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Why do firms create new products?
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MKT 300 Chapter 12

Developing New Products

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Why do firms create new products? Regardless of where on the continuum a new product lies, firms have to Innovate. Changing customer needs, Market Saturation, Managing Risk through Diversity, Fashion Cycles, and Improving Business Relationships.
Innovation The process by which ideas are transformed into new products and services that will help firms grow.
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 various categories of adopters.
Pioneers (Breakthroughs) New product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market
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.
Innovators Those buyers who want to be the first to have the new product of service.
Early Adopters The second group of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation; 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 rep approx 34% 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.
Late Majority The last group of buyers to enter a new product market; when they do the product has achieved its full market potential.
Laggards Consumers who like to avoid change and rely on traditional products until they are no longer available.
Five groups of the diffusion of innovation curve? Innovators, Early Adopters, Early Majority, Late Majority, and Laggards.
What factors enhance the diffusion of a good or service? Relative Advantage, Compatibility, Observability, and Complexity and Trialability.
How firms develop new products Internal Research and Development, R&D Consortia, Licensing, Brainstorming, Outsourcing, Competitors' Products, and Customer Input.
Reverse Engineering Involves taking apart a competitors 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.
Concepts Brief written descriptions of a product or service; its technology, working principles, and forms; and what customer needs it would satisfy.
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.
What are the steps in new product development process? Idea Generation, Concept Testing, Product Development, Market Testing, Product Launch, & Evaluation of Results.
Product Development (Product Design) Entails process of balancing various engineering, manufacturing, marketing and economic considerations to develop a products form and features or a service's features.
Prototype The first physical form or service description of a new product still in rough or tentative form that has the same properties as a new product but is produced through different manufacturing processes, sometime crafted individually.
Alpha Testing An attempt by the firm to determine whether the product will perform according to its design and whether is satisfies the need for which it was intended; occurs in the firm's research and development department (R&D).
Beta Testing Having potential consumers examine a prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use.
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 Introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch.
Trade Promotions Advertising to wholesalers or retailers to get them to purchase new products, often thru special pricing incentives.
Introductory Price Promotions Short-term price discounts designed to encourage trials.
Trade Show Major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry.
Manufacturers Suggested Retail Price (MSRP) The price that manufacturers suggest retailers use to sell their merchandise.
Slotting Allowance Fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products.
Product Life Cycle (4 Stages) 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.
Introduction Stage Stage of the product life cycle when innovators start buying the product.
Growth Stage Stage of the product life cycle when the product gains acceptance, demand, and sales increase, and competitors emerge in the product category.
Maturity Stage Stage of the production life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or re-positioning them.
Decline Stage of the product life cycle when sales decline and the product eventually exists in the market.
Created by: towilliamsjr
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