An innovative idea for a new Product
In a food processing product firm, the research and development department is always in pursuit of more economical, feasible, and reliable products. The idea for a new product is presented by the research and development department along with its feasibility report for production. The department also presents recommendations on how this product would be better than any other proposed products to the management. An estimate of its production and processing costs is presented.
The next step is a close study by the marketing department of the region. The marketing department would ponder upon competitor analysis, are there any similar products in the market? If yes, then how would this product do better? If no, then how would a new product be perceived and responded to by the local customers? Every geographical location has different customer tastes and cultural orientations vary greatly. A product related to local farm products such as pineapple and guava may be extremely catchy in a far eastern country but maybe marginally successful in central Asian countries. On other hand, a typical mango or strawberry product may be more successful in south Asian countries considering the limited market of fresh juices and food products there. But that may be a nothing-new idea in Europe and North America. The marketing department conducts consumer surveys, including free distributions and interviews. They propose a name of the product and its physical form that would attract customers. In addition, the marketing department also proposes a suitable price of the product which would be a range of minimum and maximum possible market prices.
The next task is of the production department. After studying the report from the marketing and R&D departments, production managers undertake a cost-benefit analysis. What is the minimum margin possible? Considering the production facilities and all sales and distribution costs that would arise, will the product be profitable in long run. Mangers are not really concerned about short-term results; they foresee what the long-run prospects of the product are. In some cases, where the project is a huge innovative step regarding region and competitors, financial managers always consider “options” in the future. There are probabilities assigned to every future outcome, and the net present value is calculated for the project. After studying the cost-benefit analysis, and contribution margin approach, financial managers propose a new price. The top management then analyzes whether that price falls in the given price range from the marketing department.
Provided the product is found feasible in all respects, the management or Board of Directors give their consent to the launch. The R&D department considers whether there can be any betterment in the proposed design to make it more feasible for large-scale production. Now again the marketing department undertakes an extensive task. They need to market the new product on a huge scale just before the product arrives on the market.
Procurement is the next big step. Packing and graphic design on the product packing is a vital tool for marketing. Logo and packing design are finalized based on the marketing department’s initial surveys. In parallel, the sales department strives to make available the new product throughout the region. Distributors are independent contractors hired by the firm who distribute the goods in the market to retailers. Distributors assign salespersons are who convince major retailers to give shelf space. This step is never necessary in the case of big recognized food brands whose products capture the market in no time. However, almost all the firms undergo huge marketing campaigns, at the retailer level and customer level to ensure product success.