Sep 042014
 

 

New-to-the-world products are one of several classifications of new products (please see separate article). Other classifications of new products include: new categories, product line extensions, product improvements and product repositioning.

Risks of new-to-the-world products

Although there are many potential advantages, as outlined above, for introducing a new-to-the-world product, this type of product carries significant risk and responsibility the firm bringing the market, as follows:

Need to grow market demand

When a new-to-the-world product is first launched, it is launched into a market that has zero sales, because no consumer’s currently buys this particular product. Therefore, the firm needs to generate excitement in the marketplace and encourage trials of their product.

Promotional costs

In line with the need to grow market demand and potentially educate consumers as to the benefits of the product, there would be a need to invest more heavily in a new-to-the-world product, as opposed to an existing product that is known and understood by the marketplace.

Development costs

Particularly for technical type products, there is likely to be significant upfront costs in designing, research, developing and testing some form of breakthrough product. This comes at a significant risk because future sales are unknown. The market may take off, but then again the product may fizzle out and all development costs will be lost.

Lack of retailer access

Once sales start to build up (hopefully) then retailers are relatively easy to obtain, as per one of the advantages listed above. However, in the early days of the product (that is, in the introduction phase) many retailers will be resistant to giving up floor space in their stores for an unknown product or one that is only selling small quantities.

Competitive challenges

While there is a first mover advantage, as listed above, there is also a second mover advantage. This comes about from a competitor that allows the initial company to build market demand, access retailers, educate consumers, determine price points and basically work out the best way to market this new product.

A more patient competitor and then enter the market, possibly with improved product, and tap into all the hard work and expenditure of first company.

An example here would be Apple, who has consistently entered an established market (such as smartphones, tablets and MP3s) with a superior product once the market had become quite viable.

Related Topics

Benefits of new-to-the-world products