Commercialization

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Commercialization is the process of introducing a new product into the market. The actual launch of a new product is the final stage of new product development, and the one where the most money will have to be spent for advertising, sales promotion, and other marketing efforts. In the case of a new consumer packaged good, costs will be at least $ 10 million, but can reach up to $ 200 million. In general one can say that it will cost about a dollar for each dollar of sales turnover achieved.

"Most Technology-based inventions never go beyond the conception stage.The light bulb in the mind gets lit often, but only occasionally does it leave a trace" [Jolly).

Commercialization is often confused with sales, marketing or business development. The Commercialization process has three key aspects:

  1. The funnel. It is essential to look at many ideas to get one or two products or business that can be sustained long-term
  2. It is a stage-wise process and each stage has its own key goals and milestones
  3. It is vital to involve key stakeholders early, including customers

[edit] The Commercialization Process

Commercialization (going from "mind to market"[Jolly]) of a product will only take place, if the following four questions can be answered:

When?

The company has to decide on the introduction timing. When facing the danger of cannibalizing the sales of the company’s other products, if the product can be improved further, or if the economy is down, the launch should be delayed.

Where?

The company has to decide where to launch its products. It can be in a single location, one or several regions, a national or the international market. This decision will be strongly influenced by the company’s resources, in terms of capital, managerial confidence and operational capacities. Smaller companies usually launch in attractive cities or regions, while larger companies enter a national market at once.

Global roll outs are generally only undertaken by multinational conglomerates, since they have the necessary size and make use of international distribution systems (e.g., Unilever, Procter & Gamble). Other multinationals use the “lead-country” strategy: introducing the new product in one country/region at a time (e.g. Colgate-Palmolive).

To Whom?

The company has to decide who their primary target consumers are. In this way it can concentrate its distribution and promotion resources.

The primary target consumer group will have been identified earlier by research and test marketing. These primary consumer group should consist of innovators, early adopters, heavy users and/or opinion leaders. This will ensure adoption by other buyers in the market place during the product growth period.

How?

The company has to decide on an action plan for introducing the product by implementing the above decisions. It has to develop a viable marketing mix and create a respective marketing budget.

[edit] Example of commercialization

When Germany's Siemens unveiled its new fashion mobile phone brand, Xelibri, in 2003, the main thrust of Xelibri’s launch strategy was to establish credibility as a fashion brand. Xelibri hosted the opening party of the London Fashion Week to which celebrities and opinion-leading editors and journalists of the fashion press were invited to celebrate “Xelibri’s birthday party”. This, together with other selected fashion events and a comprehensive PR campaign, drew huge media attention, including the support of fashion industry influencers, while creating high brand and product awareness […] Advertising was used to sustain the high brand awareness already created by other communication tools; TV and cinema ads served to reinforce Xelibri’s fashion statement. Being positioned as a fashion accessory, upmarket department stores like Selfridges in the UK and Peek & Cloppenburg in Germany, that did not sell mobile phones before, were used as the primary distribution channel for this new line of phones.

[edit] References

  • Jolly, Vijay K.(1997) :Commercializing New Technologies: Getting from Mind to Market;Harvard Business School Press-Note an new edition is due in early 2009

[edit] Further reading

  • Clemens, F. et al. (2003): Xelibri: A Siemens Mobile Adventure; case study of WHU School of Management, Vallendar, Germany; distributed by ECCH Collection, England and USA
  • Dibb, S. et al. (2001): Marketing – Concepts and Strategies; Fourth European Edition Houghton Mifflin; Boston
  • Jobber, D. (2001): Principles & Practice of Marketing; Third Edition McGraw-Hill; London
  • Kotler, P. et al. (1996): Principles of Marketing; Fourth European Edition Prentice Hall; Harlow (UK)
  • Lancaster, G. and Massingham, L. (1999): Essentials of Marketing; Third Edition McGraw-Hill; London

[edit] See also

  • Oregon State University Commercialization Curricula