Price, product, promotion and place (4Ps): Product Students should…

The idea

Developing a new product means creating a good or service that did not previously exist, or substantially changing an existing one, so that it better satisfies customers. Benefits include attracting new customers, gaining a competitive advantage, spreading risk across a wider product portfolio, charging a higher price during the novelty phase and replacing declining products before sales fall away. Risks include high research and development costs, the chance that demand is overestimated, production problems, competitor copying and damage to reputation if the launch fails. A small bakery, for example, might spend £8,000 developing a gluten-free range; if local demand is strong it gains new customers, but if sales are weak the money is lost and cash flow suffers.

What earns the marks

• Explains at least one benefit of developing a new product, such as attracting new customers, gaining competitive advantage, spreading risk across a product portfolio or replacing a declining product.
• Explains at least one risk of developing a new product, such as high research and development costs, uncertain demand, production difficulties, competitor imitation or reputational damage from failure.
• Uses a business example to show how a benefit or risk affects sales, costs, cash flow or competitiveness.
• Distinguishes between the benefit of a successful launch and the risk that the launch may not succeed, rather than treating new product development as automatically good or bad.
• Reaches a supported judgement about whether the benefits of developing a particular new product outweigh the risks in a given context.

Common mistakes and how to put them right

• Assuming every new product succeeds.

  Put it right by explaining that demand may be lower than forecast and that research and development spending may not be recovered.

• Confusing product development with promotion.

  Put it right by keeping the focus on creating or improving the product itself, not on how it is advertised.

Exam tips

• Read the case study carefully and link each benefit or risk to the specific business, its market and its resources.
• Use connectives such as 'however' and 'therefore' to show the balance between benefits and risks.
• If asked to evaluate, state a clear conclusion and justify it with evidence from the case rather than repeating both sides.