New Product Development and Innovation

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@EnoughFoil

Study Notes

Reasons for New Product Development

Businesses create new products to stay competitive and relevant in the market.
Customer Needs: Products are developed to meet evolving customer needs and preferences.
Market Saturation: New products help to combat market saturation and prevent decline in value.
Managing Risk: A diverse product portfolio reduces risk by spreading investment across multiple offerings.
Fashion Cycles: Industries like fashion rely on trends and short product life cycles, with new products driving sales.
Improving Business Relationships: New products can be designed to improve supplier relationships and partnerships.

Diffusion of Innovation

Pioneers: Breakthrough products that create a completely new market or significantly alter competition & consumer preferences.
First Movers: Companies that are the first to introduce a product category, aiming to establish dominance and market share early on.

How Firms Develop New Products

Idea Generation:
- Internal R&D: Significant investment in research to develop new technologies and breakthroughs.
- Licensing: Acquiring rights to technologies or ideas from other research-intensive firms or universities.
- Brainstorming: Collaborative group sessions for generating new ideas, encouraging open discussion and creativity.
- Outsourcing: Seeking expertise from external firms when internal capabilities are insufficient.
- Competitors’ Products: Analyzing successful products for inspiration and identifying opportunities for improvement.
- Customer Input: Valuable feedback from customers to identify needs and refine product development efforts.
Concept Testing: Evaluating a written description of the product with potential customers to gauge interest and gather feedback.
Product Development:
- Prototype Development: Building physical models of the product to test functionality and usability.
- Alpha Testing: Internal testing by a team of employees to ensure product quality and performance.
- Beta Testing: Release of the product to a select group of customers for real-world feedback and further refinement.
Market Testing: Testing the product in a limited market segment to gauge demand and identify potential issues before a full launch.
Product Launch: Introducing the product to the market with tailored marketing strategies, including pricing, promotion, distribution, and timing.
Evaluation of Results: Assessing the product's performance based on technical specifications, customer acceptance, and financial outcomes.

Product Life Cycle

Introduction: A new product enters the market; sales are low, profits are negative or low, and only a few innovators adopt it.
Growth: Sales rise rapidly, profits increase, and early adopters and the early majority start using the product.
Maturity: Sales peak and stabilize; profits peak then begin to decline; competition intensifies with many competitors and products.
Decline: Sales and profits decline as the market becomes saturated and laggards adopt the product.

Strategies for Extending the Product Life Cycle

Develop new uses: Expand the applications of the product to reach new markets.
Modify the product: Enhance features, design, or functionality to attract new customers and renew interest.
Increase frequency of use: Encourage consumers to use the product more often for greater value.
Increase the number of users: Target new customer segments to expand the product's reach.
Find new users: Identify unmet needs and opportunities in new demographics.
Reposition the product: Refocus the product's image or target audience to appeal to different consumers.
Tweak marketing strategy: Adjust marketing messages and strategies to stay relevant and competitive.