NOTICE: Hard copies of the Australian New Crops Newsletter are available from the publisher, Dr Rob Fletcher. Details of availability are included in the
Advice on Publications Available.The late Matthew Johnston
Formerly of the Faculty of Business and Law
Central Queensland University
Rockhampton Queensland 4702
[This article first appeared in the Proceedings of the RIRDC Workshop, 'Bamboo for Shoots and Timber' held at Hamilton, Brisbane on October 24-25, 1997 and edited by Professor David Midmore; RIRDC Publication 98/32; RIRDC Project UCQ-9A; further details of marketing and product development can be sourced from Kotler, P., Chandler, P., Gibbs, R. & McColl, R. (1989). Marketing in Australia. Sydney: Prentice Hall.]
The introduction of a new industry into Australia, requires more than simply growing the plants. Merely producing a product will not guarantee that people will purchase it. A full review of the market's requirements is essential. This paper focusses on the stages of developing a new product and the components of a marketing plan.
Major Stages in a New Product's Development
1. Idea Generation
This process is often haphazard. Ideally it should be generated after a niche for the product is found. Without further investigation, the potential of a new product cannot be recognised.
2. Screening
Screening forms a part of the investigation process and it ensures that only good ideas go into production. Will the product generate a large enough market and satisfactory profits?
3. Concept Development and Testing
Once a product has been chosen for production, the form in which it will enter the market needs to be developed and tested. The 'product concept' is an elaborated version of the initial idea expressed in terms of the consumers who will purchase the product concept. Marketing is used to develop the initial idea into alternative product concepts, evaluating their attractiveness to the consumers, and choosing the best alternative.
The producer specifies the number of stores and locations in which the test product will be available. The producer controls shelf location, displays and point of purchase promotions and pricing according to specific plans. Sales results are recorded to determine the impact of these factors on demand. This style of test marketing, like standard market testing, allows competitors to see the new product before it becomes widely available.
To identify which of the product concepts is most viable, they should be tested with an appropriate group of target consumers. The outcome of 'concept testing' is the appropriate product that consumers will want. Once the appropriate product has been found, a marketing strategy is developed for this product.
4. Marketing Strategy
The marketing strategy development consists of three parts:
4.1 The first part deals with the size, structure and behaviour of the target market, the planned product positioning and the sales, market share and profit goals sought in the first few years of production.
4.2 The second part concerns the price, distribution strategy and marketing budget for the first year. The positioning of the product is very important.
4.3 The third part consists of the planned long-run sales and profit goals and the marketing mix strategy over time.
5. Business Analysis
The viability of the proposed product is evaluated using a review of the sales, costs and profit projections. This will determine if producing the product will satisfy the objectives of the members of the industry. The expected costs of production and profits must be estimated to establish whether the projected returns from the venture will be high enough to return a satisfactory profit. Business analysis techniques may include: break-even analysis, payout or payback period analysis, and risk-and-return analysis.
6. Product Development
A physical version of the product concept or prototype is developed to examine whether it embodies the key attributes of the initial product concept; whether it performs satisfactorily under normal use and conditions and whether it can be produced for the budgeted production cost.
7. Market Testing
After the prototype product is developed, it is market tested. Market testing allows the marketer to gain experience with the product, root out potential problems and to find out where changes can be made in the product and its packaging to make it more appealing to customers.
The underlying purpose of market testing is to test the product in real market conditions and situations. It also allows the distribution, pricing, branding, packaging and budget levels to be tested. Market testing is used to learn how consumers and dealers will react to handling, using and repurchasing the product and the results can be used to make more reliable costs, sales and profit forecasts.
Market Testing can be carried out in standard, controlled or simulated test markets. Standard Test Markets test the product in a situation resembling a full scale launch. The product is given a full advertising and promotional campaign and uses consumer and distributor surveys to gauge the performance of the product. This testing method has quite a few drawbacks. They usually take a long time to complete, up to three years, and can cost millions of dollars. This form of test market also gives competitors a look at the new product.
An alternative to test markets is Sales Wave Testing, where a sample of consumers try the product in their own home at no cost. Then the product being tested and competitors' products are offered to the consumers as many as four times (sales wave): the number of consumers selecting the product repeatedly and their level of satisfaction is monitored.
8. Commercialisation
Once the market testing has been completed and any required alterations to the product or its packaging has been made, the product will be launched into the marketplace. Four decisions have to be made when commercialising the product:
The introductory marketing strategy must be thoroughly planned, including the markets the product will be sold in and the budget of the introduction, including the cost of the marketing campaign itself.
Components of a Marketing Plan
Any product development requires a written marketing plan which ensures that the plan does not deviate from its objectives.
1. Executive Summary
This is an introductory summary of the main goals and actions to be completed by the plan. It includes planned expenditure and returns and the methods that will be used to attain these goals.
2. Situation Analysis
This analysis describes the context of future marketing activity, showing marketing opportunities that could be seized, thus enabling the firm to achieve its objectives. Subsections include:
2.1 Background statement: a summary of historical data, a description of the market, its segments (groups of buyers who require different benefits from the product) and the environment.
2.2 Normal forecast: The expected position of the product in the future, based on the market and environmental conditions of the background statement. A number of scenarios (pessimistic and optimistic) are assessed for their impact upon the profitability of the product. The base case, which is the expected forecast of product development and strategy options can be formulated and evaluated against these scenarios.
2.3 SWOT analysis: Strengths and Weaknesses of the product and competitor products are contrasted for the total market and its segments. This analysis should reveal the relative size, brands, customer types, customer preferences, customer behaviour and the relative ability of the product to serve the market and the ability of the company to control distribution and resellers. Opportunities and Threats derived from the environment are analysed to determine which opportunities best fit the abilities of the product and which threats must be accommodated by the strategy. This analysis needs to be comprehensive.
3. Objectives and Issues
Objectives can be set as sales levels or percentage of market share. From the Normal Forecast, strategies can be formulated for each scenario.
4. Market Strategies
Outlines or broad game plans for attaining the objectives set for the product. Marketing strategies are the marketing logic by which the business hopes to achieve its marketing objectives (Kotler, P. 1994 Marketing Management: Analysis, Planning Implementation and Control. Eighth edition. Prentice Hall, Sydney).
5. Action Programs
6. Budgets
A monetary budget is a profit and loss statement showing expected sales, costs and profit.
7. Controls
What controls will be used to monitor the progress of the marketing plan?
Conclusion
For the production of any new product, the marketing strategies and plans are an integral part of any success or failure of the product.
Any claims made by authors in the Australian New Crops Newsletter are presented by the Editors in good faith. Readers would be wise to critically examine the circumstances associated with any claims to determine the applicability of such claims to their specific set of circumstances. This material can be reproduced, with the provision that the source and the author (or editors, if applicable) are acknowledged and the use is for information or educational purposes. Contact with the original author is probably wise since the material may require updating or amendment if used in other publications. Material sourced from the Australian New Crops Newsletter cannot be used out of context or for commercial purposes not related to its original purpose in the newsletter
Contact: Dr Rob Fletcher, School of Land and Food, The University of Queensland Gatton College, 4345; Telephone: 07 5460 1311 or 07 5460 1301; Facsimile: 07 5460 1112; International facsimile: 61 7 5460 1112; Email:
r.fletcher@mailbox.uq.edu.au[
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GK; latest update 17 October 2001 by: RF