Conceiving, developing, and managing new products

New product

• A modification of an existing product or an innovation the consumer perceives as meaningful

Types of New products

• Modifications

• Minor innovations

• Major innovations

• Significantly different

Product life cycle

Product Innovation

• Importance– New products cause old products to become

obsolete– Consumer tastes and preferences change– Competition copies– All products are mortal– High failure rate

• Reasons for high failure rate• Classifications of failure

Stages in the new product development process

Managing products throughout the product life cycle

The Introduction Stage

• Also called “pioneering” stage• Most expensive and risky• Truly innovative – build primary demand• Product strategies

– JUMP IN! Pioneer advantage– Wait until growth stage

• Pricing strategies– Market skimming – Market penetration

Growth Stage

• Sales and profits rise

• Product is adopted by individual consumers– Factors Influencing adoption

• Diffusion is the process by which an innovation is spread through a social system

• Competition enters the market

• Profits peak

The diffusion process

• Innovators (2.5-3%)

• Early adopters (13%)

• Early majority (34%)

• Late majority (34%)

• Laggards (16%)

Maturity

• Sales continue to grow, but at a declining rate

• Benefits of having a product at the maturity stage

• Marketing strategies to extend the maturity stage of the product life cycle

Decline

• Reasons

• Strategies– Delete a product– Ensure efficiency in marketing and

production– Prune unprofitable sizes and models– “Run out” the product

Obsolescence

• Functional

• Style

Evaluating the product life-cycle concept

• Stages, time span and shape of the product life cycle vary by product

• Economy, inflation, and consumer lifestyles may shorten or lengthen a product’s life cycle

• A firm may do worse than the average product in the market

• A firm may be able to manage the life cycle, or extend it or reverse decline

• Firms may engage in a self-fulfilling prophecy