MKTG 350 1st Edition Lecture 13Developing new products1. Changing customer needs- peoples needs change over time 2. Market saturation- need to come out with something new because they have already sold all of the current product – iPhone 5 3. Managing risk through diversity—portfolios need to make sure that risk is minimized4. Fashion cycles- company’s need to change products to fit with trends- product life cycle5. Improving business relationships – customers need new products Innovation- process which idea gets transformed into new products Diffusion of innovation- spread of use of products though the market over time –- Innovators- first ones to try a new product, risk takers and knowledgeable- Early adopters- opinion leader (influential in getting people to try products)—visible and people look up to them - socially connected, not quite as big as risk takers, enjoy novelty - Early majority- 1/3 of population, even less risk takers, key profit group - Late majority- by the time this group buys the product, it has reached full market potential – the product is on sale now- sales have leveled off or are starting to decline people don’t like risk - Laggards- most risk adverse- they are fine with what they have and don’t want anything – flip phones, wont buy new product unless current not even available anymore and they need to get a new one Factors affecting product diffusion1. Relative advantage- for a new product to be adopted it has to have an advantage over other products that already exist 2. Compatibility- new product is consistent with our behavior- IV – never need to eat againis not compatible because people like to eat and drink 3. Observability- if we can see the benefits, we are more like to adopt it or faster- on TV we can see that the product works _Proactive4. Complexity- less likes to adopt it if it more difficult to work 5. Trialibility- can we try it out before we buy it- we are more likely to buy it How firms develop new products: in order1. Idea generation- development of viable new product a. Sources of ideas These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Internal R&D, R&D consortia, licensing, brainstorming, out sourcing, competitors products, consumer input (lays potato chip contest) staples- 22000 ideas ii. New to the world/ Pioneer product- brand new thing that has never been done before (technological break though) (flat screen TV)- rollerblades, polaroid cameras/ digital cameras- Band-Aid, Q-tips, Xerox (chap stick- callall brands chap stick) iii. New category entry- product that is already being made by someone else but it is new for your company (coke making bottled water) iv. Additions to product line- Coke- with a new soft drink (a new flavor coke with lime) v. Product improvement- enough of a difference from original so its new enough – bagel bites with new saucevi. Repositioning- change way the person views the product – new use for product (baking soda) 2. Concept testing- testing the new product idea among a set of potential customers a. Concept is a brief written description the product, customers reactions determined whether or not it goes forward, triggers the marketing research process b. Estimate sales volumec. Would you purchase this product?, does it satisfy an unmet need? How frequently you would purchase? How much would you purchase? Would this be a gift or an everyday purchase? What price would you pay? What id you demographic? d. STILL JUST IDEAS 3. Product development-development of prototypes for the products – 3D printinga. Prototype- first physical example if this product b. Alpha testing- done in the factory by the people who work for the company (to see if the product is going to preform according to its design) – animal testing c. Beta testing – first time real customers see the product – people participating in the market research (not released to markets yet) 4. Market testing- testing the actual products in a few marketsa. Premarket tests- customer exposed, customers surveyed, firm makes decisionb. Test marketing- mini product launch, more expensive than pre-market, market demand is estimated (will the product do what you think it will) can put start date back a year – not a sure fire bet don’t know if you will succeed – clear Pepsi,hit in test market but then failed in the real market 5. Product launch- full-scale commercialization of the producta. Kellogg- milk with cereal in containerb. Minute maid- heart healthyc. Aqua fresh- floss in toothpaste cap d. Think about price, benefit communication, slotting allowance (manufacture pays to put the product on the shelf), 6. Evaluate results- analysis of the product performancea. Satisfaction of technical requirementb. Customer acceptancec. Satisfaction of firm’s financial