Post on 08-May-2015
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New Product Development & Adoption Process
New Product ‘New to the World’ Products
New Product Lines
Additions to Existing Product Lines
Improvements in or Revisions of Existing Products
Repositioning
Cost Reductions
The degree of product Newness
Newnessto the Company
Newness to the target customers
New-to-the-worldHigh
Low
Reduced Costs
Product Repositioning
to Existing Product Lines
Products
20%
26%
10%
7%
26%
Low High
11%
NewProductLines
Revisions / Improvements
Organising for New Product DevelopmentFor organisations, it is proper to have a formal new product development
process in place and more likely to be effective than adopting a haphazard
approach to this critical activity.
New product development requires support from top management and budget
allocation, definition of business activity, product categories of interest, and
specific criteria of ROI.
New product Development Phases
Phases Marketing Activities
Idea Generation Searching for new product ideas from internal and external sources.
Idea Screening Select the most promising ideas and drop those with only limited potential. Study the needs and wants of potential buyers, the environment, and competition.
Concept Testing Describe or show product concepts and their benefits to potential customers and determine their responses. Identify and drop poor product concepts. Gather useful information from product development and its marketing personnel.
Business Analysis Assess the product’s potential profitability and suitability for the market-place. Examine the company’s research, development, and production capabilities. Ascertain the requirements and availability of funds for development and commercialisation. Project ROI.
Product Development
Determine technical and economic feasibility to produce the product. Convert the product idea into a prototype. Develop and test various marketing mix elements.
Test Marketing Conduct market testing. Determine target customers’ Reactions. Measure its sales performance. Identify Weaknesses in product or marketing mix.
Commercialisation Make necessary cash outlay for production facilities. Produce and market the product in the target market and effectively communicate its benefits.
Idea GenerationThe focus in this first stage is on searching for new product ideas.
Some other creative methods companies use to gain new product ideas
include brainstorming, synectics, attribute listing, forced relationship, and
reverse assumption analysis.
Idea ScreeningThe aim of screening is to reject the poor ideas as early as possible because
the costs of new product development keep rising sharply with each
successive development phase.
Concept TestingConcept testing of a new product idea refers to a more detailed version of
the idea. It involves describing the product concept through oral or written
description and the benefits to a small number of potential customers, and
make an assessment of their responses regarding the product.
Business AnalysisIt is an assessment to determine the new product’s potential contribution
to the company’s sales, costs, and profits and for this reason a financial
analysis is necessary.
Product DevelopmentThis stage refers to when the new product concept moves to test stage.
The company determines the technical feasibility to produce it at costs low
enough to sell it at reasonable price.
Test MarketingTest marketing is essentially a limited introduction in some carefully selected
geographic area that is viewed as representing the intended market. Test
marketing is a sample launching of the entire marketing mix.
Companies use various testing methods. Some of the more popular ones are:
Sales-Wave
Controlled Test Marketing
Simulated Test Marketing
Test Market
CommercialisationThe decision to commercialise involves the largest costs to a company.
New Product Adoption ProcessNew product introductions and their adoption, particularly in case of new-to-
the-world products often takes a very long time. Customers are sometimes
suspicious, even sceptical about adopting new products.
Product Lifecycle Phases of Adopter Groups
PLC stages Introduction Growth Maturity Decline
Adoptergroups
Innovators
Earlyadopters
Earlymajority
Latemajority
Laggards
Percentages (2.5%) (13.5%) (34.0%) (34.0%) (16.0%)
Adoption DecisionThe adoption of an innovation requires that an individual or a group of
consumers decide buying a new product.
Adoption Process and Extended Decision- making
Stages in adoption process Stages in extended decision-making
Awareness
Knowledge
Evaluation
Trial
Adoption
Need recognition
Information search
Brand evaluation
Purchase
Post purchaseevaluation
Factors Affecting New Product Adoption RateThe chances of a product’s adoption and subsequent diffusion are largely dependent on its nature. The rate at which the diffusion of an innovation takes place is a function of the following 10 factors:
1. Type of Target Group
2. Number of People Involved in Decision-making
3. Extent of Marketing Efforts Involved
4. Need Fulfillment
5. Compatibility
6. Relative Advantage
7. Complexity
8. Observability
9. Triability
10. Perceived Risk
Time Factor and Diffusion ProcessTime is an important component of new product diffusion and concerns the
time of adoption of a new product by consumers considering, whether
consumers are earlier or later adopters and the rate of diffusion, that is, the
speed and extent with which individuals and groups adopt the new product.
Time of Adoption
There are five categories of adopters classified by time of adoption:
1. Innovators.
2. Early Adopters.
3. The Early Majority.
4. The Late Majority.
5. Laggards.
InnovatorsInnovators constitute, on an average the first 2.5 per cent of all those consumers who adopt the new product and are technology enthusiasts.
Early Adopters Early adopters tend to be opinion leaders in local reference groups and represent, on an average the next 13. 5 per cent who adopt the new product.
The Early Majority The early majority tend to be deliberated and cautious with respect to innovations and represents 34.0 per cent.
The Late Majority The late majority (34.0 per cent) are somewhat sceptical about innovative
products. They are conservative, wary of progress, rely on tradition and
generally adopt innovations in response to group norms and social pressure, or
due to decreased availability of the previous product rather than positive
evaluation of the innovation.
LaggardsLaggards represent the last 16.0 per cent of adopters. Like innovators, they
are the least inclined to rely on the group’s norms. Laggards are tradition
bound, tend to be dogmatic and make decisions in terms of the past.
Adopters and Non-adopters: 1. Early adopters
2. Later adopters
3. Non-adopters
Rate of Diffusion
Rate of diffusion of a new product refers to the cumulative level of adoption of an innovation over time among groups.
Culture may have an important influence on the diffusion of innovation. Two
concepts are worth considering in this regard: cultural context and cultural
homogeneity.