LO4: How Firms Develop New Products

I. Idea Generation
Internal Research and Development
High costs
Considered continuous investments
Aim for blockbusters
R&D Consortia
Groups with and of other firms and institutions, possibly including govt and educational
institutions.
Licensing
Buy products from other research-intensive firms
Brainstorming
No ideas thereof can be immediately accepted or rejected
Outsourcing
Third-party that helps firms generate new product and service ideas
Competitors Products
Use reverse engineering to develop a improved version
This is a copycat approach
Customer Input
Both B2B and B2C
In B2C, lead users, those innovative product users who modify existing products according
to their own ideas to suit their specific needs.
II. Concept Testing
Concept testing, present a concept to potential buyers to obtain their reactions
Exploratory Research
In-depth interviews
Conclusive research
Internet or mall-intercept surveys
III. Product Development (inside R&D Dept.)
Engineering, Manufacturing, Marketing, Economic
Prototype: first physical form or service description
Alpha testing
Whether it will perform according to its design and whether it satisfies the need intended
Occur in the R&D Dept.
Beta testing
Uses select group of potential customers in real use settings
Determine functionality
Identify issues or design problems
IV. Market Testing (in real market)
Premarket Tests
Conducted before brought to market -> how many will try and continue to use
Mocking the real market
Test Marketing
Introduce a new product or service to a limited geographical area
In an effort to see all the market mix
V. Product Launch
Positioning->Market Targeting->Market Mix
Promotion
Trade promotions (B2B): promotions to wholesalers or retailer, often include:
Introductory price promotions: limited-duration, lower-than-normal prices
Trade show: temporary concentration of manufacturers that provide retailers the opportunity
to view what is available and new in the marketplace
Personally selling
B2C:
Pull demand
Add values: customer service
Place
Logistics
Inventory orders
Replenish inventory
Packaging. Price sticker
Price
MSRP
Slotting allowance: a fee paid simply to get new products into stores or to gain more or
better shelf space for their products
Timing
VI. Evaluation of Results
Collect consumer panel data
Measure success by
Its satisfaction of technical requirements
Customer acceptance
Its satisfaction of the firms financial requirements

LO5: The Product Life Cycle

Product life cycle defines the stages that products move through as they enter
I. Introduction Stage: stage when innovators start to buy
Initial losses due to R&D
II. Growth Stage: where it gain acceptance, demand, sales, more
competitors
Market -> more segmented
May exit in narrow segments known as industry shakeout
III. Maturity Stage: industry sales peak. may have to rejuvenate or
reposition <Succeed?> --yesnew life; --nodecline stage
Characterized by the adoption by late majority and intense competition,
increased marketing cost and lower prices, saturated market
Strategy:
Entry into New Markets or Market Segments
Geographically: international market
New market segment
Development of New Products
e.g. new computers
IV. Decline Stage
V. The Shape of the Product Life Cycle Curve
Shape varies from product to product: e.g. DVD vs. VCR
VI. Strategies Based on Product Life Cycle: Some Caveats
Basically, what up there is bullshit