Chapter 12 Developing New Products

customer input

(1) B2B (2)B2C (3) customer writing reviews online

6 steps of product development process

(1) Idea generation (2) concept testing (3) product development (4) market tasting (5) product launch (6) evaluation of results

Different groups of adopters articulated by the diffusion of innovation theory.

(1) Innovators 2.5% (2) Early adopters 13.5% (3) Early majority34% (4) Late majority34% (5) Laggards16%

Reasons firms create new products

(1) changing customer needs (2) market saturation (3) Managing risk through Diversity (4) Fashion cycles (5) Improving business relationships

7 type of sources of ideas

(1) internal research and development (2) research and development consortia (3) licensing (4) brainstorming (5) outsourcing (6) competitors' products (7) customer input

4 stages of product life cycle

(1) introduction stage (2) growth stage (3) maturity stage (4) decline stage

the success of a new product by three interrelated factors:

(1) its satisfaction of technical requirements, such as performance; (2) customer acceptance; (3) its satisfaction of the firm's financial requirements, such as sales and profits.

4 factor would effect the success of product launching

(1) promotion (2) place (3)price (4) timing

4 aspects of using diffusion of innovation model

(1) relative advantage (2) compatibility (3) observability (4) complexity and trialability

three way to promote new products

(1) trade promotion (2) introductory price promotion (3) trade shows

introduction stage ( innovators)

1st stage of the product life cycle when innovators start buying the product.

Idea generation

1st step of new product development process; development of viable new product ideas

growth stage (early adopters and early majority)

2nd stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category.

concept testing

2nd step of new product development process; testing the new product idea among a set of potential customers.

maturity stage (late majority)

3rd stage of the product life cycle when industry sales reach their peak, so firm try to rejuvenate their products by adding new features or repositioning them.

product development

3rd step of new product process; development of prototypes and/or the product.

market testing

4th step of new product development process; testing the actual products in a few test markets.

product launch

5th step of new product development process; full-scale commercialization of the product.

compatibility

A diffusion process may be faster or slower, depending on various consumer features, including international cultural differences.

competitor's products

A new product entry by a competitor may trigger a market opportunity for a firm, which can use reverse engineering to understand the competitor's product and then bring an improved version to market.

brainstorming

Firms often engage in brainstorming sessions during which a group works together to generate ideas. One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or rejected.

fashion cycles

In industries that rely on fashion trends and experience short product life cycles—including apparel, arts, books, and software markets—most sales come from new products.

internal research and development

Many firms have their own R&D departments, in which scientists work to solve complex problems and develop new ideas; the product development costs for these firms are quite high, and the resulting new product or service has a good chance of being a technological or market breakthrough.

complexity and trial-ability

Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try. For example, most customers who may be interested in purchasing a new tablet know that they can go to any Apple store and immediately try it there in the store.

market saturation

The longer a product exists in the marketplace, the more likely it is that the market will become saturated. Without new products or services, the value of the firm will ultimately decline.

observability

When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process. Consumers seeing their friends using the iPad, seeing the devices on television or on YouTube, or reading about them in the deluge of media coverage surrounding each iPad release may be convinced to purchase one as well.

changing customer needs

When they add products, services, and processes to their offerings, firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or by keeping customers from getting bored with the current product or service offering.

Early majority

a group of consumer in diffusion of innovation model that represents approximately 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; few new products and services can be profitable until this large group buys them.

relative advantage

a product or service is perceived to be better than substitutes.

trade promotion

advertising to wholesalers or retailers to get them to purchase new products, often through special pricing incentives.

alpha testing

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 R&D.

the shape of product life cycle

bell shape

concepts

brief written descriptions of a product or service; its technology, working principle, and forms; and what customer needs it would satisfy.

improving business relationships

by changing and innovating its pallet, Kraft offered chimney stacks for each flavor, enabling the retail stockers to reach whichever flavor they needed easily. Sales of Capri Sun's lemonade improved by 162 percent.

outsourcing

companies have trouble moving through these steps alone, which prompts them to turn to outside firms like IDEO.

premarket tests

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

laggards

consumers who like to avoid change and rely on traditional products until they are no longer available.

slotting allowances

fees firm pay to retailers simply to get new products into stores or to gain more or better shelf space for their products.

licensing

firms buy the rights to use the technology or ideas from other research-intensive firms through a licensing agreement. This approach saves the high costs of in-house R&D, but it means that the firm is banking on a solution that already exists but has not been marketed.

managing risk through diversity

firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can. If some products in a portfolio perform poorly, others may do well.

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.

lead users

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

test marketing

introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch.t includes promotions like advertising and coupons, just as if the product were being introduced nationally, and the product appears in targeted retail outlets, with appropriate pricing.

reverse engineering

involves 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.

decline stage (laggards)

last stage of the product life cycle when sales decline and the product eventually exits the market.

evaluation of results

last step of new product development process; full-scale commercialization of the product of the performance of the new product and making appropriate modifications.

trade shows

major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry.

MSRP

manufactures suggest retailers use to sell their merchandise.

Research and development consortia

more and more firms have been joining consortia, or groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products.

pionners

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. (Ipod>itunes>iphone>ipad)

first movers

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

introductory price promotion

short-term price discount designed to encourage trail.

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.

late majority

the last group of buyers to enter a new product market; when they do, the products has achieved its full market potential.

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 over various categories of adopters; helps marketers understand the rate at which consumers are likely to adopt a new product or service.

early adopters

the second group of consumers in the diffusion innovation model, after innovators, to use a product or service innovation; generally don't like to take as much risk as innovator bus instead wait and purchase the product after careful review.

product life cycle

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.

innovators

those buyers who want to be the first to have the new product or service; buyers keep themselves very well informed about product category. ( first person buy a new product)