Chapter 10 - Maintaining a Competitive Edge with New Offerings

Maintaining a Competitive Edge with New Offerings

What are the 2 new product categories?

New-to-the-world products (aka. Pioneered or break-through) and New-to-the-firm products 

What do new-to-the-world products create and about what %?

create new markets, about 10% of new products

What do new-to-the-firm products entail?

product development/diversification, adding to existing product lines, iterating existing products, repositioning products

Product development is necessary for _____

growth

What are some rewards for product development?

expansion into new markets (diversify customer base → reduces risk), increased market share (push out competition), increased revenue

What are some risks of product development?

most fail, lack of differentiation, too expensive, don’t have technology/skill set to produce, poor timing

What is step 1 of the new product development process and what can it entail?

idea generation - internal R&D (expensive), R&D consortia (work with gov/uni), licensing, brainstorming with employees, outsourcing, analyzing competitors’ products, co-creation with customer input (reduces risk)

What is step 2 of the new product development process and what can it entail?

idea screening and evaluation - filter ideas by asking questions (added value? filling a gap? good fit? do we need associated services? price? projected sales? production timeline?

What is step 3 of the new product development process and what can it entail?

concept development and testing - present to potential customers, obtain reactions via qualitative research

What is step 4 of the new product development process and what can it entail?

marketing strategy development - outlines used: 4 P’s, budget, goals, sales, market share, and profit

What is step 5 of the new product development process and what can it entail?

business analysis - assess business appeal (payback timeline, break-even analysis) depends on how much capital you have

What is step 6 of the new product development process and what can it entail?

product development - prototype developed, alpha testing (employees), beta testing (potential customers)

What is step 7 of the new product development process and what can it entail?

test-marketing - sales-wave research, controlled test-marketing, simulated test-marketing, crowdsourcing

What is step 8 of the new product development process and what can it entail?

commercialization (going to the market/first step of product life cycle) - entire market or rolling launch, expensive/coordinate marketing mix/critical timing

What is step 9 of the new product development process and what can it entail?

evaluation of results - metrics to evaluate new products: R&D spending as a % of sales, current year % of sales, time to value, product adoption rate, ROI

What is time to value?

how fast do consumers see the product as valuable

What is product adoption rate?

how many users there are

What are the 5 stages of the diffusion of innovation smallest to largest?

innovators, early adopters, early majority, late majority, laggards

Who are the innovators?

smallest group - first to have a new product, enjoy taking risks, highly knowledgable, drive trends

Who are the early adopters?

less willing to risk, wait for a review from innovators, opinion leaders, determine size of the market

Who are the early majority?

few products are profitable until EM adopts, tipping point, avoid risk (wait for bugs to be tested)Wh

What is the tipping point?

product either grows/profits or leaves the market 

Who are the late majority?

last group to buy NEW products, represents market saturation

Who are the laggards?

largest group, do not buy new products, dislike change, depend on traditional products until no longer available

What do characteristics of innovation tell you and what are they?

how fast is it going to diffuse through the market - relative advantage, compatibility, complexity, divisibility/tryability, communicability/observability

What are the 4 stages in the product life cycle?

tool for strategic planning - introduction, growth, maturity, decline

What occurs in the introduction stage of product development?

building awareness, slow sales growth, no profits

What occurs in the growth stage of product development?

demand and sales increase, competitors emerge (some drop out), product version developments, product becomes profitable

What is economies of scale?

cost of unit for production goes down as more units are produced

What occurs in the maturity stage of product development?

sales peak (middle of stage, so there is some decline), longest stage, market saturated, defend against competition (market share/price battle therefore, profits decline), consider marketing strategies to stay relevant

What is market modification?

developing new markets

What is product modification?

developing new products/varieties/options

What occurs in the decline stage of product development?

decline in sales and profitability, serve niche consumer group or exit the market

What decision has to be made in the decline stage of product life cycle?

Harvest or divest