on the sales and image of the current products the company offers. If the company undertakes an “aggressive” marketing campaign of the product being developed it will undermine the public image of the current production line. This is because customers may decide to wait for this new product and prefer not to spend on the current products the company already has in the market. And this is a natural reaction because you are marketing it as a new, improved, version of the existing ones, or even a totally new product that will replace completely the existing ones. In this case, some authors argue that the company should direct its entire resources on the new developing lines of products to give a clear message to the customers and to the competition that this new product is higher in quality and value than previous ones. This sort of message will help build up confidence for the new product even before its launch (Taylor, 2006, p. 14). Of course existing products will suffer market loss and retreat until extension maybe but the company will benefit more from the revenues generated by this new line of products.
On the other side, there are those who believe that such a strategy will damage the company and it can even harm it fatally. They point out that it is a mistake by a company to put much of its resources into the development of a new product because one cannot be sure of the consumer response. If a company has good brand recognition for the actual products it offers, it should keep its status as long as possible even after the launch of the new products.
This way the company can figure out a strategy to have a smoother transition from the existing products to the new ones. This smoother transition will protect the company from possible market ‘shocks’ that might happen if it were to direct much of its efforts in the new product development.
References:
Taylor, W. (2006). Introduction to Management. Ninth Edition. Prentice Hall: New Jersey.
Gomez-Mejia, Luis R.; David B. Balkin and Robert L. Cardy (2008). Management: People, Performance, Change. 3rd edition. New York: McGraw-Hill.