Marketing starts in a market, where individuals or organized groups who want to buy goods or services meet people who want to sell them. The buyers must have money to spend and a willingness to spend it, or a product or service they themselves are willing to trade.
The sellers must have what the buyers want. The first step in marketing is to understand these groups. The marketers must determine the number of buyers, what they want to buy, how, when, and where they want to buy it, at what price and what they expect from it. Elaborate techniques of research have been developed to supply this information. Of course, marketers have to decide which needs they want to meet. A concept for a product or service may develop long before any marketing research is done, or it may be a response to identifying need.
In part, at least, marketing determines what products and services are to be offered. Historically, marketing experts were supposed to sell any product in any way possible. The techniques of marketing research have now given marketers new ways to learn and analyze the needs and wants of consumers. They can now play a critical role in determining what—as well as how — to market. Most large companies now produce only what their market researchers tell them will profitably sell.
All products were new at one time. Today, a product is new if it is unique—a "first"—or if it is new for the manufacturer who is entering the market to challenge the existing competition, or if it has had enough substantial design modifications to make it a new product issue. For the manufacturer, merchandising includes selecting the products to be produced; deciding on the size, appearance, form, and packaging; and "having the right goods at the right place at the right time at the right price."
The product planners try to determine whether there will be a demand for a given product, and if so, how much. Marketing managers then, working closely with top management, integrate these predictions with an analysis of all the areas of the business which will be affected. Does the firm possess the capacity and the funds to enter into the new product area? What are the existing marketing strengths, skills, and resources? How strong is the competition? The commitment of a company's energies and funds may be far- reaching. Not only may substantial investments be required to develop and market new products, but contracts or even mergers with other firms may be necessary.
Professional marketing managers know that appraising new products and changing an existing product line are ongoing processes. There are many motivations for constant surveillance of the product line. Scrutiny may reveal opportunities to increase sales by offering customers more functional products, greater convenience, more prestige, greater value, or some combination of these qualities. Volkswagen of Germany, for example, introduced three entirely new models in a few years in an attempt to fill the needs of a more affluent market seeking different qualities in an automobile. Additional products added to the line may reduce certain costs by more fully utilizing the firm's production or marketing capabilities. The airline which gets into the business of car rental for its passengers requires minimal extra cost while making fuller use of its personnel and company resources. At the same time, the existing sales pitch is easily integrated. Sometimes a new product will enhance those already in the line. Lipstick and nail polish sales rise when their manufacturers add perfume to the line, and libraries seem to lend more books when they also offer records, paintings, and films to the community.
Regardless of the motivation for new or additional products, marketing managers must consider the full range of effects the products will have on the business. Prime considerations are the similarity of the proposed product to the existing product line of the company, the similarity to the competition's products, and the resources of the firm. Marketing people determine if the products are suitable for distribution through normal or existing channels. They ask if the regular sales methods are appropriate and if the new products can be linked to others in the line. They make whatever changes are necessary in the promotion or advertising policies, while carefully thinking out the costs of production and the final pricing.
At one extreme, a new product will be sold to current customers by the existing sales force, using the distribution channels previously developed and the same price and advertising appeals. In this case, the only major question is whether or not the product will result in additional sales or merely siphon off sales from existing company products. Frozen vegetable marketers, for example, saw their products' sales rise with a proportionate dip in sales of their canned produce. But when the major soft drink manufacturers added low-calorie diet sodas to their line, new sales were generated without detriment to the existing line.
In contrast, some new products appeal to previously untapped markets. When Pierre Cardin introduced its first products for women, the firm's marketers were presented with new and complex problems. Distribution channels were different, a specialized sales force was required and unfamiliar promotion and pricing problems arose. It is between these two extremes that most marketers find themselves.
While pioneering is risky, some firms seek to develop and market radically new products. Trusting that, as leaders in a field, they will reap rewards for being first, some firms invest large sums on new product research and development. The failure rate for this approach is high, so not all companies have such inclinations. In a less expensive way, some firms monitor the product development of others to see if an item is demonstrably salable. Similar to this approach is the strategy wherein firms spend nothing on research and development and introduce products only into mature markets. This kind of business has low overhead and usually manufactures large volumes at low cost, relying on price as its only important sales advantage.
After deciding to produce a product, the planners carefully weigh all of the input. Settling on a final design involves many processes, taking into account the style, fashion, quality, packaging, and complexity of the product. Marketing a new product is always a gamble, but information and planning greatly reduce the risk of failure.