RIFT VALLEY TECHNICAL TRAINING INSTITUTE

HEALTH SCIENCES DEPARTMENT

PRODUCT DEVELOPMENT, MARKETING AND SALES NOTES

1.1 INTRODUCTION TO PRODUCT DEVELOPMENT

Product development is the complete process of taking an idea from concept to delivery and
beyond. Whether you are delivering a brand new offering or enhancing an existing product,
the product development cycle begins long before anything is built.
Product development typically refers to all stages involved in bringing a product from
concept or idea through market release and beyond
Product Development Cycle
What Is the Product Development Cycle?
The product development cycle is the process of taking a product from an idea through its
market release and beyond. This cycle involves many departments in a company: product
managers, developers, designers, Quality Assurance testers, and others.
Production plan

What Are the Product Development Cycle Stages?

There is no universal definition of the product development cycle. Businesses disagree
about how many stages the cycle includes. Even those who agree on the number of steps
disagree about where one ends and the next starts.
Another point of disagreement: Some teams believe the cycle goes only as far as the product
launch. Other companies including Product Plan believe the cycle continues beyond the
product’s market release and includes improvements to the product over time.
Here is how we define what we view as the seven stages of the product development cycle.
You can use these steps as a guide to creating your own product development strategy.
Stage 1: Develop the idea.
This is the brainstorming stage. The product team looks for ways to solve problems for their
user personas. During this phase, the team will generate several product ideas.
Stage 2: Validate the idea.
By the end of the first stage, the team will have a long list of product concepts. The goal
now is to narrow the list to one product or feature worth pursuing. There are several ways of
screening ideas to learn which are the most viable.
For example, the team can weigh each product idea according to a consistent set of criteria.
One way to do this is with the weighted scoring feature in Product Plan’s roadmap app.
The team should also screen its product concepts by speaking with its ideal customer user
personas. These are the people likely to buy a product from the company, so their view on
the list of ideas should carry weight. For example, A student with innovative nutrition
product for weight again would speak to customers who are on wait gain programs if they
can consider their products e.g. based on contents, test, presentation etc.

Stage 3: Build a prototype.

For a company that develops software, the engineering team can create a very simple
mockup of the application. They could even develop only a wireframe.
If the business manufacturers physical products, the team might want to build a physical
prototype and give it to a focus group or small group of customers for their feedback.
Stage 4: Create the messaging/market strategy.
In parallel with building and sharing the prototype, the product team will be working with
the marketing department to create the product’s market strategy. This will include:
1. Developing the product’s value proposition
2. Creating tools and materials for the sales department
 3. Building marketing and advertising campaigns
Note: The marketing team can work on the product’s messaging and materials
simultaneously as the developers build the prototype or mockup. But the product team
should share their focus-group feedback with marketing as soon as possible. For example,
they should let marketing know what these early users found most useful about the product.
Stage 5: Build the product.
After gathering focus-group feedback about its prototype or mockup, the team is now ready
to build a minimum viable product (MVP).
This does not need to be the full-featured product the team envisioned during its
brainstorming session. The team will have time to build out the product. The goal now is to
ship an MVP as quickly as possible. The sooner the company puts a working version of its
product into users’ hands, the sooner it can receive useful feedback to improve the product.
Stage 6: Release the product.
After developing and testing its MVP, the company is now ready to launch it to the public.
The MVP will help the company gain several important insights at once, including:
The level of market interest (and whether it is higher or lower than the company’s research
suggested).
The types of buyer or user personas signing up for the product (and whether or not these are
the people the product team anticipated would show the most interest).
How real users react to the product (and whether or not this data aligns with the company’s
assumptions).
Note: At this point, the marketing team has likely been running a campaign to generate
interest. The sales department has probably reached out to prospects to let them know the
product will be available soon.

Stage 7: Improve the product.

Finally, the product team will take real-world feedback from its early users to improve the
product.
In fact, the team will likely take this user data and repeat several of the stages above. For
example, they might return to Stage 5 (build new functionality or fix existing functionality),
then move to Stage 6 (release the updated product and analyze user feedback), and then
return to Stage 7 (apply that feedback to make the product still better).
This is why we believe the product development cycle does not end once the product first
hits the market. Product teams should be continuing to develop their products well after
launch.
In snap shot
Product development process involves:
1. Idea generation,
2. Idea screening,
3. Concept development, and testing,
4. Market strategy/business analysis,
5. Product development, market testing
6. Market entry/commercialization

1.2 IDEA GENERATION AND CONCEPT DEVELOPMENT

The topic covers;
1. Source of idea
2. Idea processing
3. Information gathering
4. Information evaluation
5. Feasibility analysis
Introduction
A business opportunity is an attractive idea, which provides the possibility of a return for the
entrepreneur taking the risk. Such opportunities are presented by customer requirements and
leads to the provision of a product or service which creates or adds value to the buyers.
What is a Business Idea?
 An opportunity in the environment which, can be translated into a business Activity
 The existence of a situation in the environment, which, can be advantageously turned
into a business activity.
 The existence of an opportunity, which can be exploited for making money through the
operation of business activities.
Why search and evaluate business ideas?
 There are so many business opportunities available at any one time and the
requirements for translating them into business activities differ between each of them.
 The need to develop a competitive edge by providing something new that has little or
no competition
 The success and profitability differ between various business opportunities, hence need
to pick one with profit and success potential.
Ways of generating business ideas
Business ideas can be generated through various ways. These include:
1. Identifying a need in the community: people usually have many unsatisfied needs. By
carrying out a market survey on the location where you need to establish your business and
talking to the potential customer may reveal gaps in that market.
2. Market research: Conduct a market survey and try to identify business opportunities
existing in the market. People may be requiring new product/services or the ones existing
could be having several weaknesses. These are good opportunities for you.
3. Listening to complaints of customers so that you improve an existing business.
4. Brainstorming: This involves sitting in a group and trying to think of as many possible
businesses as possible using the ‘freewheel ’policy. Take time and digest all the suggested
ideas as a basis for making the final decision on the one most suitable for you.
5. Creativity – By looking at things in a new way and combining two or more ideas in a
new way, such as, one stop shopping spots for customers e.g. a restaurant and a salon
combination.
6. Business ideas can also be generated through developing personal hobbies and
discussions with friends
Reasons for generating business ideas
You need an idea and a good one at that for business.
A good idea is essential for a successful business venture both for start-up and to stay
competitive afterwards.
Respond to market needs – markets are made up essentially of customers who
have needs and wants waiting to be satisfied. Those people or firms who are able to satisfy
these requirements are rewarded.
Changing fashions and requirements – provide opportunities for entrepreneurs to respond
to demand with ideas, products and services.
Stay ahead of the competition – remember, if you do not come up with new ideas,
products and services, a competitor will. The challenge is to be different or better than
others.
Technology – do things better. Technology has become a major competitive tool in today’s
markets, with the rate of changing forcing many firms to innovate.
Product life cycle – all products have a definite life. As the product life chart shows, even
new products eventually become obsolete or outmoded. Thus, there is need to plan for new
products and the growth of these. The firm’s prosperity and growth depend on its ability to
introduce new products and manage their growth.
Spread risk and allow for failure- linked to the product life cycle concept is the finding
that over 80 per cent of new products fail. It is necessary, therefore for firms to try and
spread their risk and allow for failures that may occur from time to time by constantly
generating new ideas.
Guidelines for Business Idea Generation Process
a) Think of as many ideas as possible
b) Go out, look and listen.
c) Always analyse ideas carefully before finally selecting which ones to implement.
d) Be simple
e) Start small. “If you want to go somewhere start small” .
Evaluation of business opportunities
A good business opportunity must fulfil or be the following:
1. Demand i.e. it should respond to unsatisfied needs or requirements of customers who
have ability to purchase and are willing to exercise that choice.
2. Return on investment – provide durable, timely and acceptable returns or rewards for the
risk and effort required.
3. Competitive – Equal to or better from the viewpoint of the customer than other
available products or services.
4. Meet objectives – meet the goals and aspirations of the person taking the risk
5. Available resources and competencies – be within the reach of the entrepreneur in terms
of resource, competency, legal requirements etc.
Methods of evaluating a business opportunity
There are usually three methods:
1) Market survey
It gives a quick indication of the potential of the business in terms of volume of sales,
market share and continued demand for the product/service which you want to sell.
2) Environmental assessment
It involves the following factors
a) Technology
b) Business and economic trends
c) Resource availability
d) Existing infrastructure
e) Social science and
f) Government policy and laws
3) Feasibility/viability studies
This involves an extensive survey of the following;
a) Technical analysis
b) Marketing analysis
c) Financial analysis
d) Management and organization analysis
e) Economic factors
Sources of Business Ideas
1. Customers
Prospective customers know best what they want and the habits/tastes that will be popular
shortly.
New product or service ideas may come from customers’ reactions to the present product
and the expected product idea. Contacts with prospective consumers can also reveal the
features that should be built into a product or service. Care needs to be taken to ensure that
the idea or need represents a large enough market to support a new venture.
2. Existing organization
Competing products and services of existing organizations and evaluation there of is a
successful source of new ideas. Frequently, this analysis uncovers ways to improve on these
offerings, resulting in a new product that has more market appeal.
The analysis of profitability and break-even level of various industries or organizations
indicate promising investment opportunities which are profitable and relatively risk-free.
An examination of the capacity utilization of various industries provides information about
the potential for further investment.
3. Distribution channels
Member of the distribution channels; intermediaries, transient customer preference, and
possible expectations may be a good business idea. Not only do channel members frequently
have suggestions for completely new products, but they can also help in marketing the
entrepreneur’s newly developed products.
4. Government
The government can be a source of new product ideas in many ways. First, the files of the
Patent Office contain numerous new product possibilities. They can suggest other more
marketable new product ideas.
Secondly, new product ideas can respond to government regulations, industrial policy,
investment guidelines, annual plan, Five-year plan, etc.
Thirdly, several government agencies nowadays assist entrepreneurs in discovering
evaluating business ideas.
Fourthly, government publications on trade and industry can also help set new venture
ideas.
5. Financial institutions and Development Agencies
These organizations also provide ready projects and offer suggestions to Potential
entrepreneurs who help identify promising projects.
6. Research and Development
The entrepreneur’s own “research and development” is the largest source of new ideas. It
may be a more formal endeavor connected with one’s current employment or an informal
laboratory in the private premises. Formal institutional research and development are often
better equipped, enabling the entrepreneur to conceptualize and develop successful new
product ideas.
But many amazing product ideas have come from informal research endeavors at the
private level.
7. Trade Shows, Fairs aid Exhibitions
These sources display new products and innovations in processes and services.
An innovative entrepreneur can get product ideas to adapt or modify and produce with
indigenous materials and technology.
8. Focus Groups
Focus groups are good sources of product ideas.
A moderator leads a group of people through an open, in-depth discussion rather than
simply asking questions to solicit participant response; for a new product area, the
moderator focuses the group’s discussion in either a directive or a nondirective manner.
The group of 8 to 14 participants is stimulated by comments from other group members to
conceptualize and develop a new product idea to fulfill market needs.
This is an excellent method for initially screening ideas and concepts too.
9. Brainstorming
The brainstorming method for generating new product ideas is based on the fact
that people can be stimulated to greater creativity by meeting with others and participating
in organized group experiences. This method would be effective if the effort focuses on a
specific product or market area.
The following four rules should be followed when using this
method:
1. No criticism is allowed by anyone in the group – no negative comments.
2. Freewheeling is encouraged- the wilder the idea, the better.
3. Quantity of ideas is desired- the greater the number of ideas, the greater the likelihood of
useful ideas emerging.
4. Combinations and improvements of ideas are encouraged – ideas of others can still
produce another new idea.
The brainstorming session should be fun, with no one dominating or instituting the
discussion.
[Link] Notebook Method In the collective notebook method, a small notebook that
easily it’s in a pocket, containing a statement of the problem, blank pages, and any pertinent
background data, is distributed. Participants consider the problem and its possible solutions,
recording ideas at least once but preferably three times a day. At the end of the month, a list
of the best ideas is developed, along with any suggestions.
[Link] Method
A new idea is developed through a lot of related issues or suggestions.
The entrepreneur can use the list of questions or statements to guide the direction of
developing entirely new ideas or concentrating on specific “idea” areas. The checklist may
take any form and be of any length.
[Link] Method
Synectic is a creative process that forced individuals to solve problems through four
analogy mechanisms: ‘ personal, direct, symbolic, and fantasy. A group works through a
two-step process.
The first step is to make the strange familiar.
Through generalizations or models, this involves consciously reversing the order of things
and putting the problem into a readily acceptable or familiar perspective, thereby
eliminating the strangeness.
Once the strangeness is eliminated, participants engage in the second step, making the
familiar strange through personal, direct, orsymbolic analogy, which ideally results in a
unique solution being developed.
[Link] Approach
The big dream approach to coming up with a new idea requires that the entrepreneur
dreams about the problem and Its solution- thinking big.
Every possibility should be recorded and investigated without regard to all the negatives
involved or the resources required.
In other words, ideas should be conceptualized without any constraints until an idea is
developed into a workable form.
15. Market Gap Analysis
Market gap analysis is a powerful method used to uncover areas in the market in
Which the needs and wants far exceed the supply.
This method has a hopper or gathering effect of converting everyday information into
bunches of lucrative product and service gaps that few have thought of before.
[Link]-style analysis Method
Entrepreneurs can use lifestyle analysis effusively for product-service ideas. Lifestyle is a
person’s pattern of living expressed in his or her psychographics .It involves measuring
consumers’ major activities (work, hobbies, shopping, sports, social events), interests (food,
fashion, family, recreation), and opinions (about themselves, social issues, business,
products).
The lifestyle analysis will help entrepreneurs understand new needs and want under the
changed conditions. It will also reflect the changing consumer values that may be a good
source of product-service ideas.
Other sources of business ideas
a. Hobbies/interests
b. Personal skills and experience
c. Mass media (newspapers, magazines, TV, Internet)
d. Creativity
e. Innovation
f. Seminars and workshops
g. Vocational trainings

1.3 PROTOTYPE PRODUCTION &TESTING

• Prototype
• is an early sample, model, or release of a product built to test a concept or process
e.g a supplement sample
• Prototype testing
• Evaluating the product before it is officially released to check whether it performs all
its functions correctly.
• This investigation makes your project come to life

Functions of Prototype
• Used to evaluate a new design to enhance precision by product analysts and users.
• It serves to provide specifications for a real, working product rather than a
theoretical one
• In some design workflow models, is the step between the formalization and
the evaluation of an idea
• Identifying objects, behaviours and concepts which are considered the accepted
norm
• Prototype is the original form.
Types of prototypes
 • Prototypes explore different aspects of an intended design:
• A proof-of-principle prototype serves to verify some key functional aspects of the
intended design, but usually does not have all the functionality of the final product.
• A working prototype represents all or nearly all of the functionality of the final
product.
• A visual prototype represents the size and appearance, but not the functionality, of
the intended design.
• A form study prototype is a preliminary type of visual prototype in which the
geometric features of a design are emphasized, with less concern for color, texture,
or other aspects of the final appearance.
• A user experience prototype represents enough of the appearance and function of
the product that it can be used for user research.
• A functional prototype captures both function and appearance of the intended
design, though it may be created with different techniques and even different scale
from final design.

Differences in creating a prototype vs. a final product

• In general, the creation of prototypes will differ from creation of the final product in
some fundamental ways:
• Material: The materials that will be used in a final product may be expensive or
difficult to fabricate, so prototypes may be made from different materials than the
final product. In some cases, the final production materials may still be undergoing
development themselves and not yet available for use in a prototype.
• Process: Mass-production processes are often unsuitable for making a small number
of parts, so prototypes may be made using different fabrication processes than the
final product..
• Verification: The final product may be subject to a number of quality assurance
tests to verify conformance with formulations or specifications.
These tests may involve custom inspection fixtures, and other techniques appropriate for
ongoing production of a large quantity of the final product.

Characteristics of prototypes
• prototype costs will be substantially greater than the final production costs due to
inefficiencies in materials and processes
• prototypes are also used to revise the design for the purposes of reducing costs
through optimization and refinement
Limitations of prototype
• prototypes generally cannot eliminate all risk
• Building the full design is often expensive and can be time-consuming

Features to consider in food product prototyping

Issues like:
• The ingredients
• The ingredients sourcing,
• The stability
• The shelf-life
• The compliance
• The claims are all key consideration
Prototype production
• Step 1: Discussion
• We meet with clients – either face-to-face or virtually
• Discuss the fundamental requirements.
• What do you want or need to achieve?
• What market(s) are you targeting?
• Which aspects of the product are mandatory and which are nice-to-have?
• Getting these clear and documented will help to make sure your product delivers
what you need it to e.g. techniques and ingredients that are available.
Step 2: Recommendations
• Using our knowledge, experience and research, we begin to make recommendations
about the product and how it will work.
• We outline how it will deliver the claims and benefits you need
• And how it will balance those with factors like taste, shelf-life and nutrition.
• We usually provide clients with details of additional claims or benefits you could
build into the recipe.
• At this stage, we’re building an outline specification and narrowing down the
possibilities but keeping your options open.

Step 3: Specification
• Now it’s time to document what we’ve recommended and agreed in order to create a
specification.
• We define the product, its ingredients and the processing to be used as well as
defining what it will deliver.
• You get a break down of the ingredients and the composition, nutritional data and
confirmation of the claims that the recipe will sustain.
• We can tell you the shelf-life that it is likely to achieve and confirm whether we
recommend chilled, ambient, fresh or frozen distribution.
• We will also have done some patent and claim searches.
Step 4: Proof of concept
• It’s likely that we will have made and tried some prototypes to get to this stage but
now it’s time to test and iterate the recipe.
• We can often do this to include a ‘development day’ with the client present, making
up small samples and variants.
• We consider the taste, colour and texture of the product, take feedback and make
adjustments.
Step 5: Batch testing for market research (optional)
• Clients sometimes want to test a batch of products with consumers.
• This can be a valuable step in moving from prototype to final, production-ready
product.
• You might be attending a show or a customer event.
• If so, we can provide product for you to offer at tastings
Next steps
• Typically, the product now moves into a regular production process.
• Source for ingredients, find and engage an appropriate manufacturer
• And provide the on-pack information that you need.

Prototype testing
• Involves evaluating the product before it is officially released to check whether it
performs all its functions correctly
Importance of Prototype testing
• evaluate a new project and see if it will be successful as a commercial product
• provides an opportunity to thoroughly study the project at the very initial stage of
work and make necessary changes in accordance with the goals.
• This process ensures the full product performance after its release.
• Testing a prototype is saving you time and money on developing a product.
• prototyping stage allows you to save costs and time, since from the very beginning a
project will be carefully worked out and all details of specification will be taken into
account
 What is advised to be tested on the prototype
Concept validation,
• which means checking if users can easily find out what the product is and what
functions it performs.
Navigation
• It can be checked under condition of testing the final version or labels and category
names. It shows if naming and placement of menu and search field are clear for
people.
Flow of certain features
• Prototypes are helpful to make sure that you have created intuitive and accessible
design for users.
Microcopy
• It is better to use real labels, button names and menu categories in your prototype. It
will both show if people can understand the interface and if there are any bugs that
need to be fixed.

Questions to Ask When Testing Product

To keep you focused, it is essential to determine the goals of usability test:
• What exactly are you testing?
• What are the questions you want to answer?
• How do you measure achievements and misfortune?
• How do various prototypes differ?
COMMON PRODUCT DEVELOPMENT MISTAKES
Many first-time product developers make common mistakes when they approach the
process. These typically include:
• Not asking for advice on how to plan ahead or get beyond their first few prototype
iterations
• Not asking what the next steps after the next steps will be
• Not accurately estimating the cost
• Not showing their prototype s to the end user soon enough, wanting instead to hide
their ideas from their customers until it’s “perfect”.
• Not making enough prototypes to get into the hands of multiple users. Design, idea,
and customer feedback is incredibly valuable
• Not designing the prototype experience in conjunction with the physical prototype
itself.
 • You can learn a lot from watching how people naturally use or misuse products
because it’s not intuitive or does not give the right cues

1.4 COMMERCIAL VIABILITY OF A PRODUCT

A What is market viability?
Market viability refers to the business potential of a specific market. A market
viability analysis will help you determine whether starting a business in that
particular market makes sense financially.
To evaluate market viability, you need to consider these three factors:
 Market size: Is the market large enough to accommodate new sellers? Is there room
for growth?
 Target audience: Do potential customers have a discretionary income? Can they
afford to buy your product?
 Competition: Who are the most important retailers in this market? What are their
strengths and weaknesses? How can you compete with them?
Your goal is to weed out markets that are too small, too competitive or made up of
customers that can’t or won’t pay your prices.
2. What is product viability?
Product viability refers to the business potential of a specific product — that is, how
relevant and interesting the product will be to target buyer personas.
When evaluating products, analyze these factors:
 Demand: Is there enough interest in this product for you to build an entire business
around it or add it to your product mix?
 Profit margin: Can you sell this product at a price point that is both competitive and
allows you to generate a return on sale (ROS)?
Stay away from products with too little demand or too low a profit margin.

Why it’s Important to Conduct a Product and Market Viability Analysis

When you consider different ecommerce niches and potential product ideas, you
want to specifically evaluate the viability, profitability and customer requirements
for each option.
You need to make sure that both the market and the product are viable before you
start a business. Why? Because doing your homework allows you to reduce the risk
of losing money on:
 Deadstock: Products need to be designed, sourced or manufactured. All of that
requires a significant upfront investment unless you are dropshipping.
 Inventory management: It’s not enough to just acquire inventory, you then need to
manage it.
 Marketing: You can be the best marketer in the world but if your business isn’t
commercially viable, you won’t be able to sell your products. Thus, you may end up
wasting money on campaigns that don’t produce results.
There is also a bunch of smaller expenses that you n eed to consider as well, such as:
 Domain name.
 Web hosting.
 Ecommerce platform (e.g., Jumia,BigCommerce, Shopify, Magento).
 Email marketing software.
 Web design.
 Content.
If you add them all up, they could add up to a significant amount of money,
especially over an extended period.
The more capital your new venture requires, the higher the risk that you are taking
on.
You need to either bet your life savings on your business idea or take out a business
loan to cover the startup costs. Either way, failure means losing that money — which
can wreck your finances.
Entrepreneurship requires caution. While you can’t fully eliminate the risks, you can
significantly reduce them by analyzing the commercial viability of your idea.
What Are the Things to Consider in a Product Viability Analysis?
Let’s get into the nitty-gritty of product viability analysis.
Here is how to evaluate a product for business potential.
1. Do market research.
Start with online market research to scoop your market depth and competitiveness.
The easiest way to do so is by doing a SWOT analysis.
 Conduct a SWOT Analysis
SWOT (Strengths, Weaknesses, Opportunities and Threats) is a popular
competitive analysis framework that helps you accurately evaluate your business,
gauge the threats and capitalize on opportunities.
Here’s how to perform a SWOT analysis for ecommerce:
 Identify the strengths of your business. These might include a robust supply chain, a
profitable product, competitive pricing, great customer service, effective Search
 Engine Optimization (SEO) strategy, pay-per-click( PPC) strategy or social media
strategy, etc. Find out in what areas you outperform your competitors.
 Analyze the weaknesses. Conversely, these might include a fragile supply chain, an
unprofitable product, poor customer service, lack of connections with influencers in
your niche, etc. Where do you fall short of your competitors?
 Identify business opportunities. Would your business benefit from finding better
suppliers on sites like Alibaba or eBay? Maybe you could do better with Amazon
FBA? Or by selling private label products? Look for ways to increase your profit
margins, improve product quality and lower product prices. Don’t be afraid to get
creative here.
 List the threats to your business. What emerging technologies might affect your
market? Which competitors are you worried about the most? Are there any new
entrants threatening your market share? You need to stay vigilant.
Remember what the former Intel CEO Andy Grove said: “Only the paranoid
survive”.
These four areas of analysis can be divided into two:
 Internal (strengths and weaknesses).
 External (opportunities and threats).
This can help avoid mixing up strengths (internal) with opportunities (external) and
weaknesses (internal) with threats (external).
What’s most important when it comes to SWOT analysis is that you are brutally
honest with yourself. Your company isn’t perfect. It has its strengths and
weaknesses. It’s also vulnerable to various threats. That’s okay.
What matters is that you accurately assess the situation and adjust your strategy
accordingly.
 Overall market trends
Once you are done with SWOT analysis, analyze what’s happening on the market:
 Is it shrinking, stable or growing?
 What are the new trends?
 Who are the biggest players?
Statista is a great website to get some numbers. Type in the name of your industry
and see what data is available.
 Niche market trends and demand
2. Complete a competitive market analysis.
To understand if you can succeed in a new market, you need to know who you are
up against.
 Here’s a quick way to do competitive analysis:
 Identify your competition. Who are the established players in your niche? Who
are the most promising newcomers? What are their best-sellers?
 Examine your competitors’ websites. Pay attention to their homepages, product
listings, product images, product descriptions and copy among other things.
Make notes of “their way” of doing online business.
 Analyze the competitors’ sales funnels. Understand how others connect with
customers at different stages of their customer journey.
 Break down their marketing strategy. Check out their social media profile.
Use Adbeat to learn more about their paid advertising strategy and Ahrefs to
figure out their SEO strategy.
 Reverse-engineer their business model. Are they dropshipping or are they
carrying inventory? One easy way to identify dropshippers is by running a
reverse image search with their product images since these can lead you to the
product page on AliExpress. And if they are carrying inventory, you want to
know everything you can about how they handle sourcing, product development,
warehousing, etc. These details might take some effort to uncover, but they can
help you determine which business model may work better for you.
This extensive competitive analysis has three objectives:
 Learn what works. You shouldn’t outright copy what your competitors are doing, but
you can learn from top sellers about what makes a winning product.
 Improve on what doesn’t work. You want to capitalize on your competitors’
weaknesses. Say, if you realize that your competitors don’t offer BOPIS, you can
outcompete them by offering a better shipping experience.
 Finding optimization opportunities. When you understand the logistics behind your
competitors’ businesses, you can find ways to optimize the repetitive processes in
ways that give you a competitive advantage. Perhaps you can outcompete them on
shipping time by partnering with a third-party logistics firm?
The more you know about your competitors, the easier it will be for you to gain and
maintain a competitive edge.
3. Determine your target audience.
Don’t commit to a product idea before you get to know your target audience.
Specifically, analyze them by:
 Demographics: factual information about an individual (e.g. age, gender, ethnicity,
occupation, job title, etc.).
 Psychographics: psychological traits such as values, beliefs, desires, etc.
 o Using this data, create a set of buyer personas — fictional characters that
represent a typical member of your target audience.
o After you identify who your ideal customers are, you’ll need to figure out if
they make sense as customers.
o Here’s what you should pay attention to:
 Attitude towards the problem that your product solves. Is the problem bothersome
enough to warrant paying for a new solution?
 Financial situation. Are they willing to spend as much as your product costs to
remedy the said problem?
 Purchase history. Do they have a track record of buying similar products in the past?
o The ideal buyer is someone who knows they have a problem, can afford a
solution you propose and have a history of using similar products
4. Figure out winning product criteria.
Finally, before you decide to pursue your business idea, you’d want to “right-size”
your product to the target market demands. How do you evaluate a product for sale?
Consider doing the following product viability assessment:
 Consider product weight and size
o You can build a thriving business by selling large, heavy
products. Burrow — an online furniture vendor is doing just great.
o However, selling bulky products makes logistics more complicated. This is
especially true when it comes to shipping. According to the Walker
Sands “Future of Retail 2019” report, free and fast shipping has been the
number one driver of more online purchases for six years in a row.
o It goes without saying that shipping large items for free and fast can be
challenging. That’s why it may be better to go with a product that is light,
small and inexpensive to move through your supply chain.
 Consider product fragility
o Another issue that you want to avoid is product breakage. Damaged goods
stand for money lost. And also harm your brand image. An unhappy
customer might take their frustration to social media.
o Unless you have past shipping experience and a reliable logistics partner,
avoid dealing with fragile products.
 Determine your product pricing
o You want to find a sweet spot right between being competitive and still
making a healthy profit.
 o Positioning is important here. If you present your product as a commodity,
you will find it difficult to charge a lot for it. However, if you present it as a
one-of-a-kind item that resonates with the values of your potential customers,
you will be able to command much higher prices.
 Understand your options for markup
o How much can you charge on top of the price that you paid for it? Note that
brand markup must be high enough to cover the business expenses
and generate enough profit to make it worth your while.
o You want to avoid products where profit margins aren’t satisfactory.
 Consider the amount of SKUs
An SKU (stock-keeping unit number) is a unique string of letters and numbers that
represents a product in a seller’s inventory. The more SKUs you have, the more
complex the logistics of your business. You need to keep track of them all, make
sure that you send the right product to each customer, etc.
Thus, you may want to start with a smaller inventory and add more products as your
business expands.
 Keep seasonality in mind
o Does the demand for this product remain stable throughout the entire year or
go up and down as the seasons change?
o Again, you can do well with seasonal goods. For example, Black Diamond
Equipment sells climbing, skiing and snowboarding gear. Obviously, the
interest in the latter two goes up in winter. But they are also selling gear for
round-year hikes and other sports.
o But as a new business owner, you may want to avoid complete reliance on
seasonal products.
o It’s difficult to create an effective business strategy when you have to rely on
that seasonal spike in sales to fund the company for the entire year.
Respectively, running a business can prove to be more stressful than you
have expected.
 Is your product perishable?
o Perishable products present the risk of expiring before you have an
opportunity to sell them.
o Or worse, they might go bad en route to the customer, which can mean a
world of trouble for your brand.
o Unless you can strategize a solid cold chain logistics strategy, it’s best to
stick to products with longer shelf lives.
  Consider product lifespan
o You also want to consider the lifespan of your product. How long can the
customer expect to use it?
o You may want to give preference to products that people buy on a regular
basis (e.g. hygiene products, makeup, etc.) because that can be a source of
repeat business.
That being said, you can also do well with products that last a lifetime, which can be
a selling point in itself. For example, Saddleback Leather sells durable leather
products that come with a 100-year warranty.

[Link] AFFECTING NEW PRODUCT DEVELOPMENT

Bringing a successful product to market is a team effort. While designers are responsible
for usability, utility and the rest of the user experience there are many factors, which
contribute to the success or failure of new product development, and many of these are
outside of the designer’s direct control.
The main factors, which contribute to new product development success as promoted by
Gonzales and Palacios in 2002:
 Knowledge Management
 Market Orientation
 New Product Development Process
 New Product Development Speed
 New Product Development Strategies
 New Product Development Teams
 Technology
 Top Management Support
Let’s take a look at each of those factors and see how much responsibility a designer
can take for them and how much lays elsewhere.
Top Management Support
At first glance, this appears to be completely out of control of the design team. After
all, top managers make the decision as to what to support and what not to support
right? Unfortunately, it’s not that simple.
The support of top management is critical to a project’s success. Without that
support, budget or resources are not likely to be granted to the project and it may not
get the priority it needs within the business as a whole. However, while the design
team cannot force management to support their projects they can develop the
political savvy to persuade management to support the best projects.
Learning to influence managers is a critical skill for design teams. Embarking on
projects without managerial support is a recipe for failure but winning over support
is a question of leadership and communication.

Market Orientation
Investopedia defines market orientation as follows: “Market orientation is a
company philosophy focused on discovering and meeting the needs and desires of its
customers through its product mix.”
It seems reasonable to suggest that while a design team does not have control over
company philosophy it should be in a good position to influence this.
Conducting user research and where appropriate market research – two fundamentals
of developing high quality user experiences; will enable the discovery of
customer/user needs and how to meet them.
Technology
The technology used to create and deliver the product must be suitable for the
market. While it is unlikely that the design team will have the final say in technology
budgets or appropriation it is likely that they will be able to influence the
development teams in their choice of technology.
It is clear that, for example, multi-million dollar hardware and software requirements
will make a product inaccessible to the consumer market but may not be an
insurmountable hurdle for government or corporate markets.
Technology must be chosen with the end-users in mind.
Knowledge Management
In many organizations today; knowledge is treated like gold dust and guarded by its
owners as they would stolen treasure. Unfortunately, the creation of knowledge silos
like these makes it impossible for knowledge to be effective.
Market research data, for example, can be incredibly useful to a design team but only
if they can access that data and it’s not kept securely in the marketing department
under lock and key. Likewise user research data can be highly valuable to the
marketing team but once again only if they can access it.
Knowledge management structures will normally fall outside of the design team’s
remit. However, there is nothing preventing the design team from advocating for
open knowledge management structures or indeed persuading senior management to
support such structures.
New Product Development Strategies
Strategy, despite the way it is often abused in management speak is simply; “a plan
of action designed to achieve a long-term or overall aim.”
Responsibility for new product development strategies is likely to be shared between
design, product management and development. This means that the design team will
have some input into the strategies chosen and will be able to influence these
strategies with their user research to guide the strategy to fit the needs of their users.
It is probably fair to say that product management will normally have the final say
on a strategic direction but designers have plenty of room to negotiate with product
managers to ensure better outcomes.
New Product Development Speed
Speed to market is a critical factor in success. If your new product development
process takes 5 years but your competitor’s takes 2 years – it is likely that no matter
how good your designs are; they will have been eclipsed by the time they get to
market.
Refining the design process to maximize speed whilst protecting the user experience
is a delicate balancing act and it is fully within the designer’s remit. However, the
development process speed is much less likely to be within the design team’s control
and their ability to influence that speed may be marginal at best.
New Product Development Process
Having clear processes for design and development are essential. While these may
be tailored to fit specific circumstances – a methodology for working that is clearly
understood and agreed to by all members of the product development team is highly
likely to produce better results than those created with no formal process.
The design team will, normally, have some input into these processes and be able to
negotiate modifications to processes when they fail to produce optimal results.
There is little control for the design team over the way other teams execute these
processes. Failure in execution, from other teams, is one of the few areas where it is
reasonable to say that failure was completely outside of the design team’s control.

New Product Development Teams

New product development normally brings together teams of diverse people from all
across an enterprise. It is strongly suggested that these diverse teams tend to be
highly creative and more successful than teams of a more standardized nature.
The way teams work together is a critical factor in their success and designers
operating as part of such a team have their part to play in this. Professionalism and
 leadership can be displayed by any member of a team (including those without
official leadership and management roles) and while the design team cannot bear any
responsibility for the actions of others within a team – they bear complete
responsibility for their own actions.
As Michael Jordan, the world famous athlete and basketball superstar says; “Talent
wins games, but teamwork and intelligence wins championships.”
The Take Away
Not every factor of success for a new product development project is directly within
the design team’s remit. However, in the majority of cases the design team will have
the ability to influence these factors and play a strong role in ensuring that the
project is given the greatest possible chance of success.
An Overview of the Factors of Success for New Product Development

1.5 INITIAL PRODUCTION RUN

It is a controlled build of a predetermined number of units with the purpose of
demonstrating the capability of the process to produce defect free product in a cost efficient
way.
It involves:
1. Initial planning stage.
Product plans and quality specifications are received from the customer or experts, draw up
a proposal for the manufacturing method and overall schedule, and based on this
information calculate a rough cost estimate. After doing this and dealing with any other
issues, we consider the feasibility of manufacturing the proposed product on a commercial
scale.
2. Product Development Phase.
After establishing the feasibility of the project, we determine the specifications of the
product in more detail by working on the design and manufacture of the dies, as well as
selecting and obtaining the necessary processing machinery tools etc.
3. Prototype production/evaluation.
 Based on the product plans and quality specifications received from the customer, and the
product specifications and product manufacturing plans determined in the Product
Development Phase, we produce a prototype. We then work with the customer to establish
whether the product meets the required quality standards. We repeat this process of product
development, prototype production and prototype evaluation until the prototype reaches the
standard of quality required.
4. Commercial prototype production planning.
In order to build a manufacturing line that can efficiently produce high quality products, we
carry out a forging simulation using the systems e.g CAE system or, which supports the
design of a core technique the cold forming process, to propose a pertinent manufacturing
design and layout.
5. Commercial Prototype Production/Evaluation.
Based on the manufacturing design and layout proposed in the Commercial prototype
production planning stage, we build a manufacturing line and produce a commercial
prototype. We then work with the customer to establish whether the product meets the
required commercial manufacturing line quality standards. We repeat this process of
commercial-scale prototype development, prototype production and prototype evaluation
until the prototype reaches the commercial manufacturing line standard of quality that is
required.
6. Commercial Production.
When all the preparations are complete, commercial production begins. Even at this stage,
modifications and improvements are made to the manufacturing line, and our engineers are
continually trying to improve their work. The whole team actively cooperates to make high
quality products as efficiently as possible
7. Inspection, Shipment, Delivery.
The completed goods are closely inspected manually and by machine to make sure there are
no defects or flaws. Only those goods that pass the inspection are delivered to the customer,
packed carefully to prevent contamination or damage.

CAUSES OF NEW PRODUCT FAILURE

1 Poor product quality: Obviously, a product, which is of poor quality, cannot be
sold in the market.
2. Higher price: Another reason for the failure of certain products is the price factor.
Higher production and distribution costs may lead to higher price. Such a product
cannot be sold in a market consisting of middle and lower income buyers.
3. Poor timing: It is important that a product, to be successful, is introduced in the
market at the correct time. If it is introduced at an unsuitable time it may turn out to
be a failure.
Example: Publishers of textbooks usually bring out books in the beginning of the
academic year.
4. Inherent defect: There may be an inherent defect in the product, which may
affect its market potentialities. Such a product may not be preferred by the buyers
even if the defect is rectified later.
5. Extent of competition: A monopolist may not have any difficulty in marketing
his product. In the case of a market where there are a large number of sellers for a
particular product, the buyer will have many alternatives. Therefore, in such a
condition unless the marketer brings out the product to the satisfaction of the buyers,
he cannot be successful.
6. Lack of promotional measures: Popularizing the brand, particularly, in
the introduction stage of a product is essential. Such a step will ensure repeated
buying and bring long-term benefits for the marketer. Failure to do so will ‘prove to
be disastrous for the product.
7. Faulty distribution policy: It is important that a product reach the right market at
the right time and at the right price. The faulty distribution policy of the marketer
may lead to many problems, i.e., the goods may not be available when required, may
lead to higher price and so on.
8. Unavailability of raw materials/ spare parts: In the case of durable goods like
televisions sets, Air-conditioners, etc., and also in the case of two wheeler and cars,
easy availability of spare parts is an important requirement. Unavailability of spares
may frustrate the buyers. Such buyers would not recommend the product to their
friends and relatives.
9. Poor after-sale service: The quality of after sale service is yet another important
cause. Most marketers, particularly those marketing durables, two-wheeler, etc., are
courteous while making sale. When the customer requires service later and
approaches the seller, the latter may show indifference.
10. Imitation products: Last, but not the least, the presence of a number of
imitation products in the market makes the genuine products vulnerable. An average
buyer may not be able to distinguish between the genuine product and the fake one.
Others are:
 Lack of product uniqueness:
 Poor planning:
 Misguided enthusiasm:
 Product deficiencies:

Measures to prevent product failures

1. The marketer shall ensure that the product he markets is in demand.
2. He can determine the price at which the retailers must sell the product to the
buyers. This will prevent manipulation of the price.
3. Before launching the product, steps must be taker to ensure that there are no
inherent defects.
4. All efforts must be made to popularize the brand name particularly in the
introduction stage.
5. The marketer shall select the right distribution network so that there is no delay in
the consumer getting the product.
6. It is also important to make available genuine spare parts in the market at fair
prices.
7. The quality of after-sale service must conform to high standards.
8. In the case of consumer and industrial goods, it is beneficial to get the quality
certified by the Indian standards Institution (ISI) and/or by the International
Standards Organization (ISO).
9. The product may constantly be updated to incorporate all the features that the
buyers expect in it. Taking the case of Maruti Udayog, the company has updated all
its models over a period of time, which is probably one of the main reasons for its
success.
10. Steps must be taken to eliminate duplicate goods in the market. This may be
done by cautioning the buyers on spurious goods. The problem may also be legally
approached.

OUTPUT LEVEL
Output is defined as the act of producing something, the amount of something that is
produced or the process in which something is delivered.
QUALITY CONTROL AND CHECKS
Quality control involves testing units and determining if they are within the
specifications for the final product.
The purpose of the testing is to determine any needs for corrective actions in the
manufacturing process.
Good quality control helps companies meet consumer demands for better products
PROCESS EFFICACY ANALYSIS
Process efficiency is essentially “the amount of effort or input required to produce
your business’s product.”
How do I measure process cycle efficiency?
To measure efficiency, you can use this process cycle efficiency formula:
value-added time/total lead time
Value-added time refers to the time spent actually creating your product. Total lead
time refers to the time it takes to complete the entire process cycle, which includes
both value-added time and wasted time (such as waiting for the next step).
According to Lean manufacturing standards, value-added time should make up more
than 25% of your process.
Businesses have also used this formula to determine overall process efficiency:
(value of outputs/value of inputs) x 100
Typically, the value will be a dollar amount. For example, say your company spends
$500,000 a day to pay for the labor and materials required to manufacture chewing
gum, and your company produces $750,000 worth of gum daily. Your company
would be operating at 150% efficiency.
A process that is over 100% is considered to add value. The higher the percentage,
the most efficient your processes are.
Other process efficiency metrics
These calculations are not the only measures of success that may be relevant to your
business. For instance, you may be producing a lot of bubblegum, but one out of
every 10 pieces is not the appropriate size. That’s when you need to look at other
types of process efficiency metrics, such as:
 Resource efficiency
 Capacity (i.e., the amount that can be produced within a specific timeframe)
 Labor productivity
 Throughput (i.e., the output of a process or machine for a unit of time)
 Turnaround time
 Profitability (i.e., the relationship between total sales and profit)
 Quality (i.e., the number of outputs that are acceptable for use or free of defects)
 Return on investment
Your business has dozens of processes, both complex and simple. By examining all
the processes in your company to determine where efficiency could be optimized (or
analyzing other process efficiency metrics, depending on your goals), you can save
you money while saving your employees’ sanity.
How to streamline processes
Now armed with a process efficiency definition and different formulas and metrics
you can use, it’s time to examine each step in every process and eliminate (or
significantly lessen) waste, redundancy, errors, and delays to maximize the work you
and your employees do.
As you try to improve process efficiency, make sure to follow these steps.
1. Map out your existing processes
When examining your processes, first translate the obscure into the concrete. In
other words, write it down and map them out. You can use a BPMN diagram,
flowchart, swimlane diagram, value stream map, or whatever makes the most sense
for your business processes.
For a more sophisticated and easily shareable approach, use Lucidchart. This
platform will help you define processes and orchestrate them in an easy-to-
understand, completely transparent flowchart.
Business Process Modeling Notation (BPMN) Diagram Example (Click on image to
modify online)
Business Process Flow Template
2. Identify value-add activities and bottlenecks
Use your flowchart to understand what is and working well with your current
process. Highlight areas where you have the opportunity to optimize the process. If
you’re using Lucidchart, you can even layer data, such as the process efficiency
metrics discussed earlier, on top of your process flowchart.
When you visualize your processes, you can make informed decisions because you
can see the loopholes and bottlenecks in your current process and approach
stakeholders and decision-makers with evidence of processes that need to be
optimized.
3. Build out the ideal process
Make changes to your diagram to develop solid processes that scale easily. If you’re
using Lucidchart, it’s simple to send your process map to stakeholders, get their
input with in-editor commenting, and quickly adjust the process based on feedback
without starting from scratch.
These improvements could include implementing new software, improving
communication, and even hiring project managers. It will also definitely involve a
fair bit of creativity to determine alternative approaches to current routines. For
instance, if your team members find they spend the majority of their days attending
meetings, you may need to designate certain days of the week as “meeting-free”
days that allow your employees to get more work done without distractions.
It’s important to note here that streamlining involves experimentation, much like
using the scientific process. You will pose a hypothesis (for instance, “we should
designate meeting-free days”), implement the theory, and then test it out. There’s no
problem with discovering that your hypothesis was wrong; you can always revert
back to your original process. The real danger is accepting stagnation as best
practice.
4. Communicate changes to the rest of the company
It’s one thing to achieve process cycle efficiency with a team of four. It’s quite
another to have a streamlined process with a team of four thousand. Without a tested,
streamlined standard, your company will become exponentially less efficient as it
scales.
In other words, your process efficiency will only improve when you and your
colleagues take action, so once you’ve built out a more efficient process and gained
approval, you need to document and share your process for others to follow.
The visual you have created can be used to help employees understand the entire
cycle and where their role fits into the company’s process. Don’t underestimate the
power of developing a visual representation of your company’s processes. The
process flowchart is invaluable: It acts as a single source of truth and a guidepost
that the entire team and company can reference.
The payoff
Improving process efficiency makes your business more efficient. But how does
higher efficiency benefit your business in the long run?
It may seem obvious to say that more efficient processes will decrease turnaround or
response time, lower production costs, and increase a business’s profits, but these
results can also lead to fringe benefits. For example, if you can offer products faster
or at a lower price, your company can meet higher demand and/or increase customer
satisfaction, both of which will make your business more competitive in your
industry.
So start reaping the benefits today. Visualize and analyze your processes to develop
a streamlined approach for meeting goals and reducing waste.
MARKET SAMPLING
In market research, sampling means getting opinions from a number of people,
chosen from a specific group, in order to find out about the whole group.
Let's look at sampling in more detail and discuss the most popular types of sampling
used in market research.
It would be expensive and time-consuming to collect data from the whole population
of a market. Therefore, market researchers make extensive of sampling from which,
through careful design and analysis, marketers can draw information about their
chosen market
Sample Design
Sample design covers:
 Method of selection
 Sample structure
 Plans for analysing and interpreting the results.
Sample designs can vary from simple to complex. They depend on the type of
information required and the way the sample is selected.
Sample design affects the size of the sample and the way in which analysis is carried
out; in simple terms the more precision the market researcher requires, the more
complex the design and larger the sample size will be.
The sample design may make use of the characteristics of the overall market
population, but it does not have to be proportionally representative. It may be
necessary to draw a larger sample than would be expected from some parts of the
population: for example, to select more from a minority grouping to ensure that
sufficient data is obtained for analysis on such groups.
Many sample designs are built around the concept of random selection. This
permits justifiable inference from the sample to the population, at quantified levels
of precision. Random selection also helps guard against sample bias in a way that
selecting by judgement or convenience cannot.
Defining the Population
The first step in good sample design is to ensure that the specification of the target
population is as clear and complete as possible. This is to ensure that all elements
within the population are represented.
The target population is sampled using a sampling frame.
Often, the units in the population can be identified by existing information such as
pay-rolls, company lists, government registers etc.
 A sampling frame could also be geographical. For example, postcodes have become
a well-used means of selecting a sample.
Sample Size
For any sample design, deciding upon the appropriate sample size will depend on
several key factors:
1. No estimate taken from a sample is expected to be exact: assumptions about the
overall population based on the results of a sample will have an attached margin of
error
2. To lower the margin of error usually requires a larger sample size: the amount of
variability in the population, ie the range of values or opinions, will also affect
accuracy and therefore size of the sample
3. The confidence level is the likelihood that the results obtained from the sample lie
within a required precision: the higher the confidence level, the more certain you
wish to be that the results are not atypical. Statisticians often use a 95% confidence
level to provide strong conclusions
4. Population size does not normally affect sample size: in fact the larger the
population size, the lower the proportion of that population needs to be sampled to
be representative. It's only when the proposed sample size is more than 5% of the
population that the population size becomes part of the formulae to calculate the
sample size
Types of Sampling
There are many different types of sampling methods, here's a summary of the most
common:
Cluster sampling
Units in the population can often be found in certain geographic groups or "clusters"
for example, primary school children in Derbyshire.
A random sample of clusters is taken, then all units within the cluster are examined.
Advantages
 Quick and easy
 Doesn't need complete population information
 Good for face-to-face surveys
Disadvantages
 Expensive if the clusters are large
 Greater risk of sampling error
Convenience sampling
Uses those who are willing to volunteer and easiest to involve in the study.
 Advantages
 Subjects are readily available
 Large amounts of information can be gathered quickly
Disadvantages
 The sample is not representative of the entire population, so results can't speak for
them - inferences are limited. future data
 Prone to volunteer bias
Judgement sampling
A deliberate choice of a sample - the opposite of random
Advantages
 Good for providing illustrative examples or case studies
Disadvantages
 Very prone to bias
 Samples often small
 Cannot extrapolate from sample
Quota sampling
The aim is to obtain a sample that is "representative" of the overall population.
The population is divided ("stratified") by the most important variables such as
income, age and location. The required quota sample is then drawn from each
stratum.
Advantages
 Quick and easy way of obtaining a sample
Disadvantages
 Not random, so some risk of bias
 Need to understand the population to be able to identify the basis of stratification
Simply random sampling
This makes sure that every member of the population has an equal chance of
selection.
Advantages
 Simple to design and interpret
 Can calculate both estimate of the population and sampling error
Disadvantages
 Need a complete and accurate population listing
 May not be practical if the sample requires lots of small visits over the country
Systematic sampling
 After randomly selecting a starting point from the population between 1 and *n,
every nth unit is selected.
*n equals the population size divided by the sample size.
Advantages
 Easier to extract the sample than via simple random
 Ensures sample is spread across the population
Disadvantages
 Can be costly and time-consuming if the sample is not conveniently located

MARKET SEGMENTATION
Market segmentation builds a subset of a market. This can be based on
demographics, needs, priorities, common interests, and other psychographic or
behavioral criteria.
The 4 basic types of market segmentation are:
 Demographic Segmentation.
 Psychographic Segmentation.
 Geographic Segmentation.
 Behavioral Segmentation.
For example, common characteristics of a market segment include interests,
lifestyle, age, gender, etc
A market segmentation strategy organizes your customer or business base along
demographic, geographic, behavioral, or psychographic lines or a combination of
them.
Market segmentation is an organizational strategy used to break down a target
market audience into smaller, more manageable groups.
Create Your Marketing Segmentation Strategy
Identifying your marketing segmentation strategies ultimately involves answering
these five important questions:‍
1. Who is your consumer or business market?
2. Where is your consumer or business market located?
3. What is your consumer or business market interested in?
4. How can you market your products and services to this market?
5. Why are certain segments interested or not interested in your products or services?
Each of these strategies can be used to target a different customer base.
Demographic
 Demographics are the most common form of segmentation. They divide customers
by the structure of certain population traits:
 Age
 Gender
 Income
 Occupation
 Marital Status
 Social Class
 Religion
 Education
An example of marketing segmentation using demographics is to combine age and
income information to target older, wealthy retirees looking to relocate to Florida to
sell beachfront property.
Another demographic strategy would be marketing fantasy or war-based video
games primarily to younger individuals ages 18-30.
Geographic
Regional demographics can help you sell products and services, depending on where
your customers live.
 State
 County
 Country
 College
 Community
 International Marketing
Colleges looking to sell sports merchandise will sell items well within the state, but
not so well outside home territory. Larger, non-collegiate conglomerates such as the
NFL can expect a wider customer base in North America, but don’t need to bother
merchandising as much overseas.
Psychographics
Psychographic or lifestyle segmentation targets customer hobbies and interests. This
segmentation strategy caters to the most niche markets, where attractiveness, quality,
and brand recognition are more important than price.
 Interests
 Social Status
 Personality Type
 Attitudes
 Opinions
 Values
One example of a psychographic segmentation strategy would be to target high-end
musical equipment to music enthusiasts that want to collect the best gear or
equipment as a status symbol for showcase collections.
Behavioral
Behavioral segmentation is relatively new in the digital age and takes into
consideration information a company has collected through customer data reports,
surveys, or marketing trends.
 Patterns of Use
 Price Sensitivity
 Brand Loyalty
 Benefits Sought
Consumers want the best brands at the best prices, and their buying patterns predict
items and services they are more likely to buy. [Link] algorithms track your
purchases and know that if you buy a book on grilling, you may also like to buy
seasoning or barbecue tongs.
Restaurant menus are also broken up into price levels based on behavior, featuring
specials, and seasonal items.
Combination Strategy
Selling snow gear to snowboarding hobbyists in Park City, Utah, combines
geographic, psychographic, and demographic marketing segments. High-quality
craftsmanship is expected, and customers will pay more for quality, innovative
snowboards.
Since 1998, CMG has been leading strategic marketing consultants for some of the
largest media and communications brands worldwide. Let’s talk and define your
marketing segmentation strategy today. Think. Do. Move.

PRODUCT TRIALS
A way of persuading customers to buy a product by allowing them to use it for a
limited time without paying.
It informs on your target customer, how your product should be positioned, what
your target audience need and value and how you can position your offering in a
way that will resonate with potential customers
CUSTOMER REACTIONS
 Customer reactions to your product or service determine your marketing success and
your product's fate.
Getting customers to fill in a survey sheet is important enough that you should
consider offering them a reward for doing so. You can waive the fees on their
checking account for the rest of the year if they mail in a completed form. Or (if you
don’t mind honest feedback) you can ask them to fill in a rating form while standing
in a potentially long line.
Your high-ranking attributes from the survey represent the features customers think
you do brilliantly. The low scores represent the features you need some work on.
Sometimes you find yourself with a long list of things (product attributes) that you
don’t
score well on

1.6 PRODUCT LAUNCH

What is Product Launch?
Product launch is a process followed when a company decides to launch a new product in an
existing or a new market. Product launch can be of an existing product which is already in
the market or it can be a completely new innovative product which the company has made.
Product launch involves various steps which involves understanding customer needs,
product design, testing of the product, marketing & advertising and ensuring that the
product reaches out to all its audience. A successful product launch provides a sales
momentum for the company.
Importance of a Product Launch
When any new product or service is introduced in the market, it is called a Product Launch.
An existing product can also be launched after further innovation or upgrades to the product.
A Product launch passes through a number of steps known as the product launch process,
starting from the ideation phase to development phase, testing phase, analyze phase to
finally the launch of the product or service.
The market launch starts after the product or the service has been launched and encompasses
the marketing plan and its implementation to ensure that the product reaches the target
market. Brand launch is defined as the creation of a new brand in the marketplace and
positioning it where none other exists.
A good product launch helps in the following:
1. Create Awareness
Launching a product or brand through articles, events and promotional events ensure that
the campaign gets noticed and people become aware of the product or brand. This, in turn,
can increase the customer base and sales.
2. Planning and Staffing
The soft launch can give an idea of the strategies to be implemented, resources and staffs
requirement and the training and preparation needed to take care once the product is
released to the whole marketplace.
2 Types of Product Launch

Furthermore, there are 2 approaches to launching a new product or service. They are
1. Soft Product Launch
A soft launch is when the approach towards the release is limited to a small set of the target
audience or a limited demographics or geographic area and check if any changes are
required before launching the product to the whole market.
2. Hard Product Launch
Whereas, a hard launch is when the product is released with full force marketing efforts
from the very first day in order to spread awareness and excitement to customers and
persuade them.
These are the two types of product launch.
Elements for a Good Product Launch
The principles & key elements for a successful product launch are the following:
a) Relating Product Capabilities to Market Needs
b) Having a clear positioning and messaging tagline
c) Setting clear goals for launch
d) Having the power of leverage
e) Having a proper time of launch

Advantages & Disadvantages of Product Launch

Some merits of product launches for a company are:
1. Excitement and Attention: Once the product launch is communicated to the audience
through a press release, articles, social media, and events, people get aware of the launch
and it will create excitement in their minds.
2. Building Trust: If people are invited to try the products through free samples, it can build
trust and customers can overcome their skepticism and accept the product. This also allows
the promotion of a product through word-of-mouth, social media, and communities.
3. Training and Preparation: A soft product launch gives time to train and prepare
employees to deal with the public appearance and customer queries once the product is
launched to the whole market.
4. Increased Revenue Streams: New products can pave the path to unexplored revenue
streams. Moreover, a new product or brand launch captures the interest of different business
which allows expansion of the business and entering into new ventures.
Despite several advantages, there are some disadvantages of a product launch.
1. High Investment: Launching a new brand or product needs a lot of investment of time and
resources for training employees, press releases, promotional activities and events. There is
a risk of the product not getting successful and the launch getting failed.
2. Proper Approach to Launch: Different types of products need different approaches to
launch, whether soft launch or hard launch. If the requirement is towards quick and more
dramatic results, a hard product launch is preferred.
Examples of Product Launch
China Launch of Forever21
In order to build a strong customer base in China, Forever21 built its Tmall global e-
commerce store and used social media platforms like Weibo and WeChat. The content was
shared for the Chinese audience like "best places to visit in Shanghai". The campaign was so
successful that the brand has opened 16 stores in China.
How to Launch a Product
Learn about your customer.
Whether you call it “market research,” or “customer development” it's key to learn about
what drives your customer. Identifying their goals, motivations, and pain points could lead
you to developing and marketing a valuable solution.
You don't need to perform years of intense research to learn about your customer. In fact,
we suggest just talking to 12 to 15 current or prospective customers.
When speaking to them, pay extra attention when they start sentences with “I wish a product
did this function…” or “Why can't products do this?” When they give these statements,
respond with questions that go deeper, like “Can you get more specific about that?" If they
don't bring up any pain points, ask them a few specific questions that will encourage them
to give deeper answers.
These conversations will give you a solid idea of what their biggest pain points are and how
you can market a solution to them. Once you learn these key details about your customers,
you can develop a buyer persona that your team can focus on serving.
2. Write a positioning statement.
Write out a statement that can clearly and concisely answer these three questions:
Who is the product for?
What does the product do?
Why is it different from other products out there?
If you'd like to go even deeper, create a statement that answers the following questions:
What is your target audience?
What segment of the target audience is most likely to buy the product?
What brand name will you give your product or service?
What product or service category does your product lie in?
How is it different from competitors in the same category?
What evidence or proof do you have to prove that your product is different?
3. Pitch your positioning to stakeholders.
Once you've established your position statement, present it to stakeholders in your company
so they are all on the same page.
If your employees have a hard time buying into the product, your customers might as well.
If your team loves it, that might be a great sign that the product launch will go well.
4. Plan your go-to-market strategy.
This is the strategy that you will use to launch and promote your product. While some
businesses prefer to build a funnel strategy, others prefer the flywheel approach.
Regardless of which method you choose, this process contains many moving parts. To
create an organized strategy for launching your product, it can be helpful to use a
template, like this one.
As you create the strategy, also start considering which type of content you'll use to attract a
prospective customer's attention during the awareness, consideration, and purchase
decision stage. You'll need to produce this content in the next step.
5. Set a goal for the launch.
Before you get started on the implementing your strategy, make sure you write down your
goals for the launch i.e Create specific goals for the launch's success. Keeping these goals in
mind will help you focus your efforts on launch tactics that will help you achieve those
goals
For example, the goals of your product launch could be to effectively establish a new
product name, build awareness, or create sales opportunities.
One of the best ways to set goals for your launch team is to write them out like SMART
goals. A SMART goal is Specific, Measurable, Attainable, Relevant, and Time-bound.
6. Create promotional content.
After planning out your go-to-market strategy and writing your SMART goals, start
producing content that will support and align with those promotional efforts. This can
include blog posts related to your product or industry, demos and tutorials, and landing
pages.
7. Prepare your team.
Be sure that your company and key stakeholders are ready for you to launch and begin
marketing the product. Communicate with the company through internal presentations,
Slack, or email to keep your company in-the-know of your launch plan.
8. Launch the product
Once you've completed all the above steps, you can launch the product.
9. See how well you did achieve your goals.
After you launch your product, track how the go-to-market strategy is performing.
Be prepared to pivot or adjust aspects of your plan if they aren't going smoothly.
Additionally, don't forget about the goals you set before the launch. See how well you did
achieve those goals. If the launch didn't meet expectations, you can rethink your go-to-
market strategy and adjust from there.

Product launch time

It's important to get the timing of your product launch right. Around 13% of startups failed
because of mistimed products. Timing is the number one factor that determines if a startup
will be successful; If your idea comes too early, customers may not be ready for it.
However, if your idea comes too late, you may not be able to squeeze in front of a market
crowded with competitors. You can't ignore timing even though there’s no scientific process
for determining it
Elements of a Successful Product Launch
Aside from the hustle and bustle of making sure that their product functions accordingly and
attracts the right niche, businesses should also focus on the external factors that can support
their product launching. Keep in mind that the crucial part of a product launch is letting
people know that you have something new and exciting for them to try out.
Pre-Launch Buzz- Maximize the technology accessible to your business and create
relevant online posts, ads, and promotions that can engage your customers and prospects on
various social media platforms. Other ways to spark customer interest are through product
sneak peeks, pre-launch product testing, and getting relevant brand ambassadors to help
with your campaign.
Comprehensive Media Planning- Your plan should focus on your product’s most
compelling features and the reason why people should consider trying your brand out-
competitive pricing, unique features, creative packaging, accessible. The company’s media
planning can include promotional strategies such as- television and radio commercials,
newspaper and magazine advertisements, and live product demos.
Social Media Outreach- According to research, a product that is partnered with a social
media marketing campaign has the greater advantage of generating a greater amount of sales
and conversions. The best thing about establishing your social media outreach along with
your product is that people recognizes you and your brand almost immediately even before
your official product launching. Their satisfaction can lead to positive reviews,
recommendations, and closed deals.

Importance of Timing a New Product Launch

Customer Preferences: You want to launch your product at the perfect point. When the
market is most anxious for the features and benefits offered by your product or service
based on customer preferences. It will attract the most sales and generate the most revenue.
Competitor Launches: Your competitor's launch also affects the timing of your launch.
First-movers try to beat the market and attract eager buyers. Other companies prefer being a
second-mover. They wait until the market becomes familiar with a product's features. Then,
they launch when demand begins to grow.
Quality: The timing of your launch may also affect the quality of the product at offering.
The life cycle is often short for companies who rushed production and quality suffered. A
pilot rollout is often a good first step. It's a way to get real customer feedback on the first
batch of product and adjust the next wave before it hits customers or retailers.
The Marketing Process: The product's launch needs to be in sync with marketing
activities. Use advertising and other promotional techniques to introduce the product's
benefits to targeted customers. Establishing a product launch date and building toward that,
and then launching on-time is important. Missing a marketed product launch date can
alienate potential customers.
How to Determine the Right Timing
When is the right time to launch a new product or service? There’s no scientific process for
determining the best time.
Omar Zenhom, in his article at The $100 MBA, recommended these five factors to
determine the right timing for a product launch:
The Readiness of the Product
In general, the best time to launch is as soon as your product is ready. Release a product as
soon as it's working. It has to perform the stated function, and that’s all. Do all the honing
and perfecting when it's already in the market. You can start profiting from your product
before you start tweaking it. Take advantage of customer excitement. Then sell the refined
versions later.
That’s not to say you should release something inferior to the public, of course. It describes
a different way of looking at product development. Product development should be a never-
ending process. It's a lifelong struggle for perfection that’s never actually achieved.
Knowing that, why not make money as soon as the product is viable? If Apple waited until
the first iPhone could do what the latest ones can, we’d still be flipping open our Motorolas.
Sales Cycles
The exact time of the year, month, or even week you choose can make a difference. Ask
yourself these questions:
Is there a particular time when your target audience will want to use that product?
When would they enjoy your product most?
Research proves that Tuesday is the best day for launching a product. On Mondays,
consumers are too focused on the coming week. While on Fridays, people look forward to
the weekend. On Tuesdays, you can be sure that people have already dealt with issues from
the previous week. It also gives you enough time - a total of three days - to spread your
message and follow-up on questions.
A seasonal product will itself determine the best time of the year to launch. Self-
improvement products can work well in January to help fulfill New Year's resolutions.
While outdoor products are best for spring and summer.
The time of the year matters as well. It doesn't make sense to reveal your product before a
major holiday. People tend to travel back home and have no time to read when surrounded
by family and friends.
Your Schedule
Your ideal launch time will also depend on your own schedule. Schedule the launch when
you have as little going on as possible. so that you can devote the needed time and energy
for the launch. It makes sense to focus on product launches over other considerations. You
only get one shot at a successful launch! Expect glitches, customer service issues, and other
unpredictable demands on your attention. It’s important to have all hands on deck, and
yourself at the helm, ready to execute the launch with 100% presence.
Launch Conditions
There are conditions you need to meet to have a successful product launch.
First, establish your brand’s credibility to justify excitement for your new product. If you
haven’t already given your consumer base a reason to trust you, it’s time to lay that
groundwork down. More customers will be willing to gamble on the certainty that a product
will meet their needs.
Make sure that you prepare your business infrastructure for the spike in sales. Is your
distribution system in place? Is your payment system glitch-free? Do you have team
members standing by for customer service and tech support? Expect success, and you’ll
guarantee it.
Finally, time the launch in relation to existing products and their performance. The best time
to launch a new product is when another product of yours is reaching the peak of its
success. You can ride that momentum into the next wave of sales.

Marketing and Communication

The best way to ensure that your launch goes well is to have a unique and creative product
in the first place. Beyond that, it’s a matter of marketing and communication. Stay in touch
with your audience. Use email and social media to build excitement around your product,
and be there to usher it into the market. Expect the unexpected. Be ready to handle
questions, concerns, and other feedback from your audience. Stand by your product but look
for ways to incorporate feedback quickly. You’ll need to know what went well, and what
didn’t. The day of your big launch is the day you start preparing for the next one.

Product evaluation
Product evaluation is to evaluate the quality of products in order to summarize experience
as the guidance for follow-up design.
By performing continuing product evaluations, you get to know your target audience and
what they think about your company's products and/or services. Product evaluations
will help you to stay ahead and will bring you data with invaluable knowledge about your
customers’ needs

PRODUCT COMMERCIALISATION

6.1 Introduction

The aim of commercialization is to change the final product prototype into an

innovative commercial product that can be launched onto the market. This is still a
creative procedure but it is extremely focussed so that the marketing is integrated with
the production, and finance is making the funds available but controlling expenditure. It
is an expensive stage and needs good financial control to ensure that resources are
available at the right time and that costs do not overrun.

Time also needs to be planned and controlled so that there is no delay. Time is of the
essence because there is now a launch date to be considered, and once that is
determined then activities are timed and their timing controlled. The aim is to launch at
a specific time. If the length of time for commercialisation is increased, either the
launch may have to be delayed perhaps up to a year in order to market at the correct
season, or everyone rushes to launch and the product is not of the correct quality, or
production cannot produce it in sufficient quantities or marketing cannot obtain the
correct distribution.

6.1 Outcomes and activities in product commercialization

From the product specifications, the marketing strategy and the final prototype product,
commercialisation builds into three important functional plans (marketing, production
and finance) and then into an overall operational plan. These are combined together as
shown in Figure 6.1, which shows the different outcomes needed in each plan. The
outcomes from the three plans are combined in an operational plan for the launch. After
the launch there is a review of the final outcomes.
Figure 6.1 The outcomes from product commercialisation

FINAL PRODUCT PROTOTYPE PRODUCT

AND PROCESS SPECIFICATIONS
MARKETING STRATEGY FINANCIAL ANALYSIS

.

MARKETING PLAN PRODUCTION PLAN

OBJECTIVES PRODUCT QUALITIES
PRODUCT DESCRIPTION RAW MATERIALS
MARKET STRATEGY PROCESSING
MARKET CHANNELS PROCESS CONTROL
PHYSICAL DISTRIBUTION STORAGE & TRANSPORT
PRICING QUALITY ASSURANCE
SALES PLAN EQUIPMENT
PROMOTION SERVICES
PERSONNEL PERSONNEL
COSTS COSTS
TIMING SCHEDULES TIMING SCHEDULES
FINANCE PLAN
COSTS, PRICES
PROFITS
CASH FLOWS
CAPITAL INVESTMENT
WORKING CAPITAL
RETURN ON INVESTMENT
RISK ANALYSIS


OPERATIONAL PLAN
PRODUCTION CAPACITIES AND INVENTORIES
SELLING ORGANISATION
PROMOTION ORGANISATION
FINANCE AND FINANCIAL CONTROLS
FULL SCALE INTRODUCTION
POST-LAUNCH EVALUATION

DETERMINATION OF RETURN ON INVESTMENT

During commercialisation, the knowledge required to formulate these plans has to be

found, organised and integrated. It starts with information from the product design and
process development: product and packaging qualities, product concept, target market,
price range, market channel, physical distribution, process flow sheet, process
conditions, product testing. At this point, final adjustments are made to the product so
that it is acceptable not only to the consumers but also to the company’s operational
divisions, the retailers and other people in the distribution system. With industrial
products, it has to be acceptable across the different groups in the buying company -
product development, quality assurance, production and buying.

The product and its inner and outer packages need to be tested through production and
distribution to determine if the packaging provides the necessary protection to the
product and also meets the expected demands of distribution, sale and use. Some of the
product prepared during the small plant tests can be tested in large consumer/customer
'use' tests. In industrial marketing, it is important not only that the new ingredient is
acceptable in the manufacturer's plant but also that the manufacturer's product is
acceptable to the consumers. In consumer marketing, there are further consumer ‘use’
tests and sometimes a small test market in a few supermarkets representative of the
overall market to test the effects of different prices and promotions. There is constant
comparison with competitive products on the market to confirm that the product has
advantages to the users.

After these studies, there is enough information to detail the market for the product and
to draw up a complete market plan for launching the product, including market trials,
methods of selling, promotion and advertising, and methods of distribution.

The production development differs if the present plant is to be used or if a new plant
is to be built or if new equipment is to be bought or built. A preliminary process
equipment design can be made or, if current plant is to be used, the layout and
adaptation of this equipment for the new process determined. The production is ‘fine-
tuned’ and quality assurance developed.

Costs and prices are studied, the investments needed for marketing and for production
are estimated and a financial analysis is made. Then the decision is taken to stop, or to
test the market and production plans, or to allow the product to go forward to launching.
The production and the marketing are integrated first in large-scale production and
market testing, and then in an operational plan. A final commercial report, based on the
information collected, analyses whether the product fits in with the commercial and
financial aims of top management.
The steps and some of the activities in commercialisation are shown in Figure 6.2.

Figure 6.2 Activities in product commercialisation

FINAL PRODUCT PROTOTYPE

PRODUCT AND PROCESS SPECIFICATIONS
MARKETING STRATEGY FINANCIAL ANALYSIS


Knowledge of the product, production and marketing

Product
Product qualities optimised
Final packaging design
Final product concept
Marketing Production
Target market finalised Plant design
Preliminary market/sales prediction Plant commissioning
Price, promotion, place studies HACCP
analysis Process
control
Yields and costs studies
Quality assurance designed, tested
Transport/storage testing

Planning marketing, production and finance

Preparation of: Preparation of: Preparation of:

Market strategy Production specifications Final costing and pricing
Market plan Production plan Investment finance plan
Market forecast Physical distribution plan Operational finance plan

MARKETING, PRODUCTION AND FINANCE PLANS


Integration of marketing, production and finance

Prepare marketing material Production on large-scale Study of cash flows

Test market Variability of production Finance sources, costs

Analyse marketing and production testing Analyse financial feasibility

Improve marketing Improve production Improve costs


OPERATIONAL PLAN
DETERMINATION OF RETURN ON INVESTMENT
COMMERCIAL REPORT
 Think Break 6.1
Outcomes from commercialisation: marketing plan objectives

Compare the marketing plan objectives in launching the following new products:

 high protein bread by a group of small bakers with their own retail shops
 a tomato flavoured potato puffed snack by a potato chip company with
national distribution

 a line of salami products by an Italian meat processor into supermarkets

in Britain

6.2 Knowledge required for the marketing plan

The following operating functions are included in the marketing plan:
 market information - market research and analysis, particularly the targets to be
set for the launch and post-launch and the methods to monitor these;
 product - product proposition (product concept), packaging, branding, image;
 market channel and distribution - choice, control and development of market
channels, transportation, storage;
 pricing - price range, relation of price to demand, margins, discounts, specialing;
 promotion - retailer and consumer promotion, advertising, public relations;
 sales - methods of selling, terms of sale, sales reporting, analysis and forecasting.

6.3.1 Market information

The aim of information is to provide knowledge of both the consumer and the retailer as
the basis for a successful marketing strategy, and also to predict the number of units that
will be sold and revenue generated in order to set the targets for the post-launch analysis
of the success of the marketing. The questions to answer are:
 What will be the consumers' purchasing and repurchasing behaviour?
 What will be the consumers' reactions to the prices, the promotions?
 What are the predicted pessimistic, most likely and optimistic sales units
and revenue over the next months, years?
 What are the predicted competitive reactions?
 What are the predicted market shares?
Before the marketing plan is developed, there should already be a comprehensive
description of the potential consumers in the target market segment. With the 'line-filler'
type of product, the company will know the consumer from previous marketing efforts.
For the innovative product, market research, using either a survey or a product test or
both, will provide information to predict the potential consumption rate. For the purpose
of sales forecasting, the company needs to know the total number of potential customers
and the potential consumption rate. From this type of data and allowing for direct
competition, it is possible to make an estimate of the probable sales in conjunction with
estimates from other sources.

There are short-term or launch forecasts and also monthly or yearly long-term forecasts.
The intervals of forecasting depend on the predicted product lifecycle. If it is a one-
season product with a life between three and six months then monthly sales at least need
prediction. For the longer life product of five to ten years, then monthly sales for the
first year and yearly predictions after that are often used.

Think Break 6.2

Knowledge required for the marketing plan: customer information

For the industrial marketing of a new fat ingredient, compare the introduction of
the new product to large bread bakers and to small bakers and confectioners.
Contrast the needs of the two different types of customers, their possible buying
methods, the types of products they make, the services they need.
Discuss the marketing methods the company could use for each group of
customers..

6.3.2 Product
The aim is to have a product the consumers will buy. Some of the questions to answer
are:
 Is the product what the consumers want?
 Does it have the benefits wanted by the consumers?
 Does it have the desired characteristics wanted by the consumer (sensory, ease
of use, safety, nutrition, psychological)?
 Is it packaged correctly?
 Is the pack the right size?
 Is the pack attractive at the point of sale?
 Are the product and the pack legal? ethical?
 Does the brand suit the product?
The product characteristics, benefits, packaging type and size, brand and packaging
aesthetics, product image and the final product proposition to be presented to the retailer
or the industrial customer are identified and then integrated into the complete product
description for the market plan. The services provided for the industrial customer need
to be identified such as delivery, packaging, technical help.

6.3.3. Packaging
The aim of packaging is to present a unique design which will stand out on the retailers'
shelves and in the kitchen, encouraging consumers to buy and use the product. The
packaging design consists first in choosing a brand and a product name, and then
developing a graphic package design. In choosing the brand, there is the decision
whether to use a family brand name or a product brand name or both. Products have
been seen on supermarket shelves with three brand names, but this is confusing to the
buyers! A family brand name gives recognition and reassurance to the consumer but
must have strong associations with the new product. The product name needs to be
readily recognised by the target consumers and instantly related to their food
preferences and also related to the benefits they see in the product. Name selection is
achieved through the typical process of idea generation and screening, with strong
involvement by the consumer. The graphic design should be attractive but also
informative, giving details on the ingredients, the nutritional value and how to use the
product. There are also legal requirements from the Food Regulations which must be
followed.

6.3.4 Market channel and distribution

The aim is to make the product available at the right price at the right place at the right
time. The questions to answer on the marketing of the product are:
 Who will sell it?

 How will it be sold?

 How much will be sold?

 How will it be transported?

 How will it be stored?

 How will it be displayed?

 How will it be promoted by the retailer?
The type of market channel will have been identified but there is also a need to analyse
the people/organisations involved so that the product can be sold effectively with
control over and integration of selling and buying.

The overall system of food production is so complicated today, with international

movement of raw materials, ingredients and consumer products, that the whole system
from the agricultural and marine producers to the final consumer needs to be studied,
not just the immediate market channel of the product from the company to the retailer.
The domination of large multinational agricultural companies, processing companies,
supermarkets and fast food restaurants means that they control or at least strongly
influence the market channels. But there are still many small companies such as family
bakeries, restaurants, coffee shops, market stalls, family stores, which need to be
reached and the distributing company has to decide if they do this themselves or work
through agents and wholesalers. Small companies, especially in food exporting, need to
have agents or distributors to organise their market channel.

In studying the market channel, the coverage of the target market achieved is
determined, the costs estimated and the sales predicted for the different types of outlets
in the market channel. The logistics are important, especially in export marketing. The
locations of the plants, storage facilities and the customers in the distribution system,
the transport available, the inventory held in the total distribution system and the losses
in quantity and quality of product in the system need to be investigated so that the
optimum system for quality of product, sales and costs can be determined.

Most companies have an established distribution system and cannot change it to suit one
new product. However, the launch of a new product is a good opportunity to study the
alternatives if there are any. In the marketing of pre-packaged consumer food products,
the supermarket has become the all-important means of achieving distribution, but there
may be an opportunity to look at alternatives such as home selling.
 Think Break 6.3
Knowledge required for the marketing plan: market channel and distribution

A company is planning to export frozen fish fillets from New Zealand to

restaurants in California. Discuss the advantages and disadvantages of the three
possible methods of distribution:
(1) their own salespeople,
(2) a frozen fish distributor/merchant and
(3) an import agent.

6.3.5 Pricing
The price aim is to have a product giving 'value for money' for the consumer but at a
price that will produce the desired sales revenue and profit for the company. Company
pricing issues include the list price, discounts, allowances, payment period and credit
terms. The list price is based not only on the company costs plus the profit and the
advertising budget, but also on external factors that affect price. The questions to
answer are:

 What price range will the consumer accept?

 Does the consumer have any psychological attitudes to price?
 What is the relationship between sales forecasts and prices?
 How does the price relate to competitors' prices?
 What are retailer and wholesaler margins, agent percentage?
 What price specials, discounts may be needed?
 What are the subsidies, the taxes, the exchange rate?
 What are the basic company costs, the advertising allowances, the company
profit? Do they vary at different levels of outputs and sales?

Pricing is not a simple matter for a new product because of the many factors to be taken
into account, but in food marketing there is little scope for a great deal of movement in
price once the company has decided on its basic cost structure, pricing policy and the
position of the product on the market. A major decision is where to position the product
in the price range for this type of product: at the top as high quality, in the centre as
good quality or at the bottom as 'cheap'. In launching new products, two pricing policies
are particularly important: market skimming, where the price is set high to recover
development costs quickly, and market penetration where the price is set so that the
consumers will buy quickly and the main market is penetrated before competitors can
react.

Think Break 6.4

Knowledge required for the marketing plan: pricing

Discuss the following two pricing situations and decide which of the two pricing
strategies you would choose in each situation:
 market skimming or market penetration in launching an environmentally
friendly, nutritionally acceptable soft drink by a large soft drink manufacturer;
 top of the market pricing or bottom of the market pricing for a new blue vein
cheese from a small dairy company.

6.3.6 Promotion
The aim of promotion is to make the consumers aware of the product and encourage
them to buy the product at the rate of sales growth desired by the company. Promotion
includes advertising, personal selling, sales promotion and publicity. The questions to
answer are:
 Who are the target consumers?
 What is the product image?
 What is the message that has to reach the consumers?
 What promotion is needed to convey this message?
 What promotional methods are available?
 What budget is there?

For a food innovation, the consumer is made aware of the product, educated about its
use and benefits, and encouraged to try it. Although TV advertising is often used for
new food products because it reaches a large number of consumers very quickly, it may
not be the most effective choice. Demonstrations and tasting can encourage the
consumer to try the product and to remove some of their doubts about it because of its
‘newness’. Promotion is also to the retailer, an important intermediary on the way to the
consumer. Because of the difficulty of persuading supermarket managers and owners to
give shelf space to a new product, retailer promotion is being given a larger proportion
of the promotional budget.
The promotional budget is the sum of money available for spending on the launch and
is usually calculated as the amount needed for a given annual sales target rather than a
fixed percentage on expected sales. Promotion as percentage of turnover may be as high
as 30% or 40% in the initial stages of a product's life; this may be justified as being
necessary to achieve maximum distribution quickly and to bring notice to the company's
other products as a whole. How much should be allocated to a new product for the
purpose of the launch is difficult to decide rationally - there is seldom a model
correlating sales with promotion for a new product. The next step is to assess whether
or not the product is worth such a promotional budget, taking into account the purpose
for which the product is being introduced. If it is not, then either work on a reduced
sales forecast and budget or leave the market to someone who will find it worthwhile.
As can be seen in some of the Case Studies throughout the text, even some large
companies have not learnt this lesson. The whole situation is rather unsatisfactory but
there are techniques to put the promotional budget decision on an analytical footing if
the company and the industry has collected the requisite data.

Selection of the advertising mix presents similar problems to budget determination, and
sometimes precedes it. Decide what you want to do and then allocate the budget to do
it! The obvious prerequisites to the selection of methods of promotion are to know
whom the promotion is aimed at and what it is trying to do. The people to influence are
usually the purchasers and all those who affect their decisions, and of course the final
consumers who eat the food. The aims of the promotion may be to produce immediate
sales, to stimulate brand recognition and to 'educate' the consumer on a new type of
product benefit or characteristic. When the target people and the reasons for the
promotions are decided, logical selection of media can commence. There are reasonably
good quantitative techniques for this task, but it is still frequently left to experience and
value judgements.
 Think Break 6.5
Knowledge required for the marketing plan: promotion

A dairy company is launching a new high protein, high calcium, reduced fat, fresh
milk which is to be sold under the brand name Active', and has asked you for a
promotional brief.
 Prepare a promotional brief clearly describing the product concept, the
people to whom the milk is to be promoted and the advertising objectives.
 From this develop a theme for the promotion.
 Discuss possible methods of promoting the milk, and outline a
promotional campaign.

6.3.7 Sales
The sales aim is to achieve the sales targets that have been predicted at the budgeted
costs. This needs organisation of the sales areas and the sales personnel. Sales targets
are set for the sales areas and the individuals, and the sales people are organised to
achieve these sales. Training is provided before the market launch, so that sales people
have knowledge of the product, the market research, pricing and promotion and know
how to sell the product. Sales calls before the launch and merchandising (shelf display
organisation) during the launch are needed to achieve the necessary shelf space for the
new products. In the marketing plan the number of such special calls must be detailed to
allow adequate planning by the area managers.
The product proposition is the material presented to the buyer by the sales person. This
will include the product itself, written and oral details of the research behind the
product, the advertising programme, the margins and suggested retail price and any
introductory offer. In supermarkets, the sales person will contact the buyer who then
has the choice of whether to recommend the product to the new products selection
committee or to make the decision themselves. Some companies will sell through a
wholesaler, a food broker or a manufacturers' agent. The sales person has to be
equipped with facts which will convince the buyer, the wholesaler or the agent that the
product is a 'must' to enable them, in turn, to 'sell’ the product to the buying committee.
6.3 The marketing plan
There are several factors that need to be considered when developing the market plan:

 product position in the market;

 stage of the lifecycle for the product class, and therefore the position of the new
product on the product class lifecycle;
 relationship of the new product marketing mix to the overall company
marketing mix;
 interaction of the parts of the marketing mix - market channel with price,
promotion with price, product with promotion;
 quantitative relationship between sales volumes and the various parts of the
marketing mix;
 marketing profitability and efficiency of the marketing mix;
 reactions to the marketing mix of the industrial, social, legal and political
environments.

A summary of the parts of the market plan is shown in Table 6.1.

Table 6.1 Summary of a marketing plan for a new product

Overall Marketing Plan

Objectives:volume of sales, market area, profit.
Predicted environment: economic, political, social, industrial.
Place of product in product mix (product line): type of product, quality level, price
range, place in line (leader, minor product).
Market segment(s): type(s), location, size, characteristics.
Market channel: type of channel, retail, food service, institutional, industrial;
intermediate organisations (wholesalers, agents, brokers); geographical positions of
all organisations in the channel.
Marketing strategy: strategy outline, target markets, marketing mix, marketing
expenditure level.

Product plan
Product: proposition, uses, characteristics.
Packaging: branding, information, legal requirements, size(s), aesthetics.
Costs and prices
Costs: fixed and variable costs, marginal costs.
Prices: company list price, distributors' margins, retail price.
Sales and distribution plan
Sales organisation: personnel, training, launch, post-launch.
Physical distribution: transport, store location, inventory plan.
Sales:reporting, analysing, forecasting.
Sales targets and budgets: area targets, sales persons' targets, areas and sales
budgets.
Sales promotion: merchandising, sales communications.
Sales evaluation: targets and costs analysis.
Advertising and promotion
Message selection: creative development.
Consumer advertising: press, television, cinema, radio, outdoor posters, public
relations, internet
Consumer promotions: price specials, reduced price offers, competitions, coupons,
free samples
Point-of-purchase: display material, tasting, cooking demonstration.
Trade promotions: incentive schemes, display competitions, sales contests.
Trade advertising: trade journals, trade displays, conferences,
publications. Schedules
Production: times, quantities, quality, losses
Distribution:times, quantities, quality, losses.
Selling: times, launch quantity, future predicted quantities.
Promotion and advertising: times.
An example of a market plan is given in Example 6.1.

Example 6.1 Low-calorie chicken hotpot

A medium-sized canning company decided that it would move into the nutritional
diet market. The general manager thinks the present products - beans in tomato
sauce, soups, spaghetti, meat and vegetables - have a poor nutritional image. The
product designer has produced a low-calorie chicken hotpot and the marketing
manager has produced the following market mix plan.

Marketing objectives
 Enter the diet food market segment emphasising the nutritional/low calorie/
convenience aspects of the product.
 Recover development costs within two years.
 Maximise profits.

Predicted Environment
At present, the country is in an economic recession but there is predicted to be a
minor resurgence in the economy. This will justify the product launch in this year.
The social environment is changing, with an increased awareness of the nutritional
value of foods, personal fitness and weight control. If the market follows overseas
trends, this trend could continue affecting a greater proportion of the population.
This means the product should be readily accepted with little social resistance.
At present, there are no calorie reduced, nutritionally balanced, canned
convenience meals on the market. This could be expected to change rapidly
once
the product is launched. Thus the company must have a flexible marketing plan to
adjust to the changing competitive environment.

Product
The product has the appeal of being:
 a balanced meal of nutrients and minerals;
 low in calories;
 convenient.
These factors were established from the market trial and from this a product image
developed of 'calorie reduced, highly nutritious, convenience meal'. Factors such as
'good for you', 'balanced', 'quick' and 'healthy' could be emphasised as product
benefits.

Product name
As the sponsoring company is diversifying into the product area of diet foods, it
could be preferable to establish a new brand with a 'health' image. Brand
suggestions include 'LITEWEIGHT', 'VITALITE' or 'NUTRILITE'. The latter
brand name tends to be better suited to the product image of a calorie reduced,
nutritional product line.
The product name decided on is 'CHICKEN HOTPOT' as this describes a chicken
and vegetable mix suitable for a quick but special meal. It also implies the product
is different from competing canned meat and vegetable products. This distinction
must be emphasised as the developed product is establishing a different product
image
As the product is to be canned, it is important that the label be distinctive to
attract consumer attention. The label must meet the Food Regulations.
Example 6.1 Low-calorie chicken hotpot – continued
Consumer
The product has to appeal to two distinct consumers:
 consumers on calorie reduced/health food diets;
 general consumers of convenience foods who would buy the product for the
reduction in calories, nutritional attributes and possibly taste preferences to
competing convenience products on the market.

Price
There are three alternative pricing strategies:
 price high, to the upper end of the diet market;
 price intermediate, to the low calorie/convenience market;
 price low, to the convenience canned meals market.

One of the marketing goals set was to maximise profits. To achieve this, the
company's demand, cost and profit functions were analysed. The production cost
was estimated at $1.71 and to cover company costs and profits the wholesale list
price was set at $3.22. If there was a retailer mark-up of 30%, this would give a
retail price of $4.19. As the product would have to be promoted, it was decided that
the price should be first set to the upper end, i.e. the diet market, and then as
production increases and development costs are recovered the price should be
dropped to the low calorie/convenience market.
The price set allows for 'specials', 'discounting' and other retail discounts that may
be necessary in the marketing of the product and establishing good relationships
with retail outlets.

Market channels
The alternative market channels are:
 market through supermarkets and convenience stores via a wholesaler;
 market direct to major supermarket chains (eliminating wholesaler);
 market to smaller health food shops and delicatessens via wholesaler;
 market to all retail stores directly.

It was established from the market trial that the main retail outlets at which the
consumer would expect to buy the product were supermarkets and convenience
stores. A smaller proportion of the respondents indicated buying the product at
health food shops and delicatessens. The company could use the latter if they
adopted the high price strategy (i.e. price to the upper end of the market).
The market channel for sale of the product through a wholesaler to supermarkets
and convenience stores is already established. Using this would minimise the cost
and marketing effort required in moving the product through the channel.
Marketing to delicatessens and health food shops requires marketing through a
wholesaler or using a manufacturers' agent to a large number of retail outlets in
small volumes. This may suit the initial small volume produced. Alternatively,
during the initial low throughput, it may be more useful to market the product only
to one or two supermarket chains in one of the major cities.

On considering the effectiveness, experience and cost of the alternatives, the first
alternative (supermarkets and convenience stores via a wholesaler) would appear to
have the greatest potential.
Example 6.1 Low-calorie chicken hotpot - continued
Physical Distribution
The product is canned and has an estimated shelf life of two years at ambient
temperatures. Due to the nature of the product, damage is restricted to dented cans
and torn labels, occurring only with excessive handling.

The existing company's physical distribution system is by road or rail, which can
be adapted to the Chicken Hotpot. The product is distributed to warehouses in main
city centres. On analysis of transport costing, it would appear rail is the cheaper
method for this initial distribution. Distribution to the smaller centres could be by
road or rail as dictated by local costs and availability of the transport.

The company adopts a policy of minimising the level of capital invested in

inventory. During the initial product launch, it is estimated a three-month supply of
product is required to fill the market channel. As the market establishes, this level
of inventory in the warehouses can decrease to approximately a two-month supply.
This does not allow for any possible seasonal trends such as increased consumption
during winter; these can only be established during the initial years of marketing
the product.

Promotion
The promotional mix consists of a combination of four promotional methods:
 advertising;  personal selling;
 sales promotion;  publicity.

The mix must be coordinated and conform to the overall market plan.
The theme for all promotional work is:

CHICKEN HOTPOT a calorie reduced, highly nutritious, convenience meal

This theme emphasises that the product is a convenience product giving a balanced
meal of essential vitamins and nutrients for those people on calorie-reduced diets or
interested in weight control. It is felt that the main product benefit to emphasise is
convenience: quick to prepare, calorie-reduced meal.

Advertising aims are to stimulate sales, and generate the new product image and the
NUTRILITE brand image.

The advertising media available for marketing the product, in order of increasing
cost and increasing penetration, are:
1. newspapers; 4. radio;
2. magazines; 5. television.
3. mail pamphlets with discount offers;

Due to limited finance, the possibility of television as a promotional medium is

eliminated. Radio tends to be specific for local regions and has intense competition
and short attention span. Thus it was also eliminated. The final media are within the
company’s budget allocation. Newspapers have a wide coverage but date quickly
and have a short attention span. Magazines reach a specialist target audience and
have a longer life due to magazine circulation. The mailing of pamphlets provides a
rapid means of informing the public (important during the product launch) but is
relatively expensive.
Example 6.1 Low-calorie chicken hotpot - continued
Two possible magazines for advertising the Chicken Hotpot throughout the
market could be:  a high circulation women’s magazine;
 a high circulation general magazine.
Both magazines have a high reach (i.e. a large number of people exposed one or
more times to the advertisement). The frequency of exposure will be determined by
the number of times the product is inserted.

Coordinating the advertising schedules is important to achieve a high reach at

product launch. A possible schedule is outlined below:
 Delivery of pamphlets to householders with a discount on the product.
 At the same time, concentrated magazine advertising in both magazines.
 Periodical burst advertising in magazines as the product is established on the
market.

Personal selling in the company consists of a sales force of two area managers with
eight sales persons. The sales persons establish contact with potential customers.
To ensure the presentation is effective, sales staff must be informed of the product,
sales method, any possible discounts, trade benefits, advertising and promotion to
be used.

Sales promotions are to gain retailer and consumer confidence in the product. To
gain trade acceptance of the product and achieve prime shelf space and in-store
displays, cooperative advertising and buying allowances could be offered.

In-store displays portray the calorie reduced, convenience, health aspect of the
product, for example a poster with a slim, healthy young couple eating the
casserole and a caption underneath stating the ease of preparation. The displays
could show methods of serving the product and, if possible, in-store cooking
demonstrations will be used. Samples could also be given. In-store promotion is
important to show the attractive eating qualities and to emphasise the lower
calories than the existing canned meals.

Publicity is to gain widespread awareness of the product in the trade and among the
consumers. At the product launch it may be possible to obtain media coverage of
the revolution in food - a calorie reduced, convenience meal balanced in nutrients
and vitamins. This is justified by the fact that the type of product is not presently
available but corresponds to the new awareness in health and fitness. Promotion of
this type would require careful planning to be effective but in general publicity has
a high level of truth attached to it, i.e. consumers tend to believe it is more
authentic than advertisements.

Overall, the promotional mix will be informative, building up an awareness of the

product at the time of launching. As the product establishes a market, the mix will
become more persuasive.
 Example 6.1. Low-calorie chicken hotpot - continued
Timing and test market
The most suitable time for launching of the product is prior to winter. This is
because the hotpot may show a seasonal trend with increased demand in the winter
months for a hot meal. The extent of the trend can only be determined by actual
marketing, but it will probably not be very marked due to the ‘light’ sauce.

Prior to national launching of the product, it may be advantageous to test market

the product in a small region. The cost of this is justified by the newness of the
product.

It is essential the product is launched soon to obtain maximum benefit from the
change in consumer awareness of health and fitness combined with the increasing
demand for convenient, quick-to-prepare foods.

Think Break 6.6

A marketing plan: low-calorie chicken hotpot

Imagine you are the general manager of the company and you have been presented
with this market plan.
1. Do you think this should be a single product launch or a product line launch?
2. Do you agree with a new brand name? How would you test the suggested name?
3. Do you want to sell high priced, top of the market product when you only go to
the cheap convenience market at the moment?
4. What changes would you suggest to the market plan?
5. Would you give permission for the product launch?

In preparing the marketing plan, there are some points to remember:

 The promotional artwork must be completed before the package manufacture.
 There must be sufficient capital to finance the stocks of product and the
introduction costs - the money available will set the limits on your
marketing plan.
 The sales force must be adequately trained before product stocks are built up in
the different distribution centres but after the promotion has been designed.
 Adequate stocks of the product must be available at the time of introduction.
 The promotion should give sales which are related to the sales forecast but also
the production capacity of the plant.

The marketing plan is summarised in a marketing programme, which is an integrated

plan of all activities together with their timing and costs. It includes a marketing budget
with the sales forecasts - volume, revenue and the costs and the gross profits. The plan
is evaluated before final approval. Is it feasible, comprehensive and flexible? Does it
include a schedule, a budget? Is it in written form, in line with company policy? Does it
provide for effective implementation? Has it been carefully reviewed and agreed by the
people who will carry it out? Is it integrated with the production plan?

Think Break 6.7

Marketing plan: differences with innovation level

Discuss the differences between the market plans for an innovative product, an
improved product and a me-too product.
Show diagrammatically the main sections of the three plans.

6.4 Knowledge required for the production plan

A production plan is developed along the same lines as the market plan to ensure that all
the tasks are carried out and completed in time. The main areas in production planning
are:
 raw materials;
 processing;
 quality assurance.

6.5.1 Raw materials

The aim here is to ensure that the raw materials are delivered at the right time and in the
right quantities and of the right quality and at the right cost so that the process runs
successfully. The factors to be considered when sourcing raw materials for both the
product and the packaging are:
 location of the source relative to the plant;
 level of quality required for the raw material;
 price that the product can afford;
  reliability of the supplier regarding specifications and delivery;
 services provided by the supplier;
 uniqueness of the supplier for this raw material.
These factors are listed in order of importance. The most important factor is met first
and so on down the list to determine the most suitable supplier(s) for each raw material.
The raw material might need to be of a specified quality but as it is highly perishable it
needs to be sourced near the plant. Therefore quality and location would be considered
first when choosing suppliers. An important decision is to have either a long-term
association with a supplier or to choose the supplier according to the factors as
conditions change.

It is important to determine the timing and the quantities of ordering, arrival, storage
and use of the raw materials. Some raw materials have very long lag times before
delivery, especially packaging materials and imported ingredients, therefore a schedule
for ordering materials is made out and followed so that all the materials arrive in time to
start production. It is also important that the materials do not arrive too early as this can
cost the manufacturer a great deal for inventory and also materials may deteriorate in
storage. There has been a great deal of emphasis on ‘just-in-time’ production in recent
years, but this can cause a great deal of trouble when starting production for a new
product. It is easier to manage a less tight schedule as it is never certain what is going to
happen. The quantity to be ordered and held in stock depends on the time from order to
delivery, the costs of delivery and storage, the quantity required for a production run
and the number of experimental runs planned. It is preferable to have the same raw
materials for all runs so that the processing effects can be studied.

Another important factor in raw material planning is to study if alternative raw materials
can be used and also if raw materials from different suppliers can be substituted for the
first choice. Then if there are any problems in supply, there are alternatives which can
be obtained quickly. If the product is a greater market success than predicted, it would
be embarrassing and might even kill the product if production had to stop because of
lack of a raw material.

The ways of handling, sorting and preparing raw materials are very important in
the food industry. There is a need to study the materials handling so that it is not
labour
intensive and fits into the main process. Also in-line sorting equipment gives a tighter
control and reduces human sorting and judgement.

6.5.2 Processing/manufacturing
The aim of processing/manufacturing is to produce the right quality and quantity of
product at the right time and cost, not only for the launch but for the months ahead.
After the production trial at the end of product design and process development, many
problems will have been identified and discussed with production staff and hopefully
solved in order to make 'start up' as trouble-free as possible. However, just because it
works, it may not be the most efficient and effective way of producing the product. The
factors which need to be studied in processing can be grouped under technical,
economic and human reactions.

Technical factors to consider are the plant design and commissioning, and the process
analysis and control. New plant or new equipment may be needed and this has to be
designed and built or bought; in both cases there need to be engineering specifications
based on the processing requirements, mechanical/electrical design and computer
control. The plant layout and supply of services is important. Sometimes imaginative
new thinking in this area can increase product quality and yields and improve the
overall efficiency and conditions of the plant. It is too easy to be complacent, so look
carefully at movement of materials, employment of staff and bottlenecks in
production.

Economic factors in processing can be summarised as initially setting the lowest

practicable capital and running costs and the required financial returns from the project,
and then ensuring by constant monitoring and fine-tuning that the budget is
implemented. Experience during the development may show a need for reconsideration
of the budget; if a change is required then it is essential that all implications for prices,
profits, predictions and so on are fully explored, understood and taken into account.

Human reactions in a processing line are critical both in getting a new development off
the ground and in the evolving stages. Commitment is a most important ingredient in
implementing change, and development always means change. If the staff want to make
it work then they will, and often this means an extensive selling job to staff at all levels
from the most senior manager to the floor operators. This needs to be done
systematically and comprehensively, and the more effectively it is done the more
smoothly the product development project will move.
In commissioning new plants, several points to remember are:
 Does the product meet specification in terms of quantity, quality, consistency?
 Can the plant be operated and controlled reliably, conveniently, without stress?
 Are the running costs for services, staffing and maintenance as planned?
 Do the plant components match the design stipulations, pricing schedules?
 Has adequate information material been prepared for the instruction of
operating, quality assurance, trouble shooting and maintenance staff?
 Have arrangements been made to remove ‘out of spec' products and other waste
materials from the plant without loss of secrecy?

Think Break 6.8

Knowledge required for the production plan: processing and manufacturing

In planning the production of the Chicken Hotpot in Example 6.1:

1. Identify the raw materials that could be used in the Chicken Hotpot,
including a nutritional mix to give the balanced nutrition.

2. Identify the unit operations in a processing flow sheet.

3. The present canning line is to be used which includes washing equipment

for vegetables, sorting belts, mixers, canning line, steam jacketed pans,
stationary autoclaves/sterilisers, water cooling stands, labelling machines.
Plan how you would use the equipment.

4. Develop a check list for all the activities needed before the trial runs.

5. How would you communicate your plans with the factory staff, engineers
and quality assurance staff?

6.5.3 Quality assurance

The aim of quality assurance is to ensure a product correct for its intended use. Quality
and safety are absolutely essential elements which must be built into new products. The
first step in analysing product safety and quality is to set up systems for Hazard
Analysis Critical Control Points (HACCP) or Hazard Analysis/Risk Assessment
(HARA) or Hazard Analysis and Operability (HAZOP). The steps in studying a
process using HACCP are as follows:
 Establish full specifications for raw materials, processing, product, packaging
and distribution.
 Identify and quantify risks.
 Prepare a full flow diagram for the process.
 Identify critical control points (CCPs) along the processing and distribution
line using risk assessment techniques.
 Establish measurements and set points and limits necessary at each CCP for
adequate and safe control.
 Establish and define criteria for tolerable departure from set points, and
corrective action to be taken to maintain control.
 Establish a monitoring regime; review the procedures for the HACCP system.

HACCP was originally introduced to ensure the safety of food, but it is now also used to
ensure product quality. Process control is based on the HACCP system, using computer
controls, total process modelling systems and process optimisation, and in-line testing.
Process control techniques are improving rapidly and will make this area of the product
development process more quantitative and less empirical. The process study also needs
to ensure that there is integration of the new process technology into the existing system
with minimum disruption and cost.

From these studies a quality assurance plan is developed, which includes the controls
and testing required during the process and the testing of the final product. Quality
assurance includes the sampling, testing and control procedures, the targets for each,
and the statistical control methods needed to study any changes that are occurring.
Companies must decide how far to take these when choosing the quality assurance
standard (ISO 9001, 9002, 9003) for their production. There may be a need for new
testing equipment and certainly for the training of staff. Once the plant is running,
tolerance limits will be finalised but they should be provisionally set well before then.
Production as well as quality assurance staff need to know the new requirements as they
are often the first to notice ‘out-of-specification' product. Quality assurance is integrated
into the company's TQM (total quality management) which takes into consideration all
aspects of the business that affect quality. Process analysis is one of the most important
tools in TQM.

The most important factor in building quality into production is the staff and the
communications between them. There is a need to have regular exchanges of
information both verbal and written between production and marketing, but especially
between the designers of the process and the production and quality assurance staff.
There should be cooperation between staff. Nothing is more likely to be disastrous than
the design team running the production trials. The production staff needs to run the
production with back-up and technical advice from the designers. Accurate and timely
information is not only crucial for effective management control, but it also improves
staff commitment and morale across departments.

A set procedure is needed; the production trial will require details from the design and
production managers on:
 quantity required, plant capacity/capability;
 reasons for trial;
 trial control methods;
 review methods for problems;
 personnel involved and contact methods.
 contingency plans;
 contamination and safety potential.

Other useful communication methods include factory trial requests, production sheets,
quality assurance sheets, product costing and a planning schedule, as well as the
production specifications and an outline marketing strategy. The regular critical
decision points should be identified so that all understand when production
development is to continue and when it is to stop. Staff education about the new process
is important.

There are information security problems during these trials, as there is a need to keep
information away from competitors, so there will be constraints on communication and
staff must fully appreciate and respect the need for confidentiality.

6.5 The production plan

The production plan includes careful consideration of:

 product specifications,
 raw materials,
 processing,
  distribution,
 quality assurance,
 personnel,
 costs,
 timing schedules.

The production trial is developed after trial runs have solved any problems with the raw
materials and processing. This may be just two or three runs if a standard process is to
be used but many months even years for an innovative process. The initial production
plan usually is gradually changed as the production outputs are increased. The product
developers should cooperate with the production staff in developing the plan, but
responsibility for the production plan is with the production/technical manager.

Think Break 6.9

The production plan: fruit drink powder
For the fruit drink powder described in previous Think Breaks in Chapter 5,
Think Break 5.5 (Section 5.4.4) and Think Break 5.7 (Section 5.7), study your
information.
What further information would you need to develop a production plan, using the
areas listed above?
Whom would you contact to get this information?
Outline a production plan for the fruit drink powder, showing the stages in the
production plan development.

6.6 Knowledge required for the financial plan

From the marketing and the production studies comes information on the costs, prices,
quantities and investment needed to launch the product and to continue producing and
marketing the product in the future. There are predictions on the relationship between
production outputs and costs, the fixed costs and variable costs, the price range and the
relationship between price and demand, the capital investment for new plant, the
investment needed for launching both by production and marketing, and the working
capital needed during the launching and post-launch.
From this information the finance team, with its knowledge of loans, interest rates,
taxes, subsidies, import duties and exchange rates, can determine inward and outward
cash flows (sales revenue and costs) for future years and the investment costs during
the same periods. From this, they can determine the profits and the total investment,
and then determine the return on the investment. The cash flows are usually discounted
so that future cash flows are brought to present-day values. These predictions are
compared with the company's financial targets and constraints. As these are predictions,
it is important that the probabilities of achieving them are estimated.

6.7 The financial plan

This consists of the prediction for the next few years of:
 costs;
 prices;
 profits;
 inward and outward cash flows;
 investments, both investment capital and working capital;
 returns on investment;
 predictions of financial variations due to product, market, company and economic
changes.

Possible changes in technology and consumer expectations also have to be taken into
account in developing the production and market plans (see Case Study 6).
 Case Study 6.
Consumer Expectations of the Food Industry
The food industry's primary mission is to convert raw materials into safe, high
quality, consumable food products. As we do that we add value - reflected in price,
and hopefully always in meeting consumer needs in increasingly better ways. In our
early history; added value meant preservation to allow food to be stored between
growing seasons; later preservation techniques allowed food to be distributed and
consumed away from the growing region; more recently added value has focussed
on food safety, convenience, better taste and nutrition. Each of these increased added
value over prior inventions.
But today's consumer? Firstly there is a growing, but changing concern about health.
The negative aspects are concerns about additives, excess calories and food safety;
however, a newer interest in diet as a source of improved health and well-being is
emerging. Secondly there is a yearning for what is called 'essence’. That is a longing
to strip away the unnecessary, the superficial; to refocus on the genuine and
authentic, the simple and basic. Is this a start of a move from the added value of
processed food back towards the original agricultural raw material?
There are two other consumer aspects. Firstly food is consumed away from home,
which has implications for food safety. Secondly are the changes in where food is
being purchased for home consumption, which has resulted in growth of alternative
channels, such as home sales and delivery, mail order, and interactive media and
computer linkages.
So what does this mean for the future?
(Source: Ruff, J. (1995) 'Consumer expectations of the food industry - a vision for
the 21st century', Food Science and Technology Today, 9(4), 195-205.)

6.8 The pre-launch trial

The next stage is to integrate the production, market and financial plans in one pre-
launch trial. Once the results of this are known, the final overall operational plan for the
launch can be organised. With a product which is using the existing production and
marketing facilities, there may not be a need for additional test production and
marketing and the product will go straight into the launch; or if there is some doubt
there can be a 'rolling' launch, with the product introduced into a series of areas.
But there is still a need to research the production and the marketing so that it can
be improved as the launch proceeds.

Test marketing is not undertaken when:

 time into the market must be as short as possible because the product is
vulnerable to competitors who can easily copy the product and launch their
competing product onto the market;
 research is convincing that the product will be successful and it does not justify
the extra expense;
 the new product is a line-filler or a me-too; the launch costs will not be high and
so the losses are small in the event of a failure;
 there is confidence that any technical problems will not affect the product quality.

Production and market testing brings the product through the production sequence in the
production plan and puts the product on the market under the market plan in controlled
conditions in a restricted area. On the production side, the raw material quality and
quantity need to be monitored along with, most importantly, the yield and quality of the
product. Any equipment problems such as breakdowns and the staff needed also need to
be monitored. Also there is a need to monitor the process variables and to identify any
tendency to wander outside the set limits, either intermittently or in a set pattern.

It is very important to monitor not just the sales of the product, but to check how the
product is performing in distribution, storage and in the supermarket, the retailers'
attitudes to the product and their placement and promotion of the product in the
supermarket, and of course the consumers' attitudes and behaviour towards the product.
Are they buying again? How much are they buying? What do they like/dislike in the
product?

This monitoring usually leads to improvements in product, production and quality

assurance and also often signals desirable changes in distribution and marketing
methods. The pre-launch trial is a time of constant improvement of the product, of
reduction in production costs and of increase in the effectiveness of the marketing
methods. In industrial marketing, the general stages are the same but the product is
being developed for use by a customer in their process or the chef in food service, so
there has to be knowledge of how the ingredient is behaving in the customers' processes
and their products. Product testing is preferably undertaken with the customer in their
own plant, but because of the customer's needs for secrecy it may have to be undertaken
in the supplier's pilot plant.

Other factors to consider are the area of market testing and the length of time the
marketing and production testing will last. The test market area needs to be
representative of the total market in terms of the consumers, the retailers and the
marketing mix. The time for the market test depends on the average repurchase period,
the competitive situation and the cost. It is necessary to observe a few repeated
purchases of the product to see if the product will be a long-term success. If this period
is likely to be very long, then buyer interviews can be used to predict repeat purchasing.
Competition may come in very fast and either launch their product or upset the market
by pricing specials, forcing the test to be shortened. Production testing is continued until
the process stabilises.

The test market can be in one or two market areas, or just in one or two supermarkets.
The sales of competitive products are determined before the new product is introduced
and during the test both the competitive products and the new product sales are
monitored. With two areas, one area can have the product introduction and the other
area does not; this gives some idea if the observed effects arise from the product or from
some other cause in the whole market. Usually as well as undertaking a retail sales
audit, consumer panels or buyers' surveys are conducted to determine consumer
reactions.

From the production and market tests, information can be found on production
efficiency, product quality variations, costs, market share, and relationship of new
product to main competing products in terms of consumer acceptability and sales, and
also the predicted sales for the total market. The company will then have a realistic idea
of how the product will fare in the national market, and of any minor improvements
needed to the production and the marketing.
6.9 Overall operational plan

The overall operational plan gives the final directions for the production and marketing.
It contains information on:
 building production capacities and inventories,
 organising selling and promotion
 organising financial controls,
 full-scale introduction,
 post-launch evaluation.
The different activities in the operational plan are shown in Table 6.2.
Table 6.2 The operational plan

Building production capacities and inventories

 Complete production facilities and organise raw materials
 Organise warehouses, stores and shipping patterns
 Determine inventory levels
 Ensure production is operating to specification
 Ensure quality assurance is operating to specification
 Produce and distribute the required volumes
Organising selling
 Organise the market area
 Organise the selling method
 Set targets for areas and individuals
 Decide on approach to buyers
 Train the sales people
 Make introductory visits
Organising promotion
 Finalise promotion design
 Book television and radio time
 Prepare television films and radio sound tracks
 Design and print in-store promotional material
 Design newspaper and magazine advertisements
 Negotiate space in newspapers and magazines
 Distribute final material to merchandisers and media
Table 6.2 The operational plan (cont.)

Organising finance and financial controls

 Organise capital investment funds
 Organise working capital
 Set cost targets
 Set price targets
 Set sales revenue
 Set profits
 Set returns on investment
Full-scale introduction
 Organise sales meetings
 Introduce generally to trade
 Introduce to specific retailers by sales people
 Deliver stock to retail stores and ensure it is displayed correctly
 Start advertising and promotions
 Release the product
Post-launch evaluation
 Quantitative targets
 Qualitative targets

These marketing, production and financial activities need to be coordinated, and time
and resources allocated to them. The development of a critical path network of the
activities ensures the completion of the launch at the correct time as the critical
activities can be recognised and taken into account. It is important to set the standards
and methods for the post-launch evaluation before the launch that is in the operational
plan.

6.10 Financial analysis

By this stage costs are more accurate. Predictions can be made of costs at different
production levels and of the sensitivity of costs to changes in raw material prices,
energy prices and personnel wages. The price range and the different types of discounts
necessary will have been confirmed. This means that the profit per unit can be
predicted. Also the sales of units at the launch and in the future will have been predicted
from the test market, so the total sales revenues over time can be forecast. From the
sales and costs, the profits can be determined and the cash flows for the next few years
set out.

Financial analysis is vital before the decision is taken to launch the product. Product
development requires adequate resourcing, paid for through financing which has to be
planned.

Both the capital investment and the working capital investment are determined for
the launch and also to support the future. It may take some time before the cash flow
becomes positive and there needs to be cash available to overcome this. For small
companies failure in new product introductions is often the result of insufficient cash
reserves or an inability to borrow money to sustain the project through this period of
loss.

The return on investment can be predicted and compared with the company's policy.
Usually discounted cash flows are used in analysing the return on investment. The risk
is also assessed by setting probabilities on the most pessimistic, most likely and most
optimistic cash flows.

Important aspects of financial analysis are:

Finance quantity, in that sufficient capital or credit has to be assured to meet the total
costs of the project as they arise and as the project progresses. In a large organisation,
this may be met from R&D budgets, by effectively borrowing resources from other
operational parts of the company, through short-term credits from suppliers, overdrafts
and so on. Smaller organisations may have to formally borrow from outside, even set up
a new corporate structure and raise external funds by the sale of shares. In any event,
what can be thought of as the project balance sheet has to balance. In the longer term it
is expected to generate profits and pay its way in full.

Finance quality, in that the cash is provided when the need occurs. Each time a
decision is made to proceed a further step with the project, new resources are
committed, and when these are actually bought, appropriate payments must be made at
that time. It should be borne in mind that new steps are generally more costly than
those
taken already, that the launch is probably the most costly, and that income only comes
after sales. Negative cash flows will accumulate and accelerate and the debt balance is
expected to peak around launch time.

Working capital must be adequate to pay for work in progress, production, marketing,
storage, distribution, wages and overheads. It is easy to underestimate and if insufficient
can lead to cutting the very corners which are essential to the speedy conclusion and
success of the project.

6.11 Summary
Commercialization is difficult and costly; mistakes can be made and these can be major
hurdles for the project. The aim is to set out the details of the production, marketing and
financial plans, and then integrate them into one operational plan and so produce
success in launching the product on the market. There are many people involved in
commercialisation and therefore communication and coordination are vital.

Bringing in a commercially viable new product is the object of the product development
project, but it is only fully successful if it comes in on-time and on budget. Well
organised and resourced commercialisation can ensure that this happens. Only when the
launch is fully successful can the development managers be satisfied, and the general
managers have the confidence in development to commission the next project. Finance
is the yardstick whereby this confidence is measured.

6.12 Suggested readings

Banks, J.G. (1994) 'Process control and quality assurance through the application of
HACCP and predictive microbiology', in Singh, R.P and Oliveira, F.A.R. (eds),
Minimal Processing of Food and Process Optimisation: An Interface, Boca Raton, Fla.:
CRC Press, pp. 191-99.

Hisrich, R.D. and Peters, M.P. (1991) 'The new products marketing program',
Marketing Decisions for New and Mature Products, New York: Maxwell Macmillan
International Editions, pp. 319 - 411.

Hood, L.L., Lundy, R.J. and Johnson, D.C. (1995) 'New product development: North
American ingredient supplier's role', British Food Journal, 97(3), 12-17.
Rizvi, S.S.H., Singh, R.K., Hotchkiss, J.H., Heldman, D.R. and Keung, H.K. (1993)
'Research needs in food engineering, processing and packaging', Food Technology,
March, 26S-35S.
Taniguchi, R. and Nihmura, M. (1994) 'Quality design and plant operation in food
processing', in Singh, R.P. and Oliveira, F.A.R. (eds.), Minimal Processing of Food
and Process Optimisation: An Interface, Boca Raton, Fla.: CRC Press, pp.243 - 49.

Some more recent readings

Earle, M. and Earle, R. (2000) ‘Adapting product commercialisation to the changes’
Building the Future on New Products, Leatherhead, Surrey, LFRA Ltd. pp 95-110,
Fuller, G.W. (2005) ‘Going to Market: Success or Failure’ New Food Product
Development, 2nd. Ed., Boca Raton, Florida, CRC Press. pp 219-239

Mayes, T. and Mortimore, S. (eds.) (2001) Making the Most of HACCP, Cambridge,
Woodhead

Russell, A. (2008) ‘Process innovation from research and development to production in

a large company – development and commercialisation of a low temperature extrusion
process.’Case studies in food product development, by Earle M. and Earle R., (eds.)
Cambridge, Woodhead, pp 202-222.
Project Break 6

Either for your company project or for another Project you have been using in
earlier chapters or for Project 6 at the end of the Chapter.

 Identify the marketing, production and financial knowledge that is needed

to develop the plans for commercialising the product(s).

 Outline the production, marketing and financial plans.

 Describe how the various plans can be integrated to give a successful

launch.

 Do you think the launch will be successful?

Project 6: Splash: Water in a Bottle
Spring, distilled, purified or enhanced, there's no purer packaging problem than
bottled water!
What is the product? What is the packaging?
The basic waters are:
 distilled and purified water which has been treated by distillation,
deionization or reverse osmosis to remove particles and minerals - most
notably chlorine - leaving almost no detectable taste;
 mineral waters from geologically and physically protected underground
sources;
 ordinary drinking water, carbon filtered;
 artesian water, basically spring water drawn from a well above the aquifer. Most
products are 'naturally pure' but some recent ones have had artificial additives such as
caffeine and herbs, and have been mixed with fruit juices.

The most important distinction between products is the packaging, mostly plastic or
glass. The packaging is mainly cylindrical bottles, but top market products have
unusual shapes. Many bottles have nipples so that the consumers can drink directly
from the bottle. At the same time, bottle and label designs have become more
fashionable and eye-catching.

The brands also bring variety. Most products have a mania for attaching themselves to a
distinctive place of origin. One of the simple strategies for grabbing the attention of
shoppers is to give their products a fanciful or downright silly name.

The gesture of indulging in bottled water has switched from one of sedentary
contentment, poured in a glass, to chin-cocked confidence swigged from the bottle.
And yet drinking water retains its sense of self-denial, rendering it a promiscuous
display of abstinence.
A company is now planning to introduce a Water of the Month Club, each month an
exotic water shipped straight to your home.
 (Source: Pratt, S. and Nemerov, A. (1997) 'Splash', Internationa1 Design Magazine,
November, 6-9. Reprinted with permission. © 1999 Aspen Publishers, Inc.)

7.1 MARKETING MANAGEMENT

It is centered on creating, planning, and implementing strategies that will help achieve wider
business objectives. These business objectives can involve increasing brand awareness, boosting
profits, or entering previously untapped markets
The four types of marketing management typically refer to the four Ps of marketing mix:
 Product,
 Price,
 Promotion,
 Place.

However, the marketing mix is not marketing management. Some types of high-level marketing
management include; resource, work, project, and operations management

Market Entry strategies

Market entry strategy refers to the sales and marketing framework businesses use as they expand
internationally.
It focuses on:
 How you will increase product awareness in a new region.
 What technology and resources you need to distribute your products.
 what language translation services make that happen.

In 1986, Cunningham identified five strategies used by firms for new foreign market entry. They
are:
1. Exporting using either a direct or an indirect method
2. Technical innovation strategy. (Perceived and demonstrable superior products).
Technical innovation strategy is the state where the company has either a truly superior products
or can convince the customer that they do. High level of technical service can also be included in
this strategy.
3. Product adaptation strategy. (Modifications to existing products)
Product adaption is the process in which the modification or changes is made on the existing
product so that it suits different types of customers or markets. This adaptation strategy is most
suitable and necessary for those companies that export their product in the new foreign market.
It ensures that the product meets local cultural and regulatory requirements. Product adaptation
Strategy helps to minimize the funds and resources to develop a new product. The factors driving
Product adoption are culture, market development, competition and laws.
4. Availability and security strategy. (Overcome transport risks by countering perceived risks)
Availability and security strategy is the process where the company is able to overcome the risk
of
Transportation in two ways. The first one is by providing all the services like delivery,
installation, service and security whereas the second one is by convincing the customer they are
not important.
5. Low price strategy. (Penetration price)
Low pricing strategy is the pricing strategy where a company offers a relatively low price to
stimulate demand and gain value in market shares. A company usually employs this strategy
where the product has few or no competitive advantage or where economies of scale are
achievable with higher production volumes. In general, developing low price specifically to
penetrate the market is low price strategy.
6. Total adaptation and conformity strategy. (Foreign producer gives a straight copy)
A total adaptation and conformity strategy is the state where the foreign producer takes a holistic
approach to do everything that the customer might need in terms of product, handling,
development and delivery. This strategy needs a high degree of inter-functional cooperation
within the supplying Company as well as a strong customer orientation.
Modes of market entry
Modes of entry into local or an international market are the channels, which your organization
employs to gain entry to a new international market

Type of Entry Advantages Disadvantages

Low control, low local knowledge,

Exporting Fast entry, low risk potential negative environmental
impact of transportation

Less control, licensee may become a

Licensing and competitor, legal and regulatory
Fast entry, low cost, low risk
Franchising environment (IP and contract law)
must be sound

Shared costs reduce Higher cost than exporting, licensing,

Partnering and
investment needed, reduced or franchising; integration problems
Strategic Alliance
risk, seen as local entity between two corporate cultures
Type of Entry Advantages Disadvantages

Fast entry; known, High cost, integration issues with

Acquisition
established operations home office

Greenfield Venture Gain local market knowledge;

(Launch of a new, can be seen as insider who High cost, high risk due to unknowns,
wholly owned employs locals; maximum slow entry due to setup time
subsidiary) control

Curve explaining the modes of market entry

8.1 MARKETING MIX

A combination of factors that can be controlled by a company to influence consumers to

purchase its products.
The marketing mix, also known as the four P's of marketing, refers to the four key elements of
a marketing strategy: product, price, place and promotion
Meaning of “Mix”; to make into one thing by stirring together: blend Mix flour and water to
make a paste. 2: to become one thing through blending Oil will not mix with water. 3 : to make
by combining different things. 4: to bring together The book mixes funny and serious elements.

Product sales
Product sales is an act of selling a product or service in return of money or compensation or
service. Product sales is when a customer buys a product / service, which will fulfill a need of
theirs. The number of products sold in a given time period helps in determining the product sales

Salesmanship- the skills and methods used in selling or promoting commercial products. The
skill or art of selling. Ability or effectiveness in selling or in presenting persuasively political
salesmanship.

Sales process
It’s a set of repeatable steps that a sales person takes to take a prospective buyer from the early
stage of awareness to a closed sale.
A sales process consists of 5-7 steps:
 Prospecting.
 Preparation.
 Approach.
  Presentation.
 Handling objections.
 Closing.
 Follow-up.

The following steps provide a good outline for what you should be doing to find potential
customers, close the sale, and retain your clients for repeat business and referrals in the future.
1. Prospecting
The first step in the sales process is prospecting. In this stage, you find potential customers,
determine whether they have a need for your product or service, and whether they can afford
what you offer. Evaluating whether the customers need your product or service and can afford it
is known as qualifying.
Keep in mind that, in modern sales, it's not enough to find one prospect at a company: There are
an average of 6.8 customer stakeholders involved in a typical purchase, so you'll want to
practice multi-threading, or connecting with multiple decision-makers on the purchasing
side. Account maps are an effective way of identifying these buyers.
2. Preparation
The next step is preparing for initial contact with a potential customer, researching the market
and collecting all relevant information regarding your product or service. Develop your sales
presentation and tailor it to your potential client’s particular needs. Preparation is key to setting
you up for success. The better you understand your prospect and their needs, the better you can
address their objections and set yourself apart from the competition.
3. Approach
Next, make first contact with your client. This is called the approach. Sometimes this is a face-
to-face meeting, sometimes it’s over the phone. There are three common approach methods.
 Premium approach: Presenting your potential client with a gift at the beginning of your
interaction
 Question approach: Asking a question to get the prospect interested
 Product approach: Giving the prospect a sample or a free trial to review and evaluate
your service
Dive deeper into the various sales approaches you can use to start a relationship off on the right
foot.
4. Presentation
In the presentation phase, you actively demonstrate how your product or service meets the needs
of your potential customer. The word presentation implies using PowerPoint and giving a salesy
spiel, but it doesn’t always have to be that way you should actively listen to your customer’s
needs and then act and respond accordingly.
5. Handling objections
Perhaps the most underrated step of the sales process is handling objections. This is where you
listen to your prospect’s concerns and address them. It’s also where many unsuccessful
salespeople drop out of the process—44% of salespeople abandoning pursuit after one rejection,
22% after two rejections, 14% after three, and 12% after four, even though 80% of sales require
at least five follow-ups to convert. Successfully handling objections and alleviating concerns
separates good salespeople from bad and great from good.
Use this flowchart to map out objections and link to relevant collateral

6. Closing

In the closing stage, you get the decision from the client to move forward. Depending on your
business, you might try one of these three closing techniques.
 Alternative close: Assuming the sale and offering the prospect a choice, where both
options close the sale—for example, “Will you be paying the whole fee up front or in
installments?” or “Will that be cash or charge?”
 Extra inducement close: Offering something extra to get the prospect to close, such as a
free month of service or a discount
 Standing room only close: Creating urgency by expressing that time is of the essence—
for example, “The price will be going up after this month” or “We only have six spots
left”
7. Follow-up
Once you have closed the sale, your job is not done. The follow-up stage keeps you in contact
with customers you have closed, not only for potential repeat business but for referrals as well.
And since retaining current customers is six to seven times less costly than acquiring new ones,
maintaining relationships is key.

Sales process takeaways: What is important?

Now that you understand the basic seven stages of sales process development, you can begin to
tailor them to your own product or service and customer base. Cut out steps that are unnecessary
to your particular business and focus on your customer. You know the rules—now get ready to
break them in ways that bring you closer to your customer and turn you from a sales professional
to a sales artist.
Whatever approach you take, keep these fundamentals in mind:
Identifying the customer’s problem
You have a product or service you want to sell now what? Anyone with a problem related to
your area of expertise can be a potential customer. You will need to dive deep into discovery
work to learn each buyer's specific goals, needs, and pain points.
Develop a solution for the customer
Once you have uncovered problems for your products to solve, tailor your offerings to fix those
issues—and be prepared to explain how your product truly is a solution for the given
problems. Sales engineers can use Lucidchart to visually demonstrate how their product or
service solves client problems and makes their lives easier, such as the flowchart below.
Sales management
It encompasses hiring, training and motivating the sales team, forecasting sales and setting sales
goals, and developing effective strategies for managing leads and increasing sales. Sales is the
primary benchmark of success for many companies, so having an effective sales management
process is paramount’s