New Product Development and Innovation
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Questions and Answers

What is the first 'P' in the marketing mix?

  • Price
  • Product (correct)
  • Place
  • Promotion
  • Why do firms create new products?

    To provide value to both firms and customers

    Innovation is not essential for a firm's survival?

    False

    What can saturated markets provide?

    <p>Opportunities</p> Signup and view all the answers

    What is the concept of 'relative advantage' in the adoption of innovation?

    <p>Products perceived to be better than substitutes diffuse more quickly.</p> Signup and view all the answers

    Which of the following is NOT a stage in the product life cycle?

    <p>Development</p> Signup and view all the answers

    The process by which the use of an innovation spreads throughout a market is known as __________.

    <p>Diffusion of Innovation</p> Signup and view all the answers

    What role do lead users play in the development of new products?

    <p>They modify existing products according to their specific needs.</p> Signup and view all the answers

    Match the following terms to their descriptions:

    <p>First Movers = Product pioneers that create a market or product category Pioneers = Introductions that establish a new market Licensing = Purchasing rights to technology or ideas Brainstorming = Group idea generation without dismissal</p> Signup and view all the answers

    All innovations are considered breakthroughs.

    <p>False</p> Signup and view all the answers

    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.

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    Description

    Explore the critical reasons behind new product development and the theory of diffusion of innovation. This quiz covers how businesses adapt to market changes, customer needs, and the impact of pioneers and first movers in shaping industries. Test your understanding of these essential concepts in product management.

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