Concept Development And Testing Marketing Essay

Concept Development and Testing – “A two-phase stage in the development of a new product in which potential buyers are presented first with the idea or description of the new product (concept testing) and later with the product itself in final or prototype form (product testing), in order to obtain their reaction.”

The most important part in this step is predicting the income and expenses of the product and to do market research, predicting who will buy the product. “A product concept is an elaborated version of the idea expressed in meaningful customer terms. During this stage, the product ideas that form the new product implementation list must be defined more precisely” JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 5 NO. 6 1996 “Here is a general view of how we incorporate research and creative concept into a concept development engagement.”

We have to clearly define every part of the product to determine the cost of the product. We need to look at raw materials, labour, fixed costs, variable costs, costs to sell and possible return of investment. There are multiple ways to determine the selling price of your product.

Pricing based on cost

This is the primary basis for determining the cost price and selling price of a product. All the costs of producing the product are added together with a margin of profit, to come up with a price. The consumer or market will eventually determine the price of the product and not the producer. Possible competitor prices should also be taken into account.

Pricing based on demand

This is the opposite of the cost based pricing. “Target costing is demand based. It means designing a product so that is satisfies costumers and meets the profit margins desired be the firm. Target costing makes the final price an input to the product development process, not an outcome of it. You estimate the selling price people would be willing to pay for a product and extract a profit margin.” HANDBOEK 8. Famous brands that use this demand based pricing are: Sony and Isuzu.

Pricing based on competition

With this pricing method you look at what all other possible competitors are doing. The price of your own product can be higher, lower or identical to that of your competitors. This method depends on quality and customer loyalty. “Price leadership is the procedure by which one or more dominant firms set the pricing practices that all competitors in an industry follow.” HANDBOEK 8 BL 393

Pricing based on breaking-even

Even before selling the product you determine how many you would need to sell to make a profit. This quantity that should be sold to break even would be seen as a sales goal. “Break-even analysis is the process used to determine profitability at various levels of sales. The break-even point is the point where revenues from sales equal all costs.” The formula is as follows,

“Break-even point (BEP) = Total fixed costs (FC)

Price of one unit (P) -Variable cost (VC) of one unit”

The effect of this on the product is immense. It will determine the price of the product and the amount of materials needed to produce the product. The price of the product will determine the quantity that the consumer will buy which will determine the revenue and the profit made from the product. In this step of the production process the product can be a success or a failure

Fixed costs are the costs that remain constant no matter how many products are produced or sold.

Variable costs are the costs that change given the amount of products sold.

Target group

You need to determine the target group. With this product it is all golfers’ old and young amateur or professional.

The next step is to do market testing.

A prototype of the product is produced and given to the target group of the consumer and asked to test the product in a basic environment and give their opinion on the quality, size packaging and price. If the reception of the product is positive and the manufacturer is sure that nothing about the product can be improved the product is ready for the next step. Marketing and commercialization. The effect of the opinions of the target group on the product could lead to the restart of the entire procedure and the product could need to be refined or completely redesigned.

The importance of team work and the amount of time needed on each of the different steps as set by this table.


Copyright © 2000-2010 Zebra Networks

10 April 2010

[Online] Available.

Copyright © 2000-2010 Power Decisions Group

10 April

April 13, 2010

[Online] Avalable



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Rama Yelkur and Paul Herbig, (Bingham and Quigley, 1989) JOURNAL OF PRODUCT & BRAND MANAGEMENT Global markets and the new product development process VOL. 5 NO. 6 1996 page 39

Angel Martı´nez-Sa´nchez, Manuela Pe´rez-Pe´rez and Pilar de-Luis-Carnicer European Journal of InnovationManagement Teleworking and new product development Vol. 9 No. 2, 2006 page 206, 208

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