Difference between Market Development and Product Development

A successful long-term plan is necessary for businesses to develop and flourish. But planning to develop and extend operations is easier said than done, which is why half of small firms fail in their first five years of existence.

Because of this high failure rate, analysts and company owners are always creating new ideas to assist address the problem. H. Igor Ansoff's Ansoff Matrix is one such theory that provides a solid framework for growing your company while accounting for potential dangers. To fully assess your company's growth plan, you may utilise this in conjunction with other qualitative business metrics like Porter's five forces and SWOT analysis.

The four primary ideas of the Ansoff Matrix are diversification, product development, market penetration, and market development.

This piece will examine two frequently misunderstood ideas, market development and product development, explaining their respective meanings and points of differentiation.

What is Market Development?

The process of marketing current items in a new target market is known as market development. Without having to create a new product, this might include new branding, distribution, price, or promotions.

Businesses may use market development to modify their products to fit a new audience because market trends and wants are always changing. By gaining access to new markets, this helps broaden the company's customer base and facilitate growth.

Fast food restaurants like KFC and McDonald's, which started out in the United States before spreading to other countries, are a well-known example of this. Even though the majority of the things they sell are the same, this forced them to modify their advertising efforts by working with local influencers and crafting advertisements that feature the language and customs of the area.

Advantages of market development

Market development provides a number of benefits for companies trying to grow, including:

• A larger and more diverse customer base: By focusing on new markets, you may draw in a wider spectrum of clients and broaden your clientele, which will assist stabilise your revenue stream.
• Decreased competition: By breaking into new markets, you might be able to avoid going up against well-established rivals head-to-head, increasing your chances of taking market share.
• Use of current resources: Market development enables you to make the most of your current resources, such manufacturing capacity or distribution networks, in order to expand your consumer base.
• Possibility for scalability: Entering new markets might present chances for your company's expansion and scalability, boosting your profitability and market share.

What is Product Development?

The process of developing a new good or service to meet the needs of the market is known as product development. By developing products that meet consumer wants and appeal to a wider market segment, businesses may utilise product development to grow their client base and boost their competitiveness.

Diversification is the process by which a business creates new goods to cater to the demands of different target markets.

For instance, when McDonald's first opened for business in India, they added new products to its menu that catered to the preferences of the locals. These featured dishes like the "Dosa Masala Burger," "McAloo Tikki Burger," and "Spicy Paneer Wrap."

Advantages of product development

Putting a product development plan into practice may help your company in a number of ways:

• Product differentiation: You may set yourself apart from the competition and draw in new business while holding onto your current clientele by consistently enhancing your current line or launching new ones.
• Enhanced customer satisfaction: It may be attained by creating items that more effectively cater to the demands of your clients. This can boost client loyalty and encourage repeat business.
• Increased market share: By providing cutting-edge goods or services, you may catch more of the market and perhaps surpass rivals that take longer to adjust.
• Possibilities for cross-selling and upselling: Adding new goods to your line or improving current ones can provide you the chance to upsell or cross-sell to your clients, boosting their lifetime value.

Difference between market development and product development

Product development and market development are two distinct and separate ideas. While the latter entails developing a new product for an existing market, market development is a systematic strategy to entering a new market to sell an existing product.

The goal of both procedures is the same, according to H. Igor Ansoff, the man behind the Ansoff Matrix of Growth: to increase operations and accomplish corporate growth. The Ansoff Matrix considers both the potential for entering new markets and the current goods and markets in order to assist visualise and assess the risks related to growth efforts.

These two growth plans have distinct costs and risks because they are positioned differently on the Ansoff Matrix. Since market development doesn't necessitate the additional R&D expenditure needed to produce new items, it is a less hazardous alternative. In order to comprehend the demands and tendencies of the new target market, market development nevertheless need a sizable investment in market research.

Product development, on the other hand, is a riskier choice because it calls for companies to build an entirely new product. Higher expenses result from the requirement for a sizable investment in R&D and product research.

Businesses must select the approach that best aligns with their long-term organisational objectives because selecting between the two may have an influence on budget allocation decisions.

Potential Hazards Associated with Product and Market Development

Every business move you make will always include some level of risk. The business's advantages and disadvantages, the level of competition, and the characteristics of the target market all play a major role in the decision between product and market development. This explains in part why the Ansoff Matrix is frequently used in conjunction with other methods of qualitative analysis like Porter's five forces analysis and the SWOT analysis.

Risks of Market Development

While market growth tactics also need a substantial expenditure, product creation is a high-risk endeavour. Businesses need to assess if their current goods can meet the demands of customers in other areas before branching out into new ones. To lower the risks, a significant investment in market research is necessary.

Avoiding market research is crucial. There might be dire repercussions if you do this. For instance, there are no beef products on the McDonald's menu in India due to cultural concerns. Had McDonald's been selling beef items in India, there may have been a fierce response and a boycott of the fast food restaurant company.

Certain companies could exhibit greater aggression than others and begin to establish many locations in different areas. Some could choose a slower expansion strategy, opening a branch and learning about the local way of life, demographics, and potential demands in order to gain a competitive advantage and overcome obstacles to market development early on.

Risks Associated with Product Development

Businesses must participate in New Product Development (NPD) to be competitive and relevant in the market since faster-changing trends are reducing the lifespan of goods and services.

A company's capacity to innovate and produce goods that outperform those of its rivals determines how well its product development department functions. Coca Cola is a prime illustration of this. Sales of Coke increased after they debuted their new vanilla flavour. As a well-known brand, Coca-Cola has a sizable amount of money to devote to product development and R&D.

But if the plan for product creation doesn't work, companies could experience issues like income loss and a damaged reputation. Purchasing a competitor's product might be a less risky strategy for product development because they have already made the investment and shown that it is effective.

This approach offers positive outcomes and is long-term cost-effective. One instance of this is Meta, which bought well-known social media firms like WhatsApp and Instagram, two of its main rivals.

In summary

Since they believe that product and market development are synonymous, many business owners are perplexed about them. These two, however, are distinct and separate ideas. While product development is the process of generating and selling new items to current markets, market development strategy comprises of marketing existing products to a new market.

Selecting the best growth initiative differs from business to organisation, even though understanding the distinction between the two will help you make well-informed judgements for your organisation. Before making any significant decisions, one must take into account a number of aspects, including the competition, budget, team capabilities, and company goals, all of which have an impact on the success of these notions.