1. BMGT 205: Principles
of Marketing
Chapter 12: Developing
New Products

2. Why do companies innovate?

3. Developing New Products

4. Changing
Customer
Needs
Improving
Business
Relationship
Fashion
Cycles
WHY DO
FIRMS
CREATE
NEW
PRODUCTS
Market
Saturation
Managing
Risk through
Diversity
Innovation and Value

6. CHECK YOURSELF
1.
What are the reasons firms innovate?

7. Diffusion of Innovation

9. Compatibility
Observability
Relative Advantage
Factors
Affecting
Product
Diffusion
Complexity and
Trialability
Using the Diffusion of
Innovation Theory

10. 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?

11. 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.

12. 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/#

13. Idea Generation
Source of
ideas
•
•
•
•
•
•
•
Internal R&D
R&D consortia
Licensing
Brainstorming
Outsourcing
Competitor’ products
Customer input

14. 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

15. Product Development
Prototype
http://youtu.be/v4boTbv9_nU
Alpha testing
Beta testing

16. 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

17. 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

18. Evaluation of Results
Satisfaction of
technical requirements
Customer acceptance
Satisfaction of the
firm’s financial
requirements

19. CHECK YOURSELF
1.
What are the steps in the new product development process?
2.
Identify different sources of new product ideas.

20. Product Life Cycle

21. Stages in the Product Life
Cycle

22. 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.

23. Check Yourself
1.
What are the stages in the product life cycle?
2.
How do sales and profits change during the various stages?

24. 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.

25. 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.

26. 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.

27. 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.