Chapter 12: Developing New Products MKTG-300 Exam #3

Why do firms produce new products?

• because of changing customer needs ex: chat assist on Samsung phone

• if the products are one-time purchase/consumption per customer ex: pixar movies

• to become a market pioneer

• new products as a growth strategy (Product Development)

• as a product portfolio strategy (?: Invest/Improve/Divest)

How does marketing support new product development?

• marketing should take an active (or leading) role in new product development

• marketing should help in finding directions of new product development. It is about defining a dynamic benefit dimension

are sales curves of one-time purchased goods different from repeat purchased goods and services?

so much different from one another

3 advantages of market pioneers?

• greater market share

• reputation

• more funding and resources

• ex: apple

Marketing innovation diffusion starts from….

customer acquisition/stimulate demand

Diffusion of innovation is an _____________ __________.

adoption process

Adoption Process graph

• from 0% to 100% of adoption rates

• people have different levels of trying and adopting new products

• in general, 2.5% always try new things. They are called innovators. They are adventuresome, curios and risk takers

Chasm between Early adopters and Early majority

13.5% are early adopters. If marketers can not take early adopters, the innovation diffusion often breaks. It is called the chasm

Early Adopters

• don’t take as much risk as innovators do but wait and purchase the product after careful review

• thus this market waits for the first reviews

• tend to enjoy novelty and often are regarded as the opinion leaders for particular product categories

early majority

• they are numerous (34%)

• influenced by early adopters and innovators

• will not buy if it is not visibility accepted (the chasm)

different types of adopters

• innovators

• late majority

• early adopters

• laggards

• early majority

Some Innovations Diffuse Faster bc of perceived attributes of innovations such as

• relative advantage

• compatibility

• observability

• complexity and trialability

Relative Advantage

degree to which an innovation is perceived better than the idea it supersedes

• either greater benefits or lower price

Compatibility

the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters

Observability

the degree to which the results of an innovation are visible to others

Trialability

the degree to which an innovation may be experimented with on a limited basis

How to Develop a new product steps

1. Idea generation

2. concept testing

3. product development

4. market testing

5. product launch

6. evaluation of results

1. Idea Generation

• R&D

• Brainstorming

• Customer input

• Competitor’s product

2. Concept Testing

• You should refine the new product idea and develop a concept statement of the new product

• concept statement should include verbal or visual presentation of:

  • product features and benefits

  • price

  • where to purchase

  • brand name and logo

• You need to ask potential customers to rate their purchase intent

3. Product development

• product development costs money, time and effort a lot!

• make sure to do concept tests before your commitment

• during the product development, you should consider getting feedback again (prototype tests- alpha and beta testing)

Alpha testing

firm attempts to determine whether the product will perform according to its design and as it intended

Beta testing

uses potential consumers who examine the product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use

4. Marketing testing

• after completed the new product development, do market testing with the completed product if needed

• in general, market testing is trial sales attempt with different marketing mix variables

  • different pricing

  • different advertising and promotion

  • different distribution

• be aware that your competitors can see your product’s presence when you do a market testing

Competitive imitation

a situation where one company fully copies or adopts strategies, products, processes, or other elements of another firm’s business with the goal of gaining a competitive advantage or improving its own performance

ex: General Food’s Toast Em’s —> Kellogg pop tarts

General Goods Maxim freeze-dried coffee —> Nestle Nescafe freeze-dried coffee

5. Product Launch

• this step requires tremendous financial resources and extensive coordination of all aspects of the marketing mix

• the firm confirms its target market(s) and positioning, and finalized the remaining marketing mix variables, and determines the marketing budget

• timing of the launch may be critical

Product Life Cycles & Graph

Development

Introduction

Growth

Maturity

Decline

• The product life cycle graph helps understand the traditional evolution of products, particularly technology products or others subject to fads in consumer preferences

Points of Inflection of Life Cycle Curve

in the life stages of products at which sales accelerate, flatten, or decline

Are all products subject to the life cycle?

No, some products and some brands like Coca-Cola and baking soda are not subject to the life cycle at all

Characteristics of each stage in product life cycle