Industrial product is defined as a complex set of economic, technical, legal, and personal relationship between the buyer and the seller. A product is a combination of basic, enhanced, and augmented properties. Basic properties are included in the generic product, with fundamental benefits sought by customers. Generic products are made differentiable by adding tangible enhanced properties such as product features, styling and quality. The augmented properties include intangible benefits such as technical assistance, available of spare parts, maintenance and repair services, warranties, training, timely delivery, and attractive commercial terms. The product package as expected by the prospective customers should be well understood by the industrial marketer.
Industrial product development is the process by which the product ideas are generated, assessed, directed and converted into products. There are seven stages in the process of industrial product development.
- Idea Generation: The Industrial marketer should be consciously search for new product idea and to their sources both inside and outside the company. Internally the new product ideas may come from sales staff that is close to customers, R&D experts, from top management. An external source of ideas includes channel members such as distributors or customers. An industrial marketer can get good ideas by using techniques like brainstorming and attribute listing. In attribute listing technique, important attributes of existing products are listed. Ideas are invited from a group of employees to search for an improved product by modifying each attribute. An industrial firm should encourage the employees to present innovative and creative ideas by offering recognition or rewards to the employees submitting the best ideas.
- Idea Screening: In order to select the product ideas which are likely to succeed, screening of new product ideas will be undertaken. Specified criterion and procedure should be set for screening new product ideas. Major considerations in the screening of a new product idea includes expected profit potential, the competitive situation, the general adoptability of the company to the new product and the volume of investment that would be necessary for the implementation of the new product idea. Marketing consideration includes the size of the market, marketing methods etc. It is also necessary to judge the technical viability of the product idea. Production considerations such as facilities required, cost of production, and availability of materials are also to be considered apart from several legal considerations.
- Concept Development & Testing: After the screening of the new product idea it should be developed into a product concept. A product concept is a detailed version of the product idea that is expressed in a meaningful terms. It is the usual practice to develop different versions of product concept and each product concept is assessed by getting response from the customers. The product concept that has the strongest reaction from the customers is selected.
- Concept Testing: The new product concepts are tested in a prospective customer organization. The concept can be presented by developing physical product or three dimensional models. The physical presentation of the product will increase the reliability of the concept testing. The three dimensional model techniques create computer generated three dimensional plastic proto-types which takes very short time to get ready. The decision makers in the prospective customer organization are contacted and interviewed with various questions on their experience of using such products. The answers so obtained will enable the company to decide on the strengths of the new product.
- Business Analysis: In the business analysis, an estimated projection of the sales, costs and profitability of the proposed new product will be developed. It is an elaborate analysis which is expressed in terms of investment required for the installation of the plant and equipment, investment in working capital, market potential, sales forecast, customer and competitive analysis, cost of product development, cost of manufacturing and marketing the product; likely price levels, profitability and return on investment etc. People who have proposed the new product idea should not be assigned with the task of business analysis because of excessive optimism or vested interest by such persons. People with reasonably fair experience and skills in strategic planning, marketing, finance, and engineering could be given the task of business analysis. The new product concept will more on to the next stage, i.e. product development, only if the projected sales and profits fulfill the company’s long term objectives or goals.
- Product Development: Product development is a process of creating desired product by the technicians. The R&D department develops one or more prototypes of the product concepts. The ability to produce the product with in the estimated cost will be confirmed or negated by the development of the prototype.
- Market Testing:Market testing is done by using different methods. The method to be adopted for testing depends on the cost and size of the product, the degree of confidentiality to be maintained during market testing and the preparedness to introduce the product with in a short period. Commonly used market testing methods are:
- Alpha and Beta Testing: When a product is tested internally with in the organization which as characteristic of high price with new technologies such testing is called Alpha testing. The product testing is conducted to assess the operating cost and performance standards. If the results of Alpha testing is satisfactory the company will go for the next stage of Beta testing at the potential users’ organization. It is the duty of the marketing team to identify the user firms who would allow confidential testing of the new product at their factories. The performance of the product in the users firm, any problems confronted when the product is under use should be checked and addressed properly with the marketing and technical team, also they should interact with the user firm’s technical team.
- Trade Shows: One commonly used method of market testing is introduction of the new product at trade shows where usually large number of prospective customers is exposed to the new product. The reactions of the customers, their purchase intentions can be assessed in such trade shows; also the orders placed by the potential customers will be taken care. The limitation of testing the new product in trade shows is that it also gets exposed to the competitors. The company will have very short span of time to introduce the product.
- Dealer Show Rooms: The distributors or dealers show rooms or display rooms can be considered as best spots for product testing, if the new industrial product is sold through such channel. The customer’s attitudes, preference and actual sales can be recorded under this method as this method uses the normal selling situation. The company should ready to execute the orders with in the reasonable time.
- Test Marketing: In normal marketing situations the test marketing method is used to test the product in a limited geographical area. This method is used by many industrial marketers through their sales force. Along with sales training required material such as price list, product catalogue etc., are given to the sales personnel. When the product is launched on full scale basis, the market information received from test marketing will help the company in taking effective decisions. After market testing, the company management takes a decision to go ahead with the next stage i.e. commercialization.
- Commercialization: An industrial product is launched when it is introduced to a target market. The commercialization process involves execution of the various activities developed in an action plan as a part of the marketing plan. The activities such as customer service, maintaining adequate stocks at the company warehouses and or with dealers/distributors, introductory advertisement, price lists, product catalogues, training of sales force etc. would be taken up at this stage. Sophisticated network techniques such as PERT and CPM can be used by industrial marketers to ensure proper coordination and timely completion of all the activities concerning the launching of new industrial product.
Credit: Industrial Marketing-MGU