Product is one of the 4Ps of the Marketing mix.
Innovation is the idea of creating something new. Creating an innovative product means something new that currently does not exist in the market. Businesses can also innovate existing products by adding new features.
Product development is the process of bringing an idea to market so that it is purchasable by Consumers.
Examples of product development and innovation:
- Hot-dog stuffed pizza crust
- First self-driving vehicles
- The first phone to have a touch-screen
- Bladeless fan
- Bagless vacuum cleaner
Businesses will create new products and innovate for the following reasons:
 | Remaining competitive means being able to offer products that are on par or better than competitors. In doing so, this will keep customers coming to a business and ideally prevent them from going to a competing business. Businesses can remain competitors in any of the 4ps of the marketing mix. Price advantage: offering a better value than other businesses, for example, lower price point or higher price but better quality and lasts longer. Place advantage, such as ease of access for customers to buy, e.g. Amazon prime and offering same-day delivery is a competitive advantage over eBay. Product advantage: having a better product than competitors with a Unique Selling Point. Promotion advantage: using methods of promotion to have a better brand image than competitors, like Apple AirPods being seen as cool, whereas competitors may not have the same brand image and reputation. |
 | Markets go through stages of shrinking, stagnation (mostly the same) or growing. Businesses may choose to enter new markets in order to spread risk, this is called Diversification. Diversification is the process of a business operating in different markets by varying its range of products. However, diversification follows the saying “don’t put all your eggs in one basket”. By spreading business operations across several markets, a business is decreasing its overall risk because if one market faces a downturn in market sales. Tesla is rumoured to be launching a Smartphone, this is an example of them entering a new market different to their main electric vehicle market. The Virgin Group is well known for diversification, with businesses ranging from mobile phone networks to space travel. Source: https://www.virgin.com/company. The main benefit of diversification can be shown when sales of music declined in physical ‘brick & mortar’ stores. Virgin Megastores (a physical CD store) collapsed, however, the rest of the Virgin Group was able to keep operating as the decline only affected the music store market. This is called reducing portfolio risk. |
 | Market share is the percent of sales a business has compared to all the competitors in the same industry (those offering the same product or service). Innovation and product development can be used to help increase the percentage of sales over competitors. Being innovative and staying ahead of the curve means that customers are more likely to choose the business over competition businesses that may have out-of-date products. Read more: Non-Financial Aims and Objectives: Increase Market Share |
 | Innovation and product development is a method businesses can increase their sales revenue. In addition to increasing their Product portfolio (range of products), businesses can also add innovative features if the product lifecycle reaches decline, the business can stimulate sales and extend the life of the product. |
 | Legislation is the laws that the government passes and businesses must follow. Changes to these can have an impact on a business’s operations. For example, the Sugar Tax lead businesses to innovate their drinks offerings, with Coca-Cola relaunching Coke Zero with a new formula that tastes closer to Classic Coke. The UK government has also announced a ban on new petrol and diesel fuel cars from 2030, meaning that car manufacturers are busy innovating with hydrogen fuel cars and extending the range of electric vehicles. If a business is negatively impacted by changes in law and doesn’t innovate, it will not be able to survive. If it doesn’t comply, they could face a fine or be shut down. P&O ferries were accused of breaking labour laws after a mass redundancy of 800 staff over a video call and could have faced an unlimited fine. |
 | A patent is awarded by the government to stop competitor businesses from making, using, or selling an invention. Patents protect businesses’ ideas and stop competitors from copying. A patent can be worth a lot of money and businesses can be sued for using ideas they do not own the patent to. Samsung and Apple had a 7-year lawsuit which resulted in a court order for Samsung to pay Apple $539 million for infringing on its patents. Google bought Motorola for £12.5b, kept most of its patents and sold Motorola to Lenovo for £2.5b, essentially paying over $10b for its patents, enabling Google to include the innovations on its Android operating system. These examples show that not only is it important to protect its products, but patents themselves can be worth a lot of money to the business that owns them. |
