New product development & adoption process ppt @ bec doms mba 2010
New Product Development & Adoption Process11-1
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
New-to-the-world High NewThe degree Product 20% 10% Linesof productNewness Products Revisions / Improvements Newness to the Company 26% 26% to Existing Product Lines Reduced Costs 11% 7% Product Repositioning Low Low Newness to the target customers High
Organising for New Product Development For 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.
Phases Marketing ActivitiesIdea 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 Determine technical and economic feasibility to produce the product. Convert theDevelopment 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. New product Development Phases
Idea GenerationThe focus in this first stage is on searching for new product ideas.Some other creative methods companies use to gain new product ideasinclude brainstorming, synectics, attribute listing, forced relationship, andreverse assumption analysis.
Idea ScreeningThe aim of screening is to reject the poor ideas as early as possible becausethe costs of new product development keep rising sharply with eachsuccessive development phase.
Concept TestingConcept testing of a new product idea refers to a more detailed version ofthe idea. It involves describing the product concept through oral or writtendescription and the benefits to a small number of potential customers, andmake an assessment of their responses regarding the product.
Business AnalysisIt is an assessment to determine the new product’s potential contributionto the company’s sales, costs, and profits and for this reason a financialanalysis 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 lowenough to sell it at reasonable price.
Test MarketingTest marketing is essentially a limited introduction in some carefully selectedgeographic area that is viewed as representing the intended market. Testmarketing 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 sometimessuspicious, even sceptical about adopting new products.
PLC stages Introduction Growth Maturity Decline Adopter Innovators Early Early Late Laggards groups adopters majority majorityPercentages (2.5%) (13.5%) (34.0%) (34.0%) (16.0%) Product Lifecycle Phases of Adopter Groups
Adoption DecisionThe adoption of an innovation requires that an individual or a group ofconsumers decide buying a new product.
Stages in adoption process Stages in extended decision-making Awareness Need recognition Knowledge Information search Evaluation Brand evaluation Trial Purchase Adoption Post purchase evaluation Adoption Process and Extended Decision- making
Factors Affecting New Product Adoption Rate The 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: 2. Type of Target Group 3. Number of People Involved in Decision-making 4. Extent of Marketing Efforts Involved 5. Need Fulfillment 6. Compatibility 7. Relative Advantage 8. Complexity 9. Observability 10. Triability 11. Perceived Risk
Time Factor and Diffusion Process Time 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 consumerswho adopt the new product and are technology enthusiasts.Early AdoptersEarly adopters tend to be opinion leaders in local reference groups andrepresent, on an average the next 13. 5 per cent who adopt the new product.The Early MajorityThe early majority tend to be deliberated and cautious with respect to innovationsand represents 34.0 per cent.
The Late MajorityThe late majority (34.0 per cent) are somewhat sceptical about innovativeproducts. They are conservative, wary of progress, rely on tradition andgenerally adopt innovations in response to group norms and social pressure, ordue to decreased availability of the previous product rather than positiveevaluation of the innovation.LaggardsLaggards represent the last 16.0 per cent of adopters. Like innovators, theyare the least inclined to rely on the group’s norms. Laggards are traditionbound, 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 DiffusionRate of diffusion of a new product refers to the cumulative level of adoption ofan innovation over time among groups.Culture may have an important influence on the diffusion of innovation. Twoconcepts are worth considering in this regard: cultural context and culturalhomogeneity.