MARK1012 Chapter Notes - Chapter 9: Market Saturation, Observability
MARK1012 CHAP 9
Chapter 9: Developing New Products
Why firms create new products?
-Changing consumer needs
-Market saturation
-Fashion trends/ cycles
-Improving business relationships
Diffusion of innovation: innovation spreads throughout a market group
Innovators: consumers who want to be the first to get their hands on new products
Early adopters: do not take as much risk as innovators do but wait and purchase the
product after review
Early majority: early group of buyers to enter a new product market. represent approx.
34% of the population
Late majority: last group of buyers to enter a new product market
Laggards: Avoid change and rely on traditional products. 16% of the market.
The Diffusion of Innovation Theory
Firms can predict what types of customers will buy their new product. With this knowledge
firms can develop effective promotion, pricing and other marketing strategies to push
acceptance among each customer group.
-Relative advantage: if the product is perceived to be better than substitutes then
diffusion will be quick
-Compatibility: diffusion can occur faster or slower depending on consumer features like
cultural differences
-Observability: products easily observed and communicated to others cause a fast
diffusion process
-Complexity & Trial-ability: less complex products which can be tested generally diffuse
faster
How Firms Develop New Products
Idea generation: development of viable new product ideas
-Sources of new product ideas: Internal research & development, R&D consortia,
licensing, brainstorming, outsourcing, competitors’ products & customer input
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Document Summary
Diffusion of innovation: innovation spreads throughout a market group. Innovators: consumers who want to be the first to get their hands on new products. Early adopters: do not take as much risk as innovators do but wait and purchase the product after review. Early majority: early group of buyers to enter a new product market. represent approx. Late majority: last group of buyers to enter a new product market. Laggards: avoid change and rely on traditional products. Firms can predict what types of customers will buy their new product. With this knowledge firms can develop effective promotion, pricing and other marketing strategies to push acceptance among each customer group. Relative advantage: if the product is perceived to be better than substitutes then diffusion will be quick. Compatibility: diffusion can occur faster or slower depending on consumer features like cultural differences. Observability: products easily observed and communicated to others cause a fast diffusion process.
