Chapter 12 - Developing New Products

Innovation

Process where ideas become new offerings

Market Saturation

The longer a product is on the market, the more competitors will appear

Why is it good to manage risk through diversity

Diversity in a portfolio will give better coverage for the company when they face competitors

Diffusion of Innovation

The process by which the use of an innovation, whether a product or a service, spreads throughout a market group over time and over various categories of adopters.

Pioneer

New product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market. Also called breakthroughs.F

First Movers

Product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead.

What are the 5 groups on difference of innovation curve?

Innovators

Early Developers

Early Majority

Late Majority

Laggards

Innovators

Those buyers, representing approximately 2.5 percent of the population, who want to be the first to have the new product or service.

Early Adopters

The second group of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation represent about 13.5 percent of the population. They generally don’t like to take as much risk as innovators but instead wait and purchase the product after careful review.

Early Majority

A group of consumers in the diffusion of innovation model that represents approximately 34 percent of the population; members don’t like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them.

Late Majority

The last group of buyers to enter a new product market, representing approximately 34 percent of the population; when they do, the product has achieved its full market potential.

Laggards

Consumers, representing approximately 16 percent of the population, who like to avoid change and rely on traditional products until they are no longer available. Sometimes laggards never adopt a product or service.

Relative Advantage

If product is perceived better then it will be adopted more quickly

Compatibility

Does it work with consumer features (culture)

Observability

When its easy to see, it’s easy to communicate

Complexity/Triabilty

If it’s easy to use, it will be easy to adopt

Product Development Processes

1 - Idea Generation

2 - Concept Testing

3 - Product Development

4 -Market Testing

5 - Product Launch

6 - Evaluation of Results

Idea Generation

Development of viable new product ideas

7 Sources For New Ideas

Brainstorming

Outsourcing

Internal R&D

R&D Consortia

Licensing

Competitor’s Products

Customer Input

What consists of Internal R&D

Company owns their own scientists and engineers that work to fix an issue

R&D Consortia

A group of firms and institutions, possibly including government and educational institutions, that explore new ideas or obtain solutions for developing new products.

Licensing

A method used in developing new products in which a firm buys the rights to use a technology or idea from another firm.B

Outsourcing

A practice in which the client firm hires an outside firm to facilitate some aspect of its business. In the context of new product development, the outsourced firm helps its client develop new products or services.

Reverse Engineering

Taking apart a competitor’s product, analyzing it, and creating an improved product that does not infringe on the competitor’s patents, if any exist.

Lead Users

Innovative product users who modify existing products according to their own ideas to suit their specific needs.

Concept Testing

The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions.

Product Development

Entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product’s form and features or a service’s features. Also called product design.

Alpha Testing

An attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended; occurs in the firm’s research and development (R&D) department.

Beta Testing

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

Market Testing

The company releases a batch of products into the market in order to figure out if it will be a success. Can take two forms: Premarket testing and test marketing

Premarket Test

Conducted before a product or service is brought to market to determine how many customers will try and then continue to use it.

Test Marketing

A method of determining the success potential of a new product; it introduces the offering to a limited geographical area prior to a national launch.

Product Launch

firm utilizes their reasearch from competitors, test audiences, and feedback and selects target marketing and position. Then, finalizes remaining marketing mix principles.

Evaluation of results

marketers undertake critical postlaunch review to determine success or failure.

How do companies measure success of product during evaluation of results period?

1 -satisfaction of technical requirements

2 - consumer acceptance

3 - satisfaction of firm’s financial requirements, such as sales and performance

Product Lifecycle

Defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning.

Product Lifecycle Stages

Introduction

Growth

Maturity

Decline

Introduction Stage

Low sales, low profits, innovators are main consumers, and there are few competitors

Growth Stage

Rising sales, rapidly rising profits, early adoptors are main consumers, and few but increasing competitors

Maturity Stage

Peak sales, peak profits, late majority consumers, and many competitors

Decline Stage

Declining sales, declining profits, laggards are typical consumers, and there are few and decreasing competitors