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Chapter 8

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Psychology 2060

Chapter 8 Reading Notes Why Do Firms Create New Products: Changing Customer Needs: firms create value more effectively by satisfying the changing needs of their current and new customers, or by keeping customers from getting bored of current products. Example: Dove loyalist can now enjoy not only the bar soap, but deodorants, shampoo, and lotions. Market Saturation: the longer a product exists in the market, the more likely it is that the market will become saturated. By introduced new products or product lines several times a year, companies can sustain its growth. Managing Risk Through diversity: through innovation firms often create a broader portfolio of products, which helps them diversify their risk and enhance firm value better than a single product can. Example: Special K not only offers cereals, but now cereal bars and protein shakes. Fashion Cycles: the generate sales, apparel fashion designer produce entirely new product selections a few times a year Innovation and Value: these products create new markets and add tremendous value to firms Pioneers: new product introductions that establish a completely new market or radically change both the rules of completion and consumer preferences in a market (also called breakthroughs) First Movers: product pioneers are the first to create a market or product category, making them readily recognizable to consumers and thus establishing commanding and early market share lead Adaption of Innovation Diffusion of Innovation: the process by which the use of an innovation, whether the product or a service, spreads throughout a market group over time and over various categories
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