By its nature marketing requires new ideas. Unlike some organizational functions, where basic processes follow a fairly consistent routine (e.g., accounting), successful marketers are constantly making adjustments to their marketing efforts. New ideas are essential for responding to changing demand by the target market and by pressure exerted by competitors. These changes are manifested in decisions in all marketing areas including the development of new products.
In addition to being responsive to changing customer tastes and competitive forces, there are many other reasons why new product development is vital. These include:
- Many new products earn higher profits than older products. This is often the case for products considered innovative or unique which, for a period of time, may enjoy success and initially face little or no competition.
- New products can help reposition the company in customer’s minds. For instance, a company that traditionally sold low priced products with few features may shift customers’ perceptions about the company by introducing products with more features and slightly higher pricing.
- Fierce global competition and technological developments make it much easier for competitors to learn about products and replicate them. To stay ahead of competitors marketers must innovate and often create and introduce new products on a consistent schedule.
- Companies with limited depth in a product line may miss out on more sales unless they can add new products to fill out the line.
- Some firms market seasonal products that garner their highest sales during a certain time of the year or sell cyclical products whose sales fluctuate depending on economic or market factors. Expanding the firm’s product mix into new areas may help offset these fluctuations. For manufacturing firms an additional benefit is realized as new products utilize existing production capacity that is under-used when seasonal or cyclical products are not being produced.