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12: Marketing mix: product and price
Costs and benefits of developing new products
Changing markets: Most businesses operate in very competitive and/or fast-changing markets.
see Chapter 10, page 141.
The survival and continued success of these businesses depends on developing
Market research: new products to meet the changing needs and expectations of customers.
see Chapter 11, page 153. They may need to:
■ develop new products
■ change an existing product to meet the changing tastes of customers
■ change an existing product to enter a new market.
Capital expenditure:
see Chapter 19, page 245.
New product development can be very expensive. Even if a product is developed
Economies of scale: following market research, this does not guarantee success.
see Chapter 16, page 219.
The costs and benefits of developing new products are shown in Table 12.1.
Costs of new product development Benefits of new product
development
Market research needs to be carried out In fast-changing markets, such as
to identify customer needs. This can be those involved with hi-tech products, a
very expensive. business will not survive unless it meets
the changing needs and expectations of
customers.
The development of a new product oft en Developing a new product before
requires large capital expenditure. competitors will bring competitive
advantages. The business may be able to 165
charge a high price and achieve high sales
producing high profits.
There is no guarantee that a new product New products developed for new markets
will be a success. Some products never increase potential sales, revenue and
make it to market. profit.
If the investment in a new product is Developing new products to add to those
financed by borrowing and the product already being produced by the business
is not a success, then this could threaten spreads risk.
the survival of the business.
The development of new products might
help to achieve growth and bring benefits
from economies of scale.
Table 12.1 Costs and benefits of new product development
Brand image
A brand is the name given by a business to its product or range of products. It
KEY TERM
allows a business to distinguish its products from those of its competitors. Creating
Brand image: the general a brand image increases a business’s sales and revenue because:
impression of a product held by
consumers. ■ consumers recognise their product more easily when looking at similar products
■ their product can be priced higher than less well-known brands
■ it is easier to launch new products onto the market because consumers already
know and trust the brand and so are more likely to try it than if it was from an
unknown brand – they have customer loyalty.
