How New Products Are Obtained

Marketers have several options for obtaining new products. First, products can be developed within an organization’s own research operations. For some companies, such as service firms, this may simply mean the marketer designs new service options to sell to target markets. For instance, a marketer for a mortgage company may design new mortgage packages that offer borrowers different rates or payment options. At the other extreme companies may support an extensive research and development effort where engineers, scientists or others are engaged in new product discovery.

A second way to obtain products is to acquire them from external sources. This can occur in several ways including:

Purchase the Product

With this option, a marketer purchases the product outright from another firm that currently owns the product. The advantage is  the product is already developed, which reduces the purchasing company’s time and cost of trying to develop it themselves. The disadvantage is the purchase cost may be high and, under some conditions, the purchase may not include valuable assets (e.g., equipment, facilities, people) associated with the product.

License the Product

Under this option, the marketer negotiates with the owner of the product for the rights to market the product. This may be a particularly attractive option for companies who have to fill a product need quickly (e.g., give a product line more depth) or it may be used as a temporary source of products while the marketer’s company is developing its own product. On the negative side, the arrangement may have a limited time frame at which point the licensor may decide to end the relationship leaving the marketer without a source for the product.

Purchase Another Firm

Instead of purchasing another company’s products marketers may find it easier to just purchase the whole company selling the products. One key advantage to this is that the acquisition often includes the people and resources that developed the product which may be a key consideration if the acquiring company wants to continue to develop and market their own products.