Key marketing challenges in the introduction phase
One of the key marketing challenges in the introduction phase of the product life cycle (PLC) is to clearly communicate the advantages and benefits of the new product offering, relative to existing products in the marketplace. This requires a significant and targeted communications program – typically targeting consumer innovators.
As discussed elsewhere on this website, innovators make more independent decisions, and are less reliant upon word-of-mouth and the influence of other consumers. This type of consumer is the logical choice as the initial target market for any new product. But how does the firm identify and reach an innovator?
Luckily, in today’s data-driven world, firms are able to capture information about purchase history and able to build e/mailing lists and website registrations. Innovators generally purchase the early in the new product life cycle. Therefore consumers who have purchased other related products early in their life, are more likely to be innovators. Likewise, consumers that engage in surveys with the firm, post to forums and discussion boards, sign up for a firm’s mailing lists/emails are also more likely to be innovators – due to their increased interest in the firm/brand and the products that they offer.
This means, that over time, a firm can develop a good profile of an innovator and actually develop a contact list for promotional purposes to assist with the launch of new products.
In addition, specialist blogs and websites are another way of reaching highly interested consumers – again who are more likely to be innovators – and be able to communicate rich and deep information, which they require to make a decision on a brand-new product.
The choice of blogs and websites are broad and provide a greater ability to access interested consumers in order to help generate support for new products. Blogs are essentially “influencers" in the marketplace. They typically have greater credibility and believably than traditional advertising, and are being utilized to a greater extent than ever before. Traditionally, firms would embark on some form of media/PR campaign – but blogs and websites allow the targeting of more precise consumers and increased ability to reach the innovators for new product launches.
Use of sales promotions
For products that are generally “lower involvement" and simpler products, there may be a lack of “interested consumers" looking to research and learn about the new products. This may be the case for some new types of grocery products. As a result, it will be harder to reach innovators. A simple solution to this barrier is to embark on a free sampling promotional campaign. We often see this in supermarkets and food stores, where somebody will be demonstrating a new product and providing free samples in the store. This is a form of sales promotion, which is quite effective in gaining first-time trials for a product.
Another challenge in the introduction phase is usually price. There is the cost of research development and launch that marketing is expected to recoup. Also the firm has limited experience in producing the product, resulting in higher average costs initially. The scope of sales is generally low, also contributing to a higher average cost per product.
If the product is sold through a retailer channels, retailers typically look for an incentive to take on a new product, which further puts pressure on price.
As highlighted above, in the introduction phase of the product life cycle, it is unlikely that the product will be profitable, creating the need to set prices on the basis of:
- Being attractive enough to encourage first-time consumers and trials,
- Being high enough to reflect the quality of the offering and the brand, and
- Being high enough to allow for more aggressive retailer margins and to cover as many costs as possible
Keep in mind, of course, that this new product is competing against established products in the marketplace that are the “accepted" product solution among consumers – that is, most people buy that sort of product at the moment and the new product has been designed to alter that established purchase behavior.
If the new product is a B2B product, then the firm’s sales force is the key to the selection of appropriate customers and early success. Just as individuals can be innovators, early adopters or late adopters – businesses operate the same way, with some organizations being willing to take on new products and ideas, whereas others are very conservative in their approach.
Key characteristics of the introduction phase
- Sales are typically low
- Firms are losing money, due to low sales and high costs and the need to support the product
- There is generally a limited choice of products, as the firm is looking to “prove” the product concept to the market – and there is limited funds to offer a broader product portfolio at this time
- Innovators are the key target market, as they are more likely to make purchase decisions independent of word-of-mouth
- There is uncertainty within the firm (and possibly the industry) on whether the product will be successful in the long-term
- As a result, over time there is growing pressure within the firm to reassess whether or not to continue supporting the new product
- Retailers are typically less interested in the new product while sales are low – this means that they will often seek incentives to take on the product
- Blogs and specialist websites and magazines provide an opportunity to reach a select market, hopefully rich in innovators
- Free samples and initial discounting is often required to generate first-time purchases (trials)