11 12 18 focus on 11 and 18 Chapter 11 Chapter Intro o Microsoft innovation Consumers benefit by competition React before a movement happens P Product why do firms create new products o Completely new products represent 10 of all new products new to the world to slightly repositioned spectrum o Innovation the process by which ideas get transformed into new offerings including products services processes and branding concepts that will help firms grow Without it Either continue to market current products to current customers Or take the same product to another market with similar customers o Only about 3 of new products succeed o Changing customer needs i e Dyson vacuum ex Beef adjusting image of pricy beef o Market Saturation The longer a product exists in the marketplace the more likely it is that the market will Without new products the value of the firm declines Offer better opportunities for a company that is willing to adopt a new process or mentality Ex Betty Crocker o Managing risk through diversity Through innovation firms often create broader portfolio of products which help them diversify their risk and enhance firm value better than a single product can If some do bad others may do well Ex Special K o Fashion Cycles trends and experiences Ex Books games fashion o Improving Business Relationships Most sales come from new products for industries that rely on fashion New products do not always target end consumers Sometimes they function to improve relationships with its suppliers Diffusion new to the world products are not adopted by everyone at the same time but are spread though a population Diffusion of Innovation o Diffusion of innovation the process by which the use of an innovation spreads throughout a market group over time and across various categories of adopters Understand the rate at which consumers will adopt new products and who o Pioneers breakthroughs truly new to the world Change both the rules of competition and consumer preferences in a to target market iPod First movers The first to create the market or product category Become readily recognizable Gain commanding market share and lead Keep share longer Not all pioneers succeed Imitators capitalize on failures 95 of all new consumer goods fail 50 80 of products across all markets fail o Diffusion Curve 5 Innovators Those buyers who want to be the first Like risk and are knowledgeable 2 5 of popl help product gain market acceptance Early Adopters Wait to purchase after review 13 5 spreads the word Indicator of how big the eventual adopter size will be Early majority Cant be profitable until they buy Wait until bugs are worked out Costs are lower 34 34 Late Majority Last group to enter market This is when they reach full potential Sales tend to level off or decline Laggards 16 Avoid change and rely on traditional products Sometimes never adopt new o Using Theory Predict who will buy after introduction Develop effective promotion and pricing Speed at which they diffuse depends on Relative advantage o Speed if better than substitute Compatibility Observability o International culture differences o When easily observed diffusion o Ex Cars fast diff Complexity and trial ability o Simpler and easier How firms develop new products o Idea generation Internal RD High cost Betting on few extreme successes blockbusters RD Consortia Groups of other firms and institutions o Ex Govt to get new ideas Clinical trial medical study that tests the safety and effectiveness of a drug or treatment in people Licensing Firms buy the right to use the technology or ideas from other research intensive firms through agreement Just market it Cheaper Brainstorming Outsourcing No idea can be accepted or rejected Ex IDEO excellent service for existing product Competitors Products Reverse engineering Copycat consumer goods Customer Input B2B very useful Lead users innovative product users who modify existing products according to their own ideas to suit their specific needs Help understand the general market trends o Concept Test Concept brief written description of the product its technology working principles and forms and what customer needs it would satisfy Concept testing presented to potential buyers to obtain reactions Used to avoid cost of product development o Product Development AKA product design Entails a process of balancing various engineering manufacturing marketing economic considerations to develop a products form and features Prototype first physical form still in rough form that has the same properties as a new product but is produced through different manufacturing processes o Sometimes crafted individually o Alpha testing Determine whether the product will perform according to its design Occurs in RD department Ex animal Uses potential customers Examine in real use o Beta o Market Testing 2 Premarket Test before they actually bring a product or service to market to determine how many will try and use the product Save cost of market wide launch failure Can be simulated Test marketing Introduces to a limited geographical area prior to national launch Determine the success potential of a new product More reliable Includes all Ps Costs more and takes longer than premarket o Product Launch Most critical step and requires most financial resources and marketing coordination If this fails it could ruin firm Involves Confirms it target market based on research tests competition Decide how it will be positioned Finalize the remaining marketing mix and budget o Promotion Trade promotions to wholesalers or retailers to get them to purchase the new products Intro price promo special events personal selling Trade show may be most efficient for B2B Looking to generate demand o Place o Price Where and how much Setting price is a supply chain wide decision MSRP Slotting allowance fee paid simply to get new products into stores or to gain more or better shelf space for their products o Evaluation of Results o Timing Can be measured by panel data for first time users Measured by 3 interrelated factors Its satisfaction of technical requirements sale and profit Customer acceptance SatiCan be measured by panel data for first time users Measured by 3 interrelated factors Its satisfaction of technical requirements performance Customer acceptance Satisfaction of financial requirements revenue and profits Product Life Cycle o Offers marketers a starting point for their strategic planning over the life of the product Sales Profits Typical
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