What is 'Commercialization'

Commercialization is the process by which a new product or service is introduced into the general market. The process of commercialization is broken into phases, from the initial introduction of the product through its mass production and adoption. It takes into account the production, distribution, marketing, sales and customer support required to achieve commercial success.

BREAKING DOWN 'Commercialization'

As a strategy, commercialization requires that a business develop a marketing plan, determine how the product will be supplied to the market and anticipate barriers to success.

The process of commercialization is like a funnel. At the widest part are the many ideas that a company might have for launching a product. As the funnel narrows, the company weeds out ideas based on logistics and costs, consumer and economic trends, and feasibility. Commercialization is part of a larger feedback loop for a product, as the ultimate introduction of the product into the market may require adjustments to the process.

For a potential product to be eligible for commercialization, it must have a level of public value that could result in overall profitability. These products may be developed within commercial businesses, government agencies, educational institutions or other entities involved in various forms of research and development.

Protection of Intellectual Property

Prior to commercialization, most new products are subject to efforts designed to protect the creator’s rights to the product in question. This can involve the submission of documents to obtain a patent, trademark or copyright. These protections assert the rights of ownership of the product or idea as claimed by the individual or entity representing itself as the original source of the idea.

Marketing, Licensing, and Creation of the Product

Once the property rights have been secured, the person or entity can proceed with plans to bring the product to market. This can include internal production for businesses that have the capacity to produce the item themselves or licensing efforts for those looking to partner with a company for production purposes.

As the product becomes ready for the open market, advertising efforts may begin to bring awareness of the product to consumers in the target market. Distribution channels may be created as well as partnerships with retailers that are best equipped to sell the product.

Business that can produce, market and sell the products in-house maintain a higher level of personal profit, but they are also subject to all of the associated expenses. Those that partner with other business for production or sales needs may maintain a smaller profit margin, but they are likely to experience lower costs to compensate.

RELATED TERMS
  1. Commercial

    Relating to commerce. In the investment field, the term "commercial" ...
  2. Commercial Bank

    A financial institution that provides services, such as accepting ...
  3. Commercial Code

    Private and public laws that regulated how commerce is to be ...
  4. Product Life Cycle

    The period of time over which an item is developed, brought to ...
  5. Productize

    To take a new service, product or product feature - that a company ...
  6. Life Cycle

    The course of events that brings a new product into existence ...
Related Articles
  1. Financial Advisor

    How to Create a New Financial Product in 10 Steps

    The 10 steps outlined here are essential to the creation of a new financial product.
  2. Insights

    The Role of Commercial Banks in the Economy

    We interact with commercial banks daily to carry out simple financial tasks. That said, the function and creation of a commercial bank is anything but simple.
  3. Investing

    What's a Commercial Bank?

    A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and mortgage loans; and offers basic financial products ...
  4. Investing

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  5. Investing

    Find Fortune In Commercial Real Estate

    Investing in big buildings means big money - and bigger risks.
  6. Small Business

    Understanding Marketing

    Marketing includes all of the activities of a company associated with buying and selling a product or service.
  7. Investing

    Introduction To Commercial Paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
  8. Investing

    Commercial Real Estate Agent: Career Path & Qualifications

    Learn about the qualifications, skills and licensing requirements to be a commercial real estate agent and how to get started in this career path.
  9. Investing

    The Reality of Commercial Real Estate Loans

    It’s corporations and partnerships that most commonly take out commercial real estate loans.
  10. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...
RELATED FAQS
  1. Do production costs include the marginal cost of production?

    Learn more about marginal costs of production and production costs. Find out how businesses can use marginal cost calculations ... Read Answer >>
  2. What are some ways a company can expand its product line?

    Understand what a product line is and why it's important. Learn about specific ways in which a company can expand its product ... Read Answer >>
  3. Is there any way to reverse the law of diminishing marginal returns?

    Learn more about how consumer spending, supply and demand impact production decisions. Find out more about the law of diminishing ... Read Answer >>
  4. What is the difference between research and development and product development?

    Understand the difference between research and development and product development. Learn why a company would want to invest ... Read Answer >>
  5. How can retail investors invest in commercial paper?

    Find out how individual retail investors can purchase short-term commercial paper, but why it rarely makes good investment ... Read Answer >>
  6. What are the differences between product bundling and product lines?

    Understand the differences between product bundling and product lines. Learn why a company would want to expand its product ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center