Ch. 8 - New Product Development

Question 1

In legal terms, how long is a product considered a new product?

Answer 1

Up to 12 months in Canada

Question 2

What is a new product from a company’s perspective?

Answer 2

Line extension, significant innovation/improvement, true innovation

Question 3

What is a new product from a consumer’s perspective?

Answer 3

The degree of learning required to use a product

Question 4

What are the 3 types of product innovations?

Answer 4

• Minor Innovation
• Continuous Innovation
• Radical Innovation

Question 5

Minor Innovation

Answer 5

No new learning is required to use a new product (e.g. new flavours of potato chips)

Question 6

Continuous Innovation

Answer 6

New product disrupts routine, but does not require totally new learning (e.g. electric toothbrush)

Question 7

Radical Innovation

Answer 7

New product requires new learning to use properly (e.g. smartphones when they first came out)

Question 8

Why do companies develop new products?

Answer 8

• To follow changing market demands
• To remain competitive
• To keep up with technology
• To replace dying products
• To refresh and evolve existing products
• To diversify product offering to reduce risk

Question 9

True or False: Most new products companies release are profitable

Answer 9

False. Only 10-20% of new products are still on the market and profitable after 3 years

Question 10

What are some common reasons why new products fail?

Answer 10

• Overestimation of market size, poorly defined target market
• Failure to bring value to customers
• Marketing mix failure
• Costs of product development
• Competitive actions
• Managers push favourite ideas despite negative research findings

Question 11

True or False: We often don’t know if a product will succeed

Answer 11

True. A product failure often can not be predicted before the product is released (sometimes down to chance)

Question 12

New Product Development Process

Answer 12

1. New Product Development Strategy
2. Idea Generation
3. Screening and Evaluation
4. Business Analysis
5. Development
6. Test Marketing
7. Commercialization

Question 13

What are some common sources of new ideas?

Answer 13

• Customers and suppliers
• Employees
• Research and development breakthroughs
• Competitive products
• Crowdsourcing
• AI

Question 14

In what stage of the New Product Development Process does the company begin to spend money?

Answer 14

Stage 5: Development

Question 15

Test Marketing

Answer 15

Product and program introduced in real but limited market conditions. Can be expensive and time consuming, but it helps companies avoid major marketing mistakes

Question 16

Rollout

Answer 16

Introduce new product to market by “rolling out” the product over time to different places

Question 17

What is the most expensive stage for most new products?

Answer 17

Stage 7: Commercialization

Question 18

Product Life Cycle Stages

Answer 18

1. Product Development
2. Introduction
3. Growth
4. Maturity
5. Decline

Question 19

Introduction Stage of Product Life Cycle

Answer 19

Firm works to stimulate demand for a new market entry by stressing product features. Associated with low profits/sales, and high promotion and R&D costs

Question 20

Growth Stage of Product Life Cycle

Answer 20

Sales volume rises rapidly and firms begin to realize substantial profits. This stage also attracts competitors

Question 21

What can companies do to sustain rapid growth?

Answer 21

• Improvements to the product, new features
• Additional promotion/distribution spending
• New channels, new segments

Question 22

Maturity Stage of Product Life Cycle

Answer 22

Peak sales have been reached and profits begin to decline due to competition. For the first time in the product life cycle, supply is greater than demand

Question 23

Decline (Product Life Cycle Stage)

Answer 23

Competition, innovators or shifts in consumer preferences cause decline in industry (sales and profits falls)

Question 24

What options do companies have when their product is on the decline?

Answer 24

• Maintain
• Revitalize
• Harvest
• Drop

Question 25

Maintain (Decline Stage Option)

Answer 25

Do nothing with the hope that you can make money as competitors exit

Question 26

Revitalize (Decline Stage Option)

Answer 26

Reformulate product or promo to pull out of decline

Question 27

Harvest (Decline Stage Option)

Answer 27

Reduce costs and keep selling

Question 28

Drop (Decline Stage Option)

Answer 28

Pull the product off the market to avoid costs

Question 29

Which stage would marketers like to extend the most?

Answer 29

Maturity Phase (highest sales/profit)

Question 30

How can companies stretch the product life cycle?

Answer 30

• Change the market
• Change the product
• Change marketing mix

Question 31

Adoption

Answer 31

The mental process through which an individual passes, from learning about a new product to becoming a regular user.

Question 32

What influences the rate of adoption of a product?

Answer 32

• Relative advantage (compared to existing alternatives)
• Compatibility (fit with current values and experiences)
• Complexity (ease of understanding)
• Divisibility (can you try it without paying?)
• Communicability (ability to communicate benefits through observation or description)