Before launching a new product on the market, we must analyze the environment to determine if it will have direct competition. In other cases, even if there is no direct competition, we must examine whether there are substitute products on the market (indirect competition). In any of these cases, we will carefully investigate the quantities normally sold by our competitors, which will help us establish potential sales volumes.
At other times a new product may be so unique that no information can be obtained from the competition. In this case, the person responsible for the development is forced to judge its potential market by analyzing its factors. To do this, you must analyze what is causing the demand for your product, carefully studying your potential consumer and determining their purchasing habits more accurately.
Assessment of The Profit Possibilities of a New Product
This process consists of determining the costs (both fixed and variable) related to the distribution of the article in comparison with the possible prices that can be put on it. For this, an analysis of the volumes to be manufactured according to the different prices will be carried out to reach the established objectives.
In this process, our assessment of the risks is of particular importance. Bear in mind that not all the calculations used to assess the situation have the same degree of accuracy. You have to decide how much confidence you can put in the figures: the less confidence you have in the calculation, the more risks there are in the estimate.
It is common to find companies that establish the conditions that must be obeyed to decide on this type based on the following objectives:
- That the investment is recovered in a specified number of years.
- That the price obtained is several times the cost price.
- That the probable volume of sales exceeds that of the deadlock.
Importance of Laboratory Tests
Sometimes a product is sold without proper laboratory tests. This is a serious mistake because if the consumer finds that it is a bad product, it is likely that it will never be accepted even if it is later improved.
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