Marketing Chapter 8: New Product Development

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What distinguishes a product pioneer from a first mover?

A product pioneer creates a new market, whereas a first mover simply enters an existing market first. (correct)

A product pioneer is the first to market a new idea, while a first mover is not.

First movers are responsible for innovating, while product pioneers only replicate existing products.

Product pioneers are known for their advertising strategies, while first movers have better pricing.

How do relative advantages of products impact the diffusion of innovation?

Lesser relative advantage makes products more appealing.

Relative advantage has no impact on consumer perception.

Greater relative advantage slows the adoption rate.

Higher relative advantage leads to faster diffusion. (correct)

Why might new products not target end consumers directly?

Consumer needs are already fully met.

Innovation is not a priority for many companies.

They may aim to enhance supplier relationships. (correct)

They are often too costly for consumers.

What is a potential challenge faced by first movers in the market?

They must constantly innovate to maintain market share. Signup and view all the answers

What effect does market saturation have on the adoption of new products?

Saturation leads to less competition, thus slowing adoption. Signup and view all the answers

Which of these factors enhances a product's compatibility in different markets?

Variations in product size to cater to cultural needs. Signup and view all the answers

How does improving business relationships with suppliers benefit companies?

Enhances negotiation power and reduces costs. Signup and view all the answers

What is a key aspect of a product being perceived favorably in terms of innovation?

It addresses specific needs and preferences of consumers. Signup and view all the answers

What advantage does adding new products provide to firms?

Creates and delivers value by satisfying changing customer needs Signup and view all the answers

What can lead to a decline in a firm's value over time?

Market saturation without new products or services Signup and view all the answers

How does innovation contribute to managing risk for companies?

By diversifying the product portfolio Signup and view all the answers

In which industry do short product life cycles significantly impact sales?

Fashion industry Signup and view all the answers

What is a consequence of market saturation for firms?

Heightened competitive pressure and the need for innovation Signup and view all the answers

Why do consumers frequently demand new experiences in certain markets?

They seek to be challenged by new games or versions Signup and view all the answers

Which strategy can help firms counteract the effects of market saturation?

Developing and launching new products consistently Signup and view all the answers

What is a typical characteristic of products in the fashion industry?

Frequent releases of entirely new selections each year Signup and view all the answers

What is the primary purpose of prototype testing in product development?

To identify technical and customer requirements. Signup and view all the answers

Which product life cycle stage is characterized by high competition and peak sales?

Maturity Signup and view all the answers

What is a common way to increase product usage as outlined in strategies for extending the product life cycle?

Develop new uses for the product. Signup and view all the answers

Customer acceptance in the evaluation of results focuses on which aspect?

Gaining customer support and approval. Signup and view all the answers

What happens during the market testing phase after customers are surveyed?

Market demand is estimated and a decision is made. Signup and view all the answers

Which statement best describes the importance of innovation in product development?

Innovation is necessary for maintaining market share and meeting consumer needs. Signup and view all the answers

In the product life cycle, who are typically the consumers in the introduction stage?

Innovators Signup and view all the answers

Which of the following is NOT a strategy for extending the product life cycle?

Cease all marketing efforts Signup and view all the answers

During which stage of the product life cycle would a firm typically see declining sales?

Decline Signup and view all the answers

What is a key factor firms consider during market testing as part of product development?

Customer feedback from surveys. Signup and view all the answers

What is the primary reason for firms to innovate in product development?

To remain competitive and relevant in the market Signup and view all the answers

Which of the following factors is NOT typically used in developing a product line decision?

Reducing the number of product variations Signup and view all the answers

During which phase of product development would prototype validation primarily occur?

Design and development phase Signup and view all the answers

What is a significant benefit of creating drink pods for a cocktail-making machine like the Bartesian?

It simplifies the consumer's experience Signup and view all the answers

What does the diffusion of innovation theory primarily help managers understand?

The process by which new products are adopted in the market Signup and view all the answers

What is primarily indicated by a product's concept being described in a brief written format?

It signifies the beginning of the marketing research process. Signup and view all the answers

What role do lead users play in product development?

They augment existing products to better fit their needs. Signup and view all the answers

Which of the following best describes the purpose of alpha testing in product development?

To ensure a product meets internal standards among employees. Signup and view all the answers

What strategy might a company use when it faces challenges in moving through product development steps?

Outsourcing to specialized external firms. Signup and view all the answers

How does reverse engineering relate to competition in the market?

It creates opportunities for innovation by analyzing competitors. Signup and view all the answers

Which factor significantly contributes to the influence of innovative customers in the fashion industry?

Their active participation in modifying designs based on current trends. Signup and view all the answers

What do ‘Me Too’ or copycat products aim to achieve in the marketplace?

To capitalize on the success of original products. Signup and view all the answers

What is the significance of customer input in B2B product development?

It accounts for the majority of new product ideas. Signup and view all the answers

What is a significant consequence of market saturation for firms operating in that environment?

A decline in the firm’s overall value if new products are not introduced Signup and view all the answers

How does redesigning a product, like Dyson did with vacuum cleaners, add value?

By making a standard product more appealing and effective Signup and view all the answers

What major benefit does managing a diverse product portfolio provide for companies?

It diversifies risk and reduces dependency on a single product Signup and view all the answers

What drives the need for continual new product selection in the fashion industry?

Consumer demand for novelty and trends Signup and view all the answers

Why is it important for companies to develop new versions of existing products, such as video games?

To satisfy consumer expectations for updated experiences and challenges Signup and view all the answers

What is a common strategy used by firms in response to changing consumer needs?

Introducing entirely new products to meet demand Signup and view all the answers

What characteristic is typical of the life cycle of products in the fashion industry?

Short product life cycles with most sales coming from new products Signup and view all the answers

How does market saturation create opportunities for companies?

By encouraging the diversification of their product offerings Signup and view all the answers

Which prototype was NOT developed before the finalization of Bartesian?

P3 Signup and view all the answers

What is one strategy for extending the product life cycle?

Modify the product Signup and view all the answers

During which stage of the product life cycle do firms typically experience peak sales?

Maturity Signup and view all the answers

What stage follows premarket tests in the market testing process?

Mini product launch Signup and view all the answers

What is commonly evaluated in the results of product development?

Satisfaction of technical requirements Signup and view all the answers

Which consumer type is primarily associated with the decline stage of the product life cycle?

Laggards Signup and view all the answers

What is the estimated market demand assessed after during market testing?

Sales forecast Signup and view all the answers

Which group of consumers tends to be the first to adopt new products?

Early adopters Signup and view all the answers

What factor increases the likelihood of a product’s compatibility in different markets?

Strong distribution networks Signup and view all the answers

What characterizes the competitors' landscape during the growth stage of the product life cycle?

Increasing competition Signup and view all the answers

How does the complexity of a product affect its diffusion process?

More complex products take longer to diffuse. Signup and view all the answers

What is one key advantage of product trialability in innovation diffusion?

Products that can be sampled will diffuse faster. Signup and view all the answers

Which source of ideas is least likely to lead to breakthrough products?

Competitors’ products analysis Signup and view all the answers

What characterizes pioneers in product introduction?

They establish entirely new markets or radically alter consumer preferences. Signup and view all the answers

How does relative advantage impact the diffusion of innovations?

Improved perceptions can accelerate the adoption of new products. Signup and view all the answers

What is a characteristic of brainstorming as a method of idea generation?

No idea is immediately dismissed during the process. Signup and view all the answers

What challenge can first movers in the market potentially face?

Being the first does not guarantee long-term market share. Signup and view all the answers

What is a common source of ideas for new products that involves external collaboration?

Licensing Signup and view all the answers

In the context of internal R&D, what is often a significant drawback?

High product development costs Signup and view all the answers

Which of the following is true regarding the adoption cycle?

Different categories of adopters influence the rate of diffusion. Signup and view all the answers

What role does customer input play in the idea generation process?

It ensures that product ideas align with market needs. Signup and view all the answers

What role does compatibility play in the adoption of a product?

Increasingly tailored sizes enhance a product's appeal in multiple markets. Signup and view all the answers

How can licensing benefit firms during the product development process?

By providing access to innovative technologies. Signup and view all the answers

What is a characteristic of first movers with respect to market recognition?

They quickly establish brand awareness among consumers. Signup and view all the answers

What common goal do businesses aim for when improving relationships with suppliers?

Ensuring smooth product flows and enhancing strategic partnerships. Signup and view all the answers

What might negatively influence the adoption of an innovation among consumers?

Cultural differences that hinder compatibility. Signup and view all the answers

Study Notes

Chapter 8: Developing New Products

Learning Objectives (LOs):
- LO1: Identify reasons firms create new products.
- LO2: Describe diffusion of innovation theory and how managers use it for product line decisions.
- LO3: List stages in developing new products and services.
- LO4: Describe the product life cycle and how it's used for product line decisions.

Bartesian

Developed as a Keurig-like machine for cocktails.
Prototype development was crucial (seven prototypes).
Segmentation was revised.
Required creation of drink pods.
Currently sold through Amazon and Costco.

Product: The First 'P' in the Marketing Mix

The first 'P' in the marketing mix – new products.
Central to value creation for consumers.
Product definition: Anything of value offered through a marketing exchange (goods, services, places, ideas, organizations, people, communities).
Innovation adds value.

Why Do Firms Create New Products?

New market offerings provide value to both firms and customers.
Firms must innovate to stay current and competitive in the business environment.
Innovation transforms ideas into new products and services.

Changing Customer Needs

Adding new products allows firms to create and deliver value by satisfying current and new customer needs.
Firms sometimes take well-known products (like vacuums) and make them more interesting (e.g., Dyson).

Market Saturation

The longer a product exists, the more likely the market will become saturated.
Without new products or services, the value of the firm declines.
Saturated markets nevertheless can offer opportunities.

Managing Risk Through Diversity

Innovation allows firms to create broader portfolios of products.
This diversifies risk, as a portfolio of products is better than a single product.
"Don't put all your eggs in one basket."

Fashion Cycles

Fashion relies on trends and short product life cycles.
Most sales come from new products.
Consumers want to be challenged by new games or experiences (e.g., video games, fashion).

Improving Business Relationships

New products can improve relationships with suppliers (e.g., Walmart).
New products are not always aimed at end consumers.

Adoption of Innovation

Diffusion of Innovation: The process by which the use of an innovation spreads throughout a market group over time and among categories of adopters.
Pioneers: New product introductions that establish completely new markets or radically change market rules.
First Movers: Product pioneers that take the lead in creating a market or product category.
Categories of Adopters: Innovators, Early Adopters, Early Majority, Late Majority, Laggards (by adoption time).

Using the Adoption Cycle

Factors Affecting Product Diffusion:
- Compatibility: Made more suitable for different cultures by offering various sizes.
- Relative Advantage: Perceived as superior to substitutes.
- Observability: Easily observed benefits easily communicated.
Complexity and Trialability: Complex products take longer to diffuse; products easily sampled diffuse faster.

How Firms Develop New Products

Steps in New Product Development:
- Idea Generation
- Concept Testing
- Product Development (prototypes, alpha & beta testing)
- Market Testing
- Product Launch
- Evaluation of Results

Idea Generation

Internal R&D
Customer Input
Licensing
Brainstorming
Competitors' Products
Outsourcing

Internal Research & Development (R&D)

High product development costs.
Often the source of technological products.
Often the source of breakthrough products.

Licensing

Firms purchase rights to technology/ideas from other research-intensive firms or university research centers.

Brainstorming

Groups work together to generate ideas.
No idea is immediately dismissed.

Outsourcing

Companies turn to outside firms if they have trouble moving through new product development stages.

Competitors' Products

Reverse engineering
"Me Too" or copycat products

Customer Input

Up to 85% of business-to-business (B2B) products originate from customer input.
Lead users modify existing products to meet their specific needs.

Concept Testing:

Concept: A brief written description of a product.
Outcome: Customer reactions determine whether the product continues (triggers marketing research).

Product Development stages:

Prototyping: Creating models to test concept viability.
Alpha Testing: Testing in a controlled setting (e.g., company employees).
Beta Testing: Testing with a select group of consumers to gather feedback.

Market Testing:

Premarket Tests: Test product with customers (exposure or surveys), then makes a decision.
Test Marketing: Mini-product launch (more expensive, estimates market demand).

Product Launch:

Four Ps of marketing: Promotion, Product, Place, and Price, alongside Timing, all crucial for success.

Evaluation of Results:

Assessment of the satisfaction of
- Technical requirements.
- Customer acceptance.
- Firm's financial requirements.

Product Life Cycle

Stages: Introduction, Growth, Maturity, Decline
Sales & Profit: Relationship across stages.
Consumer Types: Innovators, Early Adopters, Early Majority, Late Majority, Laggards.
Competitors: Number and nature of competitors varies.

Strategies for Extending the Product Life Cycle

Develop new uses.
Modify the product.
Increase use frequency.
Increase the number of users.
Find new users.
Reposition the product.
Tweak the marketing strategy, including price adjustments.

Variations on the Product Life Cycle Curve

High-learning products.
Low-learning products.
Fashion products.
Fad products.

Strategies Based on Product Life Cycle: Caveats

Product life cycle curves are theoretical; real-world product cycles can be complex.
Managers cannot precisely predict the shape of a specific product's life cycle.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz explores the essential aspects of developing new products in marketing. It covers topics such as the reasons behind new product creation, diffusion of innovation theory, and the stages involved in the product development process. Test your understanding of the product life cycle and its implications for marketing strategies.