Marketing Chapter 12 – Developing New Products

The process by which the use of an innovation—whether a product, a service, or a process—spreads throughout a market group, over time and across various categories of adopters. Can be described using a bell curve -innovators -early adopters -early majority -late majority -laggards The theory surrounding diffusion of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service. It also gives them a means to identify potential markets for their new products or services and predict their potential sales, even before they introduce the innovations

establish a completely new market or radically change both the rules of competition and consumer preferences in a market. The Apple iPod is a pioneer product. Not only did it change the way people listen to music, but it also created an entirely new industry devoted to accessories, such as cases, ear buds, docking stations, and speakers

Changing customer needs market saturation managing risk through diversity fashion cycles improving business relationships

as the first to create the market or product category pioneers have the advantage of becoming readily recognizable to consumers and thus establishing a commanding and early market lead

innovators are those buyers / consumers who want to be the first on the block to have a new product or service.

opinion leaders. Early adopters, who are not the very first buyers of a new product (those are the innovators) but who still buy very early in the product's life, are important to the diffusion of the products because they are often opinion leaders.

early majority represents 34% of population and is crucial bc few new products or services can be profitable until they buy in. Dont like to take as much risk as innovators and early adopters and like to wait for ll bugs to be worked out before buying

late majority buy into the product when the product has achieved its full market potential. Sales level off around the time when the late majority adopts the product.

laggards tend to avoid change and only buy into new products when traditional products are no longer availible

product or service is perceived to be better than substitutes, then the diffusion will be relatively quick. Instead of offering just an e-reader, Apple has developed a multi-purpose "tablet" device (the iPad). When launched, the iPad had several relative advantages, including a touch screen, a vibrant and large color screen, access to various games and apps, and the ability to watch videos and listen to music

A diffusion process may be faster or slower, depending on various consumer features, including international cultural differences.

When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process. Consumers seeing their friends using the iPad, seeing the devices on television or on YouTube, or reading about them in the deluge of media coverage surrounding each iPad release may be convinced to purchase one as well

Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try.

Idea generation Concept Testing Product Development Market Testing Product Launch Evaluation of Results

Idea generation -R&D -Licensing -Outsourcing ie ideo -Brainstorming -competitors products -consumer input

lead users are innovative product users who modify existing products according to thei own ideas to suit their specific needs

taking a concept and presenting it to potential buyers to obtain their reactions

Alpha testing of new products is conducted by employee ie Barbara is using a test model of her firm's new inline skates to see whether they work according to the design specifications

uses potential consumers who examine the product prototype in a real use setting

test marketing involves introducing a product to a limited geographic area to see how the product sells prior to a national launch

trade promotions are designed for manufacturers to target wholesalers and retailers with their new product

a slotting allowance is a price paid to retailers simply to get new products into stores or to gain more or better shelf space for their products

introduction stage growth stage maturity stage decline

The introduction stage for a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering

The growth stage, the second stage of the product life cycle, is marked by rising sales and profits and an increasing number of competitors.

The maturity stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms. Marketing costs (e.g., pr o motion, distribution) increase as these firms vigorously defend their market share against competitors. They also face intense competition on price as the average price of the product falls substantially compared with the shifts during the previous two stages of the life cycle. Lower prices and increased marketing costs begin to erode the profit margins for many firms. In the later phases of the maturity stage, the market has become quite saturated, and practically all potential customers for the product have already adopted the product. -entry into new markets or market segments -development of new products

Firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market. The few laggards that have not yet tried the product or service enter the market at this stage.

Trialability refers to a consumer's ability to try a new product before buying it. By making returns easy, consumers are able to try the shoes with the confidence that they can return them if they do not fit.