Chapter 12: Developing New Products
brainstorming
A group activity used to generate ideas
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.
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
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
licensing
A method used in developing new products in which a firm buys the rights to use a technology or idea from another firm
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
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.
laggards
Consumers, representing approximately 16% of the population, who like to avoid change and rely on traditional products until they are no longer available. Sometimes never adopt a product or service
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
- Changing customer needs - Market saturation - Managing risk through diversity - Fashion cycles - Improving business relationships
Reasons firm innovate:
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
innovation
The process by which ideas are transformed into new products and services that will help firms grow
1. Idea generation 2. Concept testing 3. Product development 4. Market testing 5. Product launch 6. Evaluation of results
The product development process:
innovators
Those buyers, representing approximately 2.5% of the population, who want to be the first to have the new product or service
concept
brief written description of a product or service; its technology, working principles, and forms; and what customer needs it would satisfy
premarket tests
conducted before a product or service is brought to market to determine how many customers will try and then continue to use it
product life cycle
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 development (product design)
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
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
- introduction stage - growth stage - maturity stage - decline stage
product life cycle:
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
maturity stage
stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them
introduction stage
stage of the product life cycle when innovators start buying the product
decline stage
stage of the product life cycle when sales decline and the product eventually exits the market
growth stage
stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category
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, sometimes even crafted individually
late majority
the last group of buyers to enter a new product market, representing approximately 34% of the population; when they do, the product has achieved its full market potential
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
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
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
