8-1
Chapter Objectives
LO1 Identify the reasons firms innovate
LO2 Describe the diffusion of innovation theory and how managers can use it to make product line decisions
LO3 Explain the stages involved in developing new products and services
LO4 Describe the product life cycle and summarize how it is used to make product line decisions
LEARNING OBJECTIVES
8-2
How Firms Develop New Products1 2 3
4 5 6
LO3
8-3
1. Idea Generation
Source of Ideas
CustomerInput
InternalR&D
Licensing
BrainstormingCompetitor’s
Products
LO3
8-4
• High product development costs
• Often the source of technological products
• Often the source of breakthrough products
Internal R&D
LO3
8-5
• Firms purchase the rights to technology or ideas from other research-intensive firms
• University research centers also often provide such licenses
Licensing
LO3
8-6
• Groups work together to generate ideas
• No idea can be immediately dismissed
Brainstorming
IDEO Website
LO3
8-7
• Reverse engineering
• “Me Too” or copycat products
Competitors’ Products
LO3
8-8
• As much as 85% of new business to business products come from customers
• Lead users modify existing products according to their own specific needs
Customer Input
LO3
8-9
2. 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
LO3
8-10
3. Product Development
1. Prototype
2. Alpha testing
3. Beta testing
LO3
8-11
4. Market Testing
Dodge Commercial
LO3
8-12
5. Product Launch
LO3
8-13
Entrepreneurial Marketing 8.1 Gourmantra
Identified need Introduced product to
market via sampling and local fairs
Later launched in retail stores: A&P, Sobeys, Dominion, Food Basics, Wal-Mart, and more
LO3
8-14
New Product Marketing Mix
LO3
8-15
6. Evaluation of Results
LO3
8-16
Why do new products fail?
• Too small target market
• Poor design• Low product quality• Incorrect positioning• Wrong price strategy• Poor marketing
communication• Competition
LO3
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