Marketing Chapter 8: Developing New Products

Chapter 8: Developing New Products

• This chapter focuses on developing new products and services.
• Learning Objectives (LOs) outlined include identifying reasons firms create new products, describing diffusion of innovation, listing stages in developing products/services, and describing the product life cycle.

Developing New Products

• Firms create new products to offer value to both existing and new customers.
• Innovation is crucial for staying competitive in the market.
• Firms may create innovative products to satisfy evolving customer needs or through internal research and development, licensing, brainstorming, outsourcing, or observing competitors' products.

Product Life Cycle

• The product life cycle is a model that describes the stages a product goes through from introduction to decline.
• Typical stages: Introduction, Growth, Maturity, and Decline.
• During the Introduction stage, sales and profits are low due to initial market acceptance.
• In the Growth stage, sales and profits rise rapidly as the product gains acceptance.
• The Maturity stage is characterized by peaking sales but declining profits, often because of competitors entering the market.
• The decline stage shows declining sales and profits as consumers adopt other alternatives.

Managing Risk Through Diversity

• Innovation creates a broader portfolio of products.
• Diversification of risk with various products is better than relying on a single product for business stability.
• Variety in products decreases the risk of a company losing profit if one specific product declines in the market.

Fashion Cycles

• The fashion industry often experiences quick product life cycles due to trends.
• Most industry sales come from new products, as trends shift rapidly.
• Products face a shorter life cycle as opposed to a high-learning product.

Improving Business Relationships

• New products can target end consumers, or improve relationships with suppliers.
• Walmart is one example of a company focused on improving supply relationships through its focus on new products and sourcing solutions.

Adoption of Innovation

• Diffusion of innovation is the process of an innovation spreading throughout a market, involving various categories of adopters.
• Categories of adopters: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards.
• Pioneers introduce products that create a new market or drastically change competition and consumer preferences.
• First Movers introduce products that make them readily recognizable by consumers for market share.

Stages of the Adoption Cycle

• Factors affecting product diffusion include relative advantage, compatibility, complexity and trialability, and observability.
• Understanding different methods of idea generation, internal research and development, licensing, brainstorming, outsourcing, competitors' products, and customer input are necessary for developing products.

How Firms Develop New Products

• The following steps describe a new product's development process: Idea Generation, Concept Testing, Product Development, Market Testing, Product Launch, and Evaluation of Results.
• Idea Generation includes Internal R&D, Customer Input, Competitors' Products, Licensing, and Brainstorming.
• Product Development includes Prototyping, Alpha Testing, and Beta Testing to determine the product's viability.
• Market Testing has two phases: Premarket tests and test marketing.
• Product Launch includes the promotion, timing, placement, and pricing of a product.
• Evaluation of Results occurs after market launch, analyzing the product's performance, customer acceptance, and financial satisfaction.

Strategies to Extend the Product Life Cycle

• Companies can use strategies such as developing new uses, modifying the product to increase its frequency of use, increasing the number of users, finding new users, repositioning the product, and tweaking marketing strategies.

Different Variations on the Product Life Cycle Curve

• Different product life cycles present varying growth curves, such as high-learning products, low-learning products, fashion products, and fad products.