New Product Development (Ch. 8)

Question 1

What defines a new Product (from company and consumer perspective)

Answer 1

Company: line extension, significant improvement or innovation of product
Consumer: degree of learning required

Question 2

What are some reasons that new products fail?

Answer 2

• Overestimation of market size, poorly defined target market
• Failure to bring value to consumers
• Marketing mix failure: incorrect product attributes or design, price, place,
• Costs of product development
• Competitive actions
• Managers push favourite ideas despite negative research findings
• Dice roll

Question 3

New Product Development Process - 7 steps

Answer 3

1. New product development strategy
2. Idea generation
3. Screening and evaluation
4. Business analysis
5. Development
6. Test marketing
7. Commercialization

Question 4

NPD Process: Idea generation

Answer 4

Sources of new ideas:
Customers and suppliers, Employees, Research and development breakthroughs, Competitive products, Crowdsourcing

Question 5

NPD Process: Idea screening and Concept Testing

Answer 5

Idea screening: narrow down to those worth more time and money
- Estimate: market size, product price, development time and costs

Concept Testing: Product concept, prototype
- Test new product idea with consumers

Question 6

NPD Process: Business Analysis

Answer 6

Focuses on commercial viability of the idea: 4 Ps, target market, positioning
- last checkpoint before major investment

Question 7

NPD Process: Development & Testing

Answer 7

Develop concept into physical product, large jump in investment
- Stress testing

Question 8

NPD Process: Test Marketing

Answer 8

Product and program introduced in real but limited market conditions (certain locations only)

Can be expensive and time consuming, but better than making major marketing mistake

Question 9

NPD Process: Commercialization

Answer 9

full market distribution, rollout to different locations
- most expensive stage

Question 10

Product life cycle (4 stages)

Answer 10

1. Introduction
2. Growth
3. Maturity
4. Decline

Question 11

PLC: Introduction

Answer 11

• Firm works to stimulate demand for a new market entry
• Promotional campaigns stress product features
• Negative earnings due to marketing spend and R&D

Question 12

PLC: Growth

Answer 12

• Sales rise rapidly
• Profits increase
• Success of product attracts competitors

Question 13

PLC: Maturity

Answer 13

• Industry sales continue to grow but plateau
• Many competitors in the market: profits decline
• Differences between competing products decrease
• Supply > demand for the first time

Question 14

PLC: Decline

Answer 14

• Competition, innovations or shifts in consumer preferences cause decline in industry
• Industry sales and profits fall

Question 15

Options for businesses in Decline Stage

Answer 15

Maintain: leave as is, hope to make money as competitors exit
Revitalize: reformulate product or promo to pull out of decline
Harvest: reduce marketing costs and keep selling to squeeze out profit
Drop: pull product off the market to avoid costs

Question 16

What stage would companies want to extend the longest? And how can they do so?

Answer 16

The maturity stage
- Change the market
- Change the product
- Change marketing mix (4Ps)

Question 17

Issues with the Product Life Cycle

Answer 17

It can be hard to:
- identify stage of product
- pinpoint when they’ll move stages
- forecast sales level, length of stages
- Not all products follow same life cycle

Question 18

Define Adoption of Product

Answer 18

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

Question 19

Different types of adopters

Answer 19

Risk takers: venturesome, innovators
Early adopters: careful opinion leaders
Early majority: deliberate but fast
Late majority: skeptics who want proof
Laggards: won’t change until necessary