Introduction
Nelson & Prada is a company that specializes in the production and sales of aquaponic systems. Located in the city of Montello, Wisconsin in the United States, this company offers various aquaponic solutions and training for its clients from all over the country. The firm has expanded its market coverage beyond the United States to Europe and parts of Asia. When clients purchase any of the aquaponic systems sold by this firm, they are first taken through proper training so that they can know how to operate the kits they are purchasing.
This firm’s products have received massive acceptance in the market not only because of the massive digital and mass media campaigns but also because of the high quality offered to them and superior customer care services available at this firm. In this paper, the researcher will critically analyze a new product that this firm is planning to introduce to the market to determine the strategy used in product development and how successful it is in the current competitive market environment.
Strategy
According to Annacchino, the increasing market competition in modern society has changed the new product development process from a technology-push approach to a market-pull approach (28). Firms are currently keen on understanding the needs of the market before coming up with their products. They have learned that the only way of being successful in the market is to understand the needs of the customers and develop products that meet these needs in the best way possible. Nelson & Prada has learned to follow this market-pull strategy when coming up with new products into the market.
One of the products that this firm is planning to introduce into the market is Aquaponic Monitoring and Alarms. This system monitors the aquaponic system water and air temperatures, the quality of water, and the general condition of the system. In case it detects any irregularity, it sends a text message or e-mail to the user identifying the abnormality in the system and what needs to be done to address the problem. This is a very unique system that meets the expectations of small scale aquaculture practitioners in the best way possible. It is important to understand how this firm plans to develop this new product, the processes it will take to launch it, and what happens after the launch.
Product development
The product development process may help in explaining these stages. The figure below shows the stages involved in the product development process.
As shown in the model above, it all starts with idea generation. This is the stage where this firm comes up with a new idea of managing the aquaponic system digitally. As Annacchino says, idea generation needs some adequate market research to understand what the customers’ needs are in the market (35).
These ideas were collected from the small scale aquaculture practitioners who lamented that it was not easy for them to detect abnormalities in their aquaponic systems in good time to present infections. The process of going to the market and understanding what it needs is what Annacchino describes as a market-pull strategy (24). Instead of coming up with a product that one believes will be needed by the customer, the strategy emphasizes listening to the needs of these customers first, before coming up with products that target them.
The next step in this model is concept development. At this stage, the idea that was generated is transformed into a product. As Annacchino says, the product developed and this stage should suit a firm’s product strategy and portfolio to be in line with the mission and vision statements of the firm (43). The Monitoring and Alarm System was designed in line with the product portfolio of this firm. It was designed to be one of the products that meet the needs of clients who use aquaponic systems.
It did the work of monitoring the aquaponic system and sending the signal to the user so that corrective measures can be taken. It improved the product portfolio of this company, making it even more popular among the targeted clients both locally and in the international markets.
Business analysis is the next and very important stage. At this stage, a firm tries to understand how the new concept developed can be transformed into a successful profitable business process. At this stage, a firm tries to introduce a value-adding milestone for the hardware and software components. In this product, the hardware components include the casing and a thermometer that determines the air and water temperature.
It has software that makes the recording of these environmental factors and sends a message to the user in case any irregularity is detected. The software and the hardware work closely to make this product very efficient in monitoring the environmental conditions of the aquaponic. It is this product that the market needs. It is also at this stage that the firm decides whether the product will be self-made or outsourced. In this firm, the management has come up with its ways of manufacturing this product on its own without outsourcing anything. Such a strategy often increases the profitability of such a project and gives a firm full control over all the activities relating to the product.
Beta testing and marketing is the next stage where the firm tries out the viability of the product in the market. It is what Annacchino describes as a soft launch (45). The firm will not be launching the product on a commercial level, but only on a small scale through a selected clientele base. At this stage, the firm will take the developed samples to their select customers to try it out. They will charge a relatively low price, but one that can cover all the costs and leave the firm with some profit.
This is the stage where the firm determines if the product will be a success in the market or if it may need some adjustments to make it achieve the commercial success that is needed. This stage should be successfully implemented at this firm when it comes up to the Monitoring and Alarms System.
After the marketing test, the product moves to the technical implementation stage. This is where the firm tries to address all the issues that were identified during the market testing stage. Issues about how the customers will access the product, any new adjustments needed in the product, and any other relevant factor may need to be considered at this stage as the firm prepares to launch the product. This firm may decide to sell its product through various distributors all over the country. The strategy is meant to ensure that its clients can access these products irrespective of their location.
Pricing strategy is a stage that comes before the final stage of commercialization. At this stage, the firm comes up with an appropriate price for its products. To do this, it needs to define its target market to determine what they are willing and able to pay. The target market for this product includes people practicing aquaculture all over the country. Most of them often fall in the middle class. As such, the product will be positioned as one that targets the middle class. Positioning makes it easy to develop the right message for advertising that reaches a specific target audience. Such a strategy helps in popularizing the product within a short period.
The final stage is the launch of the product where it is taken to the market on a large scale. Having identified the distributers at the previous stages, this firm will take its newly created Monitoring and Alarms system to the market on a large scale. It should sell its products through the distributors other than making direct sales. The commercialization can be a success if the firm conducts research and understands what its clients need. The product should be specially designed to meet these needs in the market. The distributors will be enthusiastic to carry the products of this firm if they are convinced of their popularity in the market.
Expected returns
According to Annacchino, a project can only be viable if its returns can meet all the costs involved in the entire production process and generate some profits that can sustain continued production (76). As such, it may be necessary to conduct a break-even analysis to know when the firm will be able to recover all the costs of operations involving the production of this new item. The following table shows all the costs involved in the project and the expected revenues within the first three years.
Table 1: Costs and Revenues.
As shown in the above table, the firm will be able to break-even in the second year. In the first year, the cost of production is high because of the numerous testing and adjustments done of the products before taking it to the market. The revenue is low because people are not yet aware of the product. In the second year, costs start going down as efficiency improves and revenues go up as clients get to know about the product. In the third year, the product becomes a cash cow because of the low expenses involved and high returns generated from it.
Conclusion
Developing a new product is a complex process that needs an understanding of market forces. The modern market is changing from a technology-push to market-pull where customers’ needs define what firms present in the market. Nelson & Pade Inc is one of the leading providers of aquaponic system solutions in the United States. In this study, the researcher has analyzed the path that this firm should take when launching its new product to achieve the expected success in the market.
Work Cited
Annacchino, Marc. The Pursuit of New Product Development: The Business Development Process. Amsterdam: Butterworth-Heinemann, 2007. Print.