Conceiving, developing, and managing new products

New product A modification of an existing product or an innovation the consumer perceives as meaningful

Types of New products Modifications Minor innovations Major innovations Significantly different

Product life cycle

Product Innovation Importance –New products cause old products to become obsolete –Consumer tastes and preferences change –Competition copies –All products are mortal –High failure rate Reasons for high failure rate Classifications of failure

Stages in the new product development process

Managing products throughout the product life cycle

The Introduction Stage Also called “pioneering” stage Most expensive and risky Truly innovative – build primary demand Product strategies –JUMP IN! Pioneer advantage –Wait until growth stage Pricing strategies –Market skimming –Market penetration

Growth Stage Sales and profits rise Product is adopted by individual consumers –Factors Influencing adoption Diffusion is the process by which an innovation is spread through a social system Competition enters the market Profits peak

The diffusion process Innovators (2.5-3%) Early adopters (13%) Early majority (34%) Late majority (34%) Laggards (16%)

Maturity Sales continue to grow, but at a declining rate Benefits of having a product at the maturity stage Marketing strategies to extend the maturity stage of the product life cycle

Decline Reasons Strategies –Delete a product –Ensure efficiency in marketing and production –Prune unprofitable sizes and models –“Run out” the product

Obsolescence Functional Style

Evaluating the product life- cycle concept Stages, time span and shape of the product life cycle vary by product Economy, inflation, and consumer lifestyles may shorten or lengthen a product’s life cycle A firm may do worse than the average product in the market A firm may be able to manage the life cycle, or extend it or reverse decline Firms may engage in a self-fulfilling prophecy