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BMGT 205: Principles
of Marketing
Chapter 12: Developing 

New Products
Why do companies innovate?
Developing New Products
Changing
Customer
Needs

Improving
Business
Relationship

Fashion
Cycles

WHY DO
FIRMS
CREATE
NEW
PRODUCTS

Market
Saturat...
CHECK YOURSELF

1.

What are the reasons firms innovate?
Diffusion of Innovation
Compatibility

Observability

Relative Advantage

Factors
Affecting
Product
Diffusion

Complexity and
Trialability

Using ...
CHECK YOURSELF

1.

What are the five groups on the diffusion of innovation curve?

2.

What factors enhance the diffusion...
How Firms Develop New
Products
IDEA GENERATION

CONCEPT TESTING

• Development of viable new
product ideas.

• Testing the...
Crowdsourcing Ideas

More and more firms are
generating new product ideas
from customers
User friendly ideas
Cost savings
O...
Idea Generation

Source of
ideas
•
•
•
•
•
•
•

Internal R&D
R&D consortia
Licensing
Brainstorming
Outsourcing
Competitor’...
Concept Testing

Concept is a brief written
description of the product
Customers reactions determine
whether or not it goe...
Product Development

Prototype

http://youtu.be/v4boTbv9_nU
Alpha testing

Beta testing
Market Testing

Premarket
tests

Customers
exposed

Customers
surveyed

Test
marketing

Firm makes
decision

Mini product
...
Product Launch

This is the part where the
product is launched with
chosen 4 p’s
Success is often known early
Failures can...
Evaluation of Results

Satisfaction of
technical requirements

Customer acceptance

Satisfaction of the
firm’s financial
r...
CHECK YOURSELF

1.

What are the steps in the new product development process?

2.

Identify different sources of new prod...
Product Life Cycle
Stages in the Product Life
Cycle
Strategies Based on 

the Product Life Cycle: Some Caveats

Bell shaped, but can take many shapes.

Challenging to know pr...
Check Yourself

1.

What are the stages in the product life cycle?

2.

How do sales and profits change during the various...
Key Terms

Alpha testing is testing where the firm attempts to
determine whether the product will perform according
to its ...
Key Terms

Firms with products in the decline stage either position
themselves for a niche segment of diehard consumers
or...
Key Terms

The growth stage of the product life cycle is marked by
a growing number of product adopters, rapid growth in
i...
Key Terms
The introduction stage for a new, innovative product or
service usually starts with a single firm, and innovators...
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Transcript of "Bmgt 205 chapter_12"

  1. 1. BMGT 205: Principles of Marketing Chapter 12: Developing 
 New Products
  2. 2. Why do companies innovate?
  3. 3. Developing New Products
  4. 4. Changing Customer Needs Improving Business Relationship Fashion Cycles WHY DO FIRMS CREATE NEW PRODUCTS Market Saturation Managing Risk through Diversity Innovation and Value
  5. 5. CHECK YOURSELF 1. What are the reasons firms innovate?
  6. 6. Diffusion of Innovation
  7. 7. Compatibility Observability Relative Advantage Factors Affecting Product Diffusion Complexity and Trialability Using the Diffusion of 
 Innovation Theory
  8. 8. CHECK YOURSELF 1. What are the five groups on the diffusion of innovation curve? 2. What factors enhance the diffusion of a good or service?
  9. 9. How Firms Develop New Products IDEA GENERATION CONCEPT TESTING • Development of viable new product ideas. • Testing the new product idea among a set of potential customers. EVALUATION OF RESULTS PRODUCT LAUNCH MARKET TESTING • Full-scale commercialization of the product. • Testing the actual products in a few test markets. • Analysis of the performance of the new product and making appropriate modifications. PRODUCT DEVELOPMENT • Development of prototypes and/or the product.
  10. 10. Crowdsourcing Ideas More and more firms are generating new product ideas from customers User friendly ideas Cost savings Outside ideas bring innovation http://lego.cuusoo.com/#
  11. 11. Idea Generation Source of ideas • • • • • • • Internal R&D R&D consortia Licensing Brainstorming Outsourcing Competitor’ products Customer input
  12. 12. Concept Testing Concept is a brief written description of the product Customers reactions determine whether or not it goes forward Triggers the marketing research process
  13. 13. Product Development Prototype http://youtu.be/v4boTbv9_nU Alpha testing Beta testing
  14. 14. Market Testing Premarket tests Customers exposed Customers surveyed Test marketing Firm makes decision Mini product launch More expensive than premarket tests Market demand is estimated
  15. 15. Product Launch This is the part where the product is launched with chosen 4 p’s Success is often known early Failures can be very expensive companies want a sure thing http://youtu.be/WB6kwSfUvhQ
  16. 16. Evaluation of Results Satisfaction of technical requirements Customer acceptance Satisfaction of the firm’s financial requirements
  17. 17. CHECK YOURSELF 1. What are the steps in the new product development process? 2. Identify different sources of new product ideas.
  18. 18. Product Life Cycle
  19. 19. Stages in the Product Life Cycle
  20. 20. Strategies Based on 
 the Product Life Cycle: Some Caveats Bell shaped, but can take many shapes. Challenging to know precisely 
 the stage of the PLC.
  21. 21. Check Yourself 1. What are the stages in the product life cycle? 2. How do sales and profits change during the various stages?
  22. 22. Key Terms Alpha testing is testing where the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended. Beta testing uses potential consumers, who examine the product prototype in a “real use” setting to determine its functionality, performance, potential problems, and other issues specific to its use.
  23. 23. Key Terms Firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market. Diffusion of innovation is the process by which the use of an innovation spreads throughout a market group, over time and over various categories of adopters.
  24. 24. Key Terms The growth stage of the product life cycle is marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions. Innovation is the process by which ideas are transformed into new products and services that will help firms grow.
  25. 25. Key Terms The introduction stage for a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering. The maturity stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms. Pioneers or breakthroughs are new product introductions, especially new-to-the-world products that create new markets.
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