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Vocabulary

• Market saturation happens when a specific market has served all potential customers and cannot create new consumers.
• Laggards are consumers who resist change and prefer traditional products until they're no longer available.

New Product Development (NPD)

• New Product Development (NPD) is the complete process of bringing a new product or service to market.
• NPD may involve developing a new item or improving an existing one.

Reasons Firms Create New Products

• Changing Customer Needs: New offerings can satisfy evolving customer needs.
• Market Saturation: New products help counter the saturation of existing ones.
• Managing Risk Through Diversity: A broader product portfolio can buffer against poor performance of individual products. If some products perform poorly others may do well improving the firm value.
• Fashion Cycles: Creating new products is important in industries with short product life cycles due to trends.
• Improving Business Relationships: Innovation can strengthen relationships with suppliers and intermediaries.

Diffusion of Innovation

• Diffusion of Innovation is a theory explaining how and why new ideas and technologies spread.
• It explains the pattern and speed at which new ideas, practices, products, technologies, and advancement spread through a population.

Five Groups on Diffusion of Innovation Curve

• Innovators: Willing to take risks and are the first to try new innovations (10%).
• Early Adopters: Aware of the need for change and comfortable adopting new ideas (15%).
• Early Majority: Adopt new ideas after seeing evidence of their effectiveness (34%).
• Late Majority: Adopt innovative technology as it diffuses through society (34%).
• Laggards: The last to adopt new products or services, resenting change (16%).

More Vocabulary

• Prototype: An early sample, model, or release of a product built to test a concept or process
• Commercialization: Managing or running something, principally for financial gain

Product Development Process/Stages

• The product development process is a six-stage plan with the goal of taking a product from initial concept to final market launch.
• This process includes identifying a market need, researching the competition and developing a minimum viable product (MVP).

Six Stages of Product Development

• Idea Generation: Creativity is essential to generate new ideas, businesses use a creative processes to generate new ideas.
• Concept Testing: Use a research process to validate new ideas.
• Product Development: Developing product concepts into a finished, marketable product.
• Market Testing: Testing a product or service in a specific market or audience to gather data and insights before a full-scale launch.
• Alpha Testing: Software testing used to identify bugs before the product becomes available.
• Beta Testing: Opportunity for customers to use the product and give feedback.
• Product Launch: Introduce into the market for initial sale.
• Evaluation of Result: Assessing and analyzing the product after launch to make appropriate modifications.
• Hard Launch: A full release that targets the entire market with full marketing support and scale.
• Soft Launch: A segmented release that targets a small piece of the market to test the approach.

Idea Generation Stage

• Businesses use a creative process to generate new ideas that are tangible or intangible.
• Companies examine market trends, conduct research, and deeply analyze user needs to identify problems and propose solutions.
• Better understanding of the users and the market will result in more successful ideas.

Concept Testing Stage

• Concept testing is a research process businesses use to validate new ideas, assessing both tangible and intangible aspects.
• It includes the product ideas with potential customers before investing time and resouces into building them.
• Sharing the product concept to prospective buyers to collect insights and gauge idea viability in the target market.

Product Development Stage

• A stage in product development consists of developing the concept of a prototype which is then tested by users to collect their feedback.
• This stage involves:
• Examining market trends.
• Conducting research
• Understanding users wants and needs
• Identifying problems
• Proposing solutions

Sources of New Product Ideas

• Listening to customers
• Internal Research and Development (R&D)
• Collaborating with independent R&D consortia
• Analyzing competitors' products
• Outsourcing tasks
• Licensing technologies from other firms
• Encouraging brainstorming among employees

Price Skimming

• A pricing strategy in which a firm charges a high price for a new product at the beginning and then lowers it over time.

Product Life Cycle

• Product Life Cycle describes the length of time a product is introduced to consumers until it is removed from the market.
• The four stages are:
• Introduction
• Growth
• Maturity
• Decline

Stages of Product Life Cycle

• Introduction Stage:
• Product is launched into the market.
• Sales grow slowly.
• Informative advertising is conducted.
• Firms might not earn a profit at this stage.
• Price skimming or competitive pricing may be used.
• Growth Stage:
• Sales grow quickly.
• Persuasive advertising may be used.
• Prices may be reduced if faced by stiff competition.
• Firms earn profits.
• Maturity Stage:
• Sales increase slowly and reach the highest figures.
• Competition is heightened as many new substitutions emerge.
• Promotional pricing might be a good option.
• Profits are at the highest level.
• Economy of sale occurs at the stage
• Repetitive advertising may occur to remind consumers of the product.
• Decline Stage:
• Sales & profits begin to decline.
• Advertising is reduced.
• Marketing research determines if the decline is permanent or temporary.
• For a permanent decline a firm stops production
• For a temporary decline a firm implements extension strategies.

Extension Stage

• Extension Strategy aims to extend the life of a product, keeping the product within the maturity stage to improve sales.
• This may include:
• Trying to sell a product in different markets.
• Introducing new variations of an original product or service.
• Making small changes in colour, design or packaging.
• Starting a new ad campaign.
• More retail outlets.