There are many reasons why companies bring products to market place. The one we would naturally think of is to make more money, but that is generally only one of the reasons.
Changing Consumer Needs
Companies need to stay in touch the changing needs of consumers. Companies cannot remain with traditional product lines and expect them to sell well for years on end. Yes we have learnt through the concept of product life cycle that some product categories stay in maturity for a long time, sometimes decades. However, even those industries need to look at the changing needs of the market.
A good example here would be Kellogg’s a major manufacturer of cereals. When you think to what is the underlying need for cereal it would probably be something like “a fast, easy to prepare, easy to consume, low-cost, healthy breakfast”.
However, the market need for breakfast style food is shifting as the lifestyle of consumers change. For instance, consumers now have far less time for a sit-down breakfast. Let’s take a typical example of a family. If both parents work, which is becoming increasingly common, then it is likely that they will probably rely on child care. This means they are very pushed for time in the morning. Knowing that the children will get food and child-care facility, the transporting parent is more than likely to drop the child that childcare without breakfast.
The child will get fed, but what about the parent? Will they have choices, but they really didn’t have before, such as a drive-through breakfast. Obviously you can’t do that every day, so many parents rely on just a coffee in the morning, from many of the outlet places available.
When you think about it, there are quite a number of indirect competitors for breakfast cereal that attempt to make the process faster by allowing the food to be consumed in transit. These include take-away coffee, juice bars, muesli bars, breakfast bars, yogurt to drink, and cereal in a drinkable form.
If breakfast cereal companies sat back and said “hey we’ve got a good market share in breakfast cereals so we don’t need to be innovative”, it will be the indirect competitors were taken revenge of the customers changing needs that will slowly drifts strength of breakfast cereal market.
That’s why cereal companies are aggressively looking at breakfast bar opportunities. That is, making their products available in different in order to better meet the changing needs of consumers.
Reasons to introduce new products
- To block competition
- To fragment the market
- To defend against competition
- To help reposition the organization
- To better meet the needs of existing consumers
- To better need the future needs of the market
- To meet the needs of a new segment
- To increase profitability
- To deliver growth for the organization
- To meet internal goals
- To enter high-growth markets
- To help implement the strategy of the organisation
- To take advantage of excess capacity
- To take advantage of a new resource
More than just profit goals
As you can see, profitability is only one of the reasons for introducing new products. Sometimes a firm will introduce a product that has a fairly limited financial return, but is very important to the firm overall strategy will position in the marketplace.
A good example of this is McDonald’s with their healthier food menu. Traditionally McDonald’s made a lot of money from burgers and fries and soft drinks. However, as the market need in terms of fast food changed, there was an expectation that people wanted a broader choice of food and generally healthier food. This is because the market has become more educated in terms of food consumption and as the market has tended to consume more meals outside the home, taking fast route from an occasional treat to almost a daily norm.
Therefore, McDonald’s has sought to reposition themselves as an organization. They want to remove themselves from being solely associated with traditional fast food products. They have deliberately added a range of salads, yogurts, lean burgers, deli choice rolls, and so on, to create the market position that they offer a range of foods that includes quite healthy meals, quite tasty meals, as well it the traditional fast food meals.
It is unlikely, that some of these new types of foods were designed to significant profit-based products. While these products probably deliver a certain level of profitability, they would be nowhere in line with their traditional style products. However, these products are so important to the overall repositioning and strategy of McDonald’s going into the future.