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FOM - CH8 - Developing New Products, The diffusion of innovation model /…

- - - - firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers, or simply by keeping customers from getting bored with the current product or service offering.
    - - The longer a product exists in the marketplace, the more likely it is that the market will become saturated. Without new products or services, the value of the firm will ultimately decline.
    - - Through innovation, firms often create a broader portfolio of products, which helps them diversify their risk and enhance firm value better than a single product can.
    - - In industries that rely on fashion trends and experience short product life cycles, including apparel, arts, books, and software, most sales come from new products.
    - - New products can sometimes function to improve relationships with suppliers
  - - - First Movers: Product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead
  - - - enjoy taking risks
      - are regarded as highly knowledgeable
      - are not price sensitive
      - keep themselves well informed about a product category
    - - don't like as much risk as innovators
      - enjoy novelty
      - regarded as leaders of opinion for particular categories
    - - don't like to take as much risk as innovators or early adopters
      - their costs are lower
      - when earily majority customers enter the market, the number of competitors in the marketplace usually also has reached its peak
    - - when they enter, the product has achieved its full market potential
      - when these group enters the market, sales are probably off to a decline
    - - laggards might never adopt certain product or service
      - laggards avoid change
      - very few companies actively pursue these customers
    - - Relative Advantage
        
        if a product is perceived to be better the substitutes, then the diffusion (of innovation) will be relatively quick
      - Compatibility
        
        the more compatible the product is to a current standard of living, the easier / faster the diffusion (of innovation) will be.
        
        The easier it is to be adopted and compatible with the current mode of operation of a person / industry, the quicker it is adopted
      - Observability
        
        When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process.
      - Complexity and Trialability
        
        Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly than those that are not.
    - - Idea generation
        
        Internal Research and Development, researching inside and outside to search for new products or solution to problems
        
        Licencing obtaining the licence of an existing product that has not been marketed yet to market it and introduce it to the public
        
        Brainstorming
        
        Competitors products: using competitors products to analyze them find weaknesses and make them better.
        
        reverse engineering: taking apart a competitor's product, analyze it, and create an improved product that does not infringe on the competitor's patents, if they exist.
        
        Listening to the customer to create new products
        
        85% of all new business-to-business product ideas come from customers
        
        Lead users (users who have customized a product for their use) can give good ideas regarding the direction of a potential innovation.
      - Concept testing
        
        Ideas are further developed into Concepts
        
        Concepts are brief written descriptions of a product or service; its technology, working principles, and forms; and what customer needs it would satisfy
      - Product Development
        
        Concepts are developed into Prototypes
        
        Prototype: the first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes, sometimes even crafted individually
        
        Alpha testing: An attempt to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended, occurs in the firms R&D department.
        
        Beta testing: uses potential consumers to examine a product prototype in a real-use setting to determine its functionality, performance, potential problems , and other issues specific to use
      - Market Testing
        
        Pre-market testing: conducted before a product or service is brought to market to determine how many customers will try and then continue to use it
        
        can serve to project potential sales data
        
        can serve to test the effectiveness of advertising
        
        Test marketing: Introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch.
        
        uses all the elements of the marketing mix
        
        the results serve to estimate demand for the entire market
        
        these are more expensive than pre-market tests (in time and costs)
        
        Test marketing campaigns can actually tip off competitors who can anticipate, launch early, and lead the market.
      - Product Launch
        
        Promotion
        
        the tests results help the firm determine an appropriate integrated marketing communications strategy depending on the complexity of the product, many decisions should be taken in consideration here
        
        Place
        
        Having enough stock, and having a product offering as complete as possible are important parts of this step, so if consumers want to buy it, that they are able to
        
        Price
        
        The firm needs to ensure that it gets the price right. It is sometimes easier to start with a higher price and offer promotions (e.g., coupons, rebates) and then over time to lower the price than it is to introduce the new product at a low price and then try to raise it.
        
        Timing
        
        Depending on the product, the timing of the launch is important too, e.g. movies
      - Evaluation of Results
        
        After the product has been launched, marketers must undertake a critical postlaunch review to determine whether the product and its launch were a success or a failure and what additional resources or changes to the marketing mix are needed, if any
        
        its satisfaction of technical requirements, such as performance;
        
        customer acceptance
        
        its satisfaction of the firm’s financial requirements, such as sales and profits
  - - - when innovators start buying the product
        
        new to the world products or services
        
        characterized by initial losses
        
        low revenues
        
        if successful, profits start towards the end of the stage
    - - when the product gains acceptance, demand and sales increase, competitors emerge in the product category
        
        rapid industry sales
        
        increase in competitors
        
        increase in number of available product versions
        
        segmentation starts to develop
        
        profits grow thanks to economies of scale, associated with manufacturing and marketing costs
        
        can decide to exit the market at this stage, called industry shakeout
    - - industry sales reach their peak, firms try to rejuvenate their products by adding new features or repositioning them
        
        competition among firms for marketshare
        
        marketing costs increase to defend marketshare against competitors
        
        price competition starts
        
        both price competition and increased expenses erode the profits
        
        companies pursue different strategies to survive this
        
        entry to new markets or market segments
        
        develop new uses for products
        
        modify the product
        
        increase frequency of use
        
        find new users
        
        reposition product
        
        tweak marketing strategy
        
        development of new products
    - - stage where sales decline and product eventually exits the market
        
        position into a niche segment
        
        exit the market
    - - not all products and services follow this shape