MKT 12: Developing new
products
Why do companies create new product?
1. Changing customer needs
2. Market saturation
3. Managing risk through diversity
4. Fashion cycles
5. Improving business relationships
Diffusion of innovation: period when a new product spreads in the market
Truly new products are called pioneers or breakthroughs, which establish new
markets and radically change competition
Pioneers have advantage of first movers, which can also sometimes become a
disadvantage
Diffusion of Innovation Curve:
1. Innovators (first buyers that enjoy taking risks and are highly knowledgeable)
2. Early adopters (take less risk, read innovators’ complains) - they spread the word
3. Early majority (has to become large enough for a product to be profitable)
4. Late majority (buy at full potential, sales have leveled off)
5. Laggard (rely on traditional products until they are no longer available)
Products move faster through this curve when they
have relative advantage
have high compatibility
are easily observed
aren’t complex
MKT 12: Developing new products
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How firms develop new products?
1. Idea generation (internal or consortium R&D, licensing (buy ideas from other
firms), brainstorming, outsourcing (hire outside firm to help generate ideas),
competitors products, customer input)
2. Concept testing among a set of potential customers
3. Product development - alpha (of product) and beta (consumer reactions) testing
4. Market testing (in a few test markets, or premarket test)
5. Product launch (full scale)
6. Evaluation of results
Product life cycle:
1. Introduction
2. Growth
3. Maturity (sometimes firm try to enter new market as their current is saturated, or to
develop new products)
4. Decline
MKT 12: Developing new products
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