Introducing New Product, Essay Example

Companies usually look towards introducing new products in the hope that it will help them strengthen brand loyalty among current customers as well as win new ones. But the decision to introduce new products is not always a straightforward due to the possibility of costs exceeding the benefits and in addition, companies may also be faced with certain constraints.

One of the potential dangers in introducing a new product is that it may cannibalize the sales of existing products, especially those that are perfect or quite close substitutes. The cost may be even greater if the product whose sales are cannibalized enjoys higher profit margins than the newer product.

The companies should also ensure they have the resources and capacity to increase production should the sales of new product rise quickly. The inability to meet the rising demand for the product may not only negatively affect brand goodwill but will also provide the opportunity to the competitors to steal some of the current and/or potential customers.

Introducing a new product also presents the company with the dilemma of scarcity of resources. The companies have only so many resources and introducing a new product means resources have to be diverted from somewhere which could result in less attention to existing product line.

Companies launch new products because they expect those products to generate positive return. But merely a positive return doesn’t justify launching a new product. The company should ensure the return on the new product will exceed what the company can expect to earn by deploying same resources somewhere else. In other words, the resources should be allocated where they expect to earn the highest potential return in a given period of time.