Product Planning
Product planning is the process of searching ideas for new products, screening them systematically, converting them into tangible products and introducing the new product in the market. It also involves the formation of product policies and strategies.
Product planning includes improvements in existing products as well as deletion of unprofitable or marginal products. It also encompasses product design and engineering which is also called product development. Product planning comprises all activities starting with the conception of product idea and ending up with full scale introduction of the product in the market.
It is a complex process requiring effective coordination between different departments of the firm. It is intimately related with technical operations of the organization, particularly with engineering, research and development departments.
Any product has two broad objectives immediate objectives and ultimate objectives. Immediate objectives include satisfaction of immediate needs of consumers, increasing sales, utilizing idle plant capacity, etc. Permanent or ultimate objectives consist of reduction in production costs, creation of brand loyalty, monopolizing the market, etc.
Significance and Objects of Product planning
Product planning and development is a vital function due to several reasons. First, every product has a limited life span and needs improvement or replacement after some time. Secondly, needs, fashions and preferences of consumers undergo changes requiring adjustments in products.
Thirdly, new technology creates opportunities for the design and development of better products. Product planning and development facilitate the profitability and growth of business. Development of new products enables a business to face competitive pressures and to diversity risks. Product is the most important constituent of marketing mix.
Finding and meeting the needs of customers is the key element in a successful marketing strategy. New product development has become all the more important in the modern world characterized by technological change and market dynamics.
New product development brings opportunities but also involves heavy commitment of finance, technology and even emotional attachment. New product decisions are necessary as well as costly. Many new products fail causing ruin to business firms.
Product development is a continuous and dynamic function. Continuous adjustments and improvements in the product arc necessary to minimize costs of production and to maximize sales. High rate of product obsolescence requires product innovation frequently. At the same time, cost and time scales have increased. In some products, the gestation period is very long, sometimes longer than the life of the product.
As a result the role of R&D expert has become very important. He needs to be in touch with sales persons and actual end users. Successful technological innovation involves great resources as well as great risks. Product innovators face spectacular successes as well as disastrous failures.
Most of the new product ideas do not become actual products. Many new products achieve limited acceptance in the market. This is so because firms very often are reluctant to move away from tried and tested products.
Thus, product planning is required for the following reasons:
(i) To replace obsolete products.
(ii) To maintain and increase the growth rate/sales revenue of the firm.
(iii) To utilise spare capacity.
(iv) To employ surplus funds or borrowing capacity.
(v) To diversify risks and face competition.