The key difference between product development and market development is that product development is a strategy that focuses on developing new products in existing markets whereas market development strategy identifies and develops new market segments for existing products. Product development and market development are two quadrants in the Ansoff’s growth matrix that demonstrates four ways in which a company can expand and grow. It was developed by H. Igor Ansoff in 1957 and is in wide use by a number of firms. The other two quadrants in the growth matrix are market penetration and diversification.
CONTENTS
1. Overview and Key Difference
2. What is Product Development
3. What is Market Development
4. Side by Side Comparison – Product Development vs Market Development
5. Summary
What is Product Development?
Product development is a strategy in which businesses develop new products or product categories and market them in existing markets, i.e. to the same customer base. This type of strategy can be implemented successfully by reputed companies that have an established brand name since customers are, generally, not hesitant to purchase products from well-known brands. Further, by giving more purchase options to customers, the company can limit them from purchasing competitor products. Product development involves significant research and development costs since the need to introduce innovative and unique products to capture the customers.
E.g. The Coca-Cola Company heavily invest in research and development and have introduced a number of new soft drinks with different flavors such as Coca-Cola Vanilla and Fanta icy lemon. Further, the company has also introduced new soft drink categories such as Minute Maid and Thumbs up.
Figure 01: Coca-Cola Vanilla – An Example of Product Development
Time to market is an essential aspect that companies should consider in line with a product development strategy. New products should be made available in the market as and when customers need them. This is specifically true for technology products such as mobile phones where competitors constantly introduce new versions.
What is Market Development?
Market development is a growth strategy that identifies and develops new market segments for existing products. A market development strategy can be implemented mainly by the following ways.
- Entering a new geographical market
This is a strategy mainly adopted by multinational companies to expand their businesses. Expanding into a new geographical market requires significant investment and proper analysis of the potential market prior to making the initial investment since this is a risky way of business expansion. Sometimes entering into a new geographical market can be restricted in some countries. In that case, companies can consider a merger or a joint venture to enter such markets.
E.g. Starbucks, to widen their global reach, entered into Middle East and South Africa .
Figure 02: Starbucks South Africa – An Example of Market Development
- Targeting new customers in new segments
If a new customer segment can be acquired for an existing product, this amounts to market development.
E.g. After Johnson’s baby products became a popular choice for babies, the company started advertising the products for adults under the tagline “Best for the baby-Best for you.”
What is the difference between Product Development and Market Development?
Product Development vs Market Development |
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| Product development is a strategy that focuses on developing new products in existing markets. | Market Development strategy identifies and develops new market segments for existing products. |
| Risk | |
| Risk is high in industries where there are a number of competitors that offer similar products. | High risk is involved if the company is entering a market where there are many established companies. |
| Significant Cost |
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| Research and Development is the most significant cost in product development. | Market development has to incur a significant cost in the form of market research. |
Summary – Product Development vs Market Development
The difference between product development and market development depends on whether new products are offered to existing market (product development) or whether existing products are introduced to a new market (market development). Suitable strategy to adopt for expansion depends on the corporate strategy while both strategies have their own benefits and limitations. Both product development and market development strategies require significant finances and are not easily practiced by companies with limited scale. A proper assessment of the target market, the tastes and preferences of customers and the nature of the competition should be thoroughly examined prior to investing in either strategy.
References
1. “Using market research to develop a product range – A Coca-Cola Great Britain case study.” Product development – Using market research to develop a product range – Coca-Cola Great Britain | Coca-Cola Great Britain case studies and information | Business Case Studies. N.p., n.d. Web. 02 May 2017.
2. “How to Choose a Market Development Strategy.” OnStrategy. N.p., n.d. Web. 01 May 2017.
3. “Market Development Strategy.” Ansoff Matrix – Market Development Strategy. N.p., n.d. Web. 02 May 2017.
Image Courtesy:
1. Vanilla Coca Cola By Neil Turner. (CC BY-SA 2.0), via flickr
2. Starbucks Rosebank in South Africa by Starbucks.com