Identifying prospects and defining target markets for new products

Identifying Prospects and Defining Target Markets

It is important that the firm defines its target customer group in specific terms. It should also examine the cost of serving this group. These factors are important as they will help the firm to narrow down its decision field.

At this stage, the firm should also identify success factors in different product ideas. For example, some ideas may require strength in the distribution network, others may require strength in technology and yet some may demand a high brand image. If the firm does not have the required strength, it should investigate how it can acquire the same and whether the pursuit of the new product idea will result in adequate profits.

Concept Development and Testing

Many firms skip this stage in the belief that they have big ideas; or that the customers would pick them up themselves. As Theodore Levitt puts it, customers should buy the concepts first only then would they move to the tangible products.

To better appreciate this stage, let us understand the three key words which are:

1.Product Idea as a possible product that the company might offer to the market;
2.Product Concept as an elaborated version of the idea expressed in meaningful consumer terms;
3.Product Image which is the particular picture that consumers acquire of an actual or potential product.

A concept is an elaborated version of a product idea. Consider the example of a leading soft drink manufacturer in the country which wanted to stretch its product line by adding a new range of fruit juices. This being the product idea, to convert this into a product concept, the firm must define its target customers, the primary benefits it will offer and the possible use situations. Following these definitions, some concepts like the following may emerge:

Concept I >> Fresh fruit for children and adolescents as a health supplement at breakfast time.

Concept II >> Fresh bottled fruit juice for the young as a fun, thirst quenching, refreshing and nutritious health drink to be had at any time.

Concept III >> Fresh bottled mango juice for the young and the grown ups as a fun, thirst quencher and refreshing beverage to be had at any time.

Concept IV >> Fresh bottled mango juice for adults as a health supplement.

Each of these concepts help the firm define the product category segment for positioning purposes. In the first concept, the fruit falls in the health drink category like the brown beverages (Bournvita, Horlicks, Natramul, etc.); in the second concept, the product falls in the category of milk product like Energee; in the third concept, the product category is soft drinks and in the last concept, it includes all fresh fruits, juices and brown beverages.

Assuming that the third concept seems to be promising, the next issue would then be to decide how the new product differs from the existing soft drinks. The firm may consider two product attributes— taste and packaging. Likewise, the firm may position it on other attributes too. The firm can also position the brand against competing ones on several features like use situation, price, calories, convenience, etc. The moment it does so, the product concept becomes a brand concept.

After the product and brand concepts have been developed, the stage is now set for testing them. These concepts are tested on a sample of target customer groups. Most often at this stage, visuals of proposed product concepts are shown to the sample respondents. The product is shown to the customer group in the physical form, i.e. a prototype or sample shown to the group.

The group is asked questions related to their understanding and belief of the concept, the extent to which the new product would satisfy customer needs and problems, the use situations, price in relation to the perceived value, purchase intentions at a given price level, and the most common outlet at which they hope to see the product and buy it. The responses are tabulated and analyzed against industry norms, and the final decision is taken by the management, keeping in mind its strengths in the industry and growth objectives.

At times, firms may also use their sales force to test new concepts. But the problem with this approach is of the sales personnel’s bias. It is therefore important that firms use independent marketing research groups or product management teams to do these concept tests.