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Chapter 8 Developing New ProductsHow new products are developed to meet the needs and wants of those customers4 Psproducts are central to adding value to the customerNewtothemarket products only account for 10 Why do firms create new productsInnovation the process in which ideas are transformed into new products and services that will help firms growChanging Consumer needsWhen adding new products to their offerings firms create and deliver value more effectively by satisfying the changing needs of their current and new customersMarket SaturationThe longer a product exists in the marketplace the more likely it is that the market will become saturatedIntroducing new lines of products every couple yearsManaging risk through diversityFirms with multiple products are better able to withstand external factorsExample Dyson vacuums or Special K cereal range of flavors bars or snacksFashion CyclesShort product life cyclesMovies make most their money the first yearInnovation and ValuePioneers new product introductions with a new market changing competition and consumer buying preferencesalso called breakthroughsFirst moversfirst to create the market or product category become readily recognized to consumers and establish a commanding market share leadAs many as 95 of consumer goods fail and products suffer failure rates of 5080Fail because 1Offer consumers too few benefits compared with existing products2Too complex and require substantial learning and effort before consumers can use them3Bad timingintroduced at a time where consumers are not ready or looking for a new productAdoption of New ProductsDiffusionadoption of innovation the use of an innovation spreads throughout a market group over time and over various categories of adaptors1Helps marketers understand the rate at which consumers are likely to adopt a new product or service2Gives a means to identify potential markets for new services3Predicts potential sales even before they introduce innovationConsumer Adoption Cycle1InnovatorsPeople who want to be first to have a new product or serviceBuyers enjoy taking risks highly knowledgeable and not price sensitiveExample person who waits outside a store for new iPhone 52Early AdoptersGenerally dont like to take as much risk as early adoptersWait to buy the product after careful reviewRegarded as opinion leaders for particular product categoriesRepresents 135 of buyers3Early MajorityRepresents 34 of buyersCrucial for the product because few new products can be profitable until this large group buys themThese members dont take risk so typically wait for the bugs to be worked out of a particular product or serviceThey experience little risk because all the reviews are in and their costs are lower because theyre renting the movie instead of going to the theatre4Late MajorityLast group of buyers to enter the product marketProduct has achieved its full market potentialBy the time the late majority enters the market sales tend to level off or may be in declineRepresent 34 of buyers5LaggardsRoughly 16 of the marketAvoid change and rely on products they know and trustTraditional products that are no longer availableUsing the Adoption CycleFactors Affecting Product Diffusion Speed
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