Chapter 11 Developing New Products o Innovation the process by which ideas are transformed into new products and services that will help firms grow o Pioneers or breakthroughs truly new products that create new markets establish a completely new market or radically change both the rules of competition and consumer preferences in a market First movers since pioneer become readily recognizable to consumers and thus establish a commanding and early market share lead o Diffusion of innovation the process by which the use of an innovation whether a product or a service spreads throughout a market group over time and over various categories of adopters o Innovators those buyers who want to be the first on the block to have the new product or service Enjoy taking risks and are regarded as high knowledgeable o Early adopters don t like to take as much risk as innovators do but instead wait and purchase the product after careful review o Early majority represent approximately 34 of the population is crucial because few new products and services can be profitable until this large group buys them If group never becomes large enough product failure o Late majority 34 last group of buyers to a new product market when they do the product has achieved its full market potential o Laggards 16 of the market consumers like to avoid change and rely on traditional products until they re no longer available o Clinical trial medical study that tests the safety and effectiveness of a drug or treatment in people o Reverse engineering taking apart a product analyzing it and creating an improved product that does not infringe on the competitors patents if any exist o Lead users those innovative product users who modify existing products according to their own ideas to suit their specific needs Helps find trends that are on the horizon o Concepts brief written descriptions of the product its technology working principles and forms and what customer needs it would satisfy o Concept testing process in which a concept statement is presented to potential buyers or users to obtain their reactions o Product development or product design process of balancing various engineering manufacturing marketing and economic considerations to develop a product s form and features or a service s features o Prototype first physical form or service description of a new product still in rough or tentative form that has the same properties as a new product bus produced though different manufacturing processes sometimes even crafted individually o Alpha testing firm attempts to determine whether the product will perform according to tis design and whether it satisfies the need for which It was intended Occurs in firms R D department o Beta testing uses potential consumers who examine the product prototype in a real use setting to determine its functionality performance potential problems and other issues specific to its use o Premarket tests to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers o Test marketing method of determining the success potential of a new product introduces the offering to a limited geographical area prior to a national launch o Introductory price promotions limited duration lower than normal prices designed to provide retailers with an inventive to try the products Slotting allowance fee paid simply to get new products into store or to gain more or better shelf space for their products o Product life cycle stages that new products move through as they enter get established in and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning Introduction stage innovators start buying the product Growth stage product gains acceptance demand and sales increase and competitors emerge in the product category Maturity stage industry sales reach their peak so firms try to rejuvenate their products by adding new features or repositioning them Declining exits market
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