Ch. 8 - New Product Development Flashcards
In legal terms, how long is a product considered a new product?
Up to 12 months in Canada
What is a new product from a company’s perspective?
Line extension, significant innovation/improvement, true innovation
What is a new product from a consumer’s perspective?
The degree of learning required to use a product
What are the 3 types of product innovations?
- Minor Innovation
- Continuous Innovation
- Radical Innovation
Minor Innovation
No new learning is required to use a new product (e.g. new flavours of potato chips)
Continuous Innovation
New product disrupts routine, but does not require totally new learning (e.g. electric toothbrush)
Radical Innovation
New product requires new learning to use properly (e.g. smartphones when they first came out)
Why do companies develop new products?
- 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
True or False: Most new products companies release are profitable
False. Only 10-20% of new products are still on the market and profitable after 3 years
What are some common reasons why new products fail?
- 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
True or False: We often don’t know if a product will succeed
True. A product failure often can not be predicted before the product is released (sometimes down to chance)
New Product Development Process
- New Product Development Strategy
- Idea Generation
- Screening and Evaluation
- Business Analysis
- Development
- Test Marketing
- Commercialization
What are some common sources of new ideas?
- Customers and suppliers
- Employees
- Research and development breakthroughs
- Competitive products
- Crowdsourcing
- AI
In what stage of the New Product Development Process does the company begin to spend money?
Stage 5: Development
Test Marketing
Product and program introduced in real but limited market conditions. Can be expensive and time consuming, but it helps companies avoid major marketing mistakes
Rollout
Introduce new product to market by “rolling out” the product over time to different places
What is the most expensive stage for most new products?
Stage 7: Commercialization
Product Life Cycle Stages
- Product Development
- Introduction
- Growth
- Maturity
- Decline
Introduction Stage of Product Life Cycle
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
Growth Stage of Product Life Cycle
Sales volume rises rapidly and firms begin to realize substantial profits. This stage also attracts competitors
What can companies do to sustain rapid growth?
- Improvements to the product, new features
- Additional promotion/distribution spending
- New channels, new segments
Maturity Stage of Product Life Cycle
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
Decline (Product Life Cycle Stage)
Competition, innovators or shifts in consumer preferences cause decline in industry (sales and profits falls)
What options do companies have when their product is on the decline?
- Maintain
- Revitalize
- Harvest
- Drop
Maintain (Decline Stage Option)
Do nothing with the hope that you can make money as competitors exit
Revitalize (Decline Stage Option)
Reformulate product or promo to pull out of decline
Harvest (Decline Stage Option)
Reduce costs and keep selling
Drop (Decline Stage Option)
Pull the product off the market to avoid costs
Which stage would marketers like to extend the most?
Maturity Phase (highest sales/profit)
How can companies stretch the product life cycle?
- Change the market
- Change the product
- Change marketing mix
Adoption
The mental process through which an individual passes, from learning about a new product to becoming a regular user.
What influences the rate of adoption of a product?
- 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)
