What Is Commercialization?

Commercialization is the process of bringing new products or services to market. The broader act of commercialization entails production, distribution, marketing, sales, customer support, and other key functions critical to achieving the commercial success of the new product or service.

Typically, commercialization occurs after a small business has grown and scaled its operations and reach levels that allow it to successfully reach a larger market. For example, if a small bakery is known for its cinnamon rolls and has sold them with great success, it can commercialize its products by selling the packaged cinnamon rolls to local grocery stores, where others can buy the pastries and the bakery can increase its sales by multiple factors.

Key Takeaways

  • Commercialization is the process of bringing new products or services to market.
  • Commercialization requires a carefully-developed three-tiered product roll-out and marketing strategy, that includes the ideation phase, the business process, and the stakeholder stage.
  • The broader act of commercialization entails production, distribution, marketing, sales, customer support, and other key functions critical to achieving the commercial success of the new product or service.

Understanding Commercialization

Commercialization requires a carefully-developed three-tiered product roll-out and marketing strategy, that encompasses the following major components:

  • The ideation phase
  • The business process stage
  • The stakeholder stage

The Commercialization Process

Many people view the ideation stage as the mouth of a funnel. Although many ideas enter the funnel top, only a fraction ultimately make their ways downward towards implementation. Ideation attempts to generate new products and services that meet unanswered consumer demands, and the most functional designs align with the company's business model, by offering high benefits at low cost.

The ideation stage strives to incorporate a marketing philosophy known as "The Four Ps," which stands for product, price, place, and promotion. Often referred to as the marketing mix, companies use this concept to determine the products to create, the price points at which to sell them, the customer base it wishes to target, and the marketing campaigns it will roll out in an effort to move merchandise off shelves.

For a potential product to be eligible for commercialization, research and development (R&D) efforts must telegraph a degree of public value that could potentially result in increased profitability for the company. In the business process stage, considerations are made in terms of feasibility, costs, and thinking through how a potential commercialization strategy could actually be rolled out.

That being said, the stakeholder stage is typically bundled in thinking through who target audiences and stakeholders for a commercialized product or service is. For commercialization to truly succeed, a company must satisfy both its customer and stakeholder needs.

Selling New Products in the Marketplace

Patents, trademark registrations, and other legal measures must be undertaken to protect a product's intellectual rights, before the product may be brought to market. Manufacturing may occur in-house, or it may be subcontracted to third parties factories. Once a product line is complete, promotional efforts then bring awareness to the target market, which is accessed through distribution channels as well as partnerships with retailers.

Although businesses that produce, market, and distribute products in-house tend to reap higher profits because they don't have to share proceeds with intermediaries, they also assume greater liability with respect to production cost overages.