New Product Development & Adoption Process

11-1

New Product
New to the World Products New Product Lines Additions to Existing Product Lines Improvements in or Revisions of Existing Products Repositioning Cost Reductions

High

New-to-the-world New Product Lines

The degree of product Newness

Newness to the Company

20%

10%
Products

Revisions / Improvements

26%

26%

to Existing Product Lines Reduced Costs

11%
Low

7%

Product Repositioning

Low

Newness to the target customers

High

Organising for New Product Development

For organisations, it is proper to have a formal new product development process in place and more likely to be effective than adopting a haphazard approach to this critical activity. New product development requires support from top management and budget allocation, definition of business activity, product categories of interest, and specific criteria of ROI.

Phases
Idea Generation Idea Screening Concept Testing

Marketing Activities
Searching for new product ideas from internal and external sources. Select the most promising ideas and drop those with only limited potential. Study the needs and wants of potential buyers, the environment, and competition. Describe or show product concepts and their benefits to potential customers and determine their responses. Identify and drop poor product concepts. Gather useful information from product development and its marketing personnel. Assess the products potential profitability and suitability for the market-place. Examine the companys research, development, and production capabilities. Ascertain the requirements and availability of funds for development and commercialisation. Project ROI. Determine technical and economic feasibility to produce the product. Convert the product idea into a prototype. Develop and test various marketing mix elements. Conduct market testing. Determine target customers Reactions. Measure its sales performance. Identify Weaknesses in product or marketing mix. Make necessary cash outlay for production facilities. Produce and market the product in the target market and effectively communicate its benefits.

Business Analysis

Product Development Test Marketing Commercialisation

New product Development Phases

Idea Generation
The focus in this first stage is on searching for new product ideas. Some other creative methods companies use to gain new product ideas include brainstorming, synectics, attribute listing, forced relationship, and reverse assumption analysis.

Idea Screening
The aim of screening is to reject the poor ideas as early as possible because the costs of new product development keep rising sharply with each successive development phase.

Concept Testing
Concept testing of a new product idea refers to a more detailed version of the idea. It involves describing the product concept through oral or written description and the benefits to a small number of potential customers, and make an assessment of their responses regarding the product.

Business Analysis
It is an assessment to determine the new products potential contribution to the companys sales, costs, and profits and for this reason a financial analysis is necessary.

Product Development
This stage refers to when the new product concept moves to test stage. The company determines the technical feasibility to produce it at costs low enough to sell it at reasonable price.

Test Marketing
Test marketing is essentially a limited introduction in some carefully selected geographic area that is viewed as representing the intended market. Test marketing is a sample launching of the entire marketing mix.

Companies use various testing methods. Some of the more popular ones are: Sales-Wave Controlled Test Marketing Simulated Test Marketing Test Market

Commercialisation
The decision to commercialise involves the largest costs to a company.

New Product Adoption Process

New product introductions and their adoption, particularly in case of new-tothe-world products often takes a very long time. Customers are sometimes suspicious, even sceptical about adopting new products.

PLC stages

Introduction

Growth

Maturity

Decline

Adopter groups

Innovators

Early adopters

Early majority

Late majority

Laggards

Percentages

(2.5%)

(13.5%)

(34.0%)

(34.0%)

(16.0%)

Product Lifecycle Phases of Adopter Groups

Adoption Decision
The adoption of an innovation requires that an individual or a group of consumers decide buying a new product.

Stages in adoption process

Awareness Knowledge Evaluation Trial Adoption

Stages in extended decision-making

Need recognition Information search Brand evaluation Purchase Post purchase evaluation

Adoption Process and Extended Decision- making

Factors Affecting New Product Adoption Rate

The chances of a products adoption and subsequent diffusion are largely dependent on its nature. The rate at which the diffusion of an innovation takes place is a function of the following 10 factors: 1. 2. 3. 4. 5. 6. 7. 8. 9. Type of Target Group Number of People Involved in Decision-making Extent of Marketing Efforts Involved Need Fulfillment Compatibility Relative Advantage Complexity Observability Triability

10. Perceived Risk

Time Factor and Diffusion Process

Time is an important component of new product diffusion and concerns the time of adoption of a new product by consumers considering, whether consumers are earlier or later adopters and the rate of diffusion, that is, the speed and extent with which individuals and groups adopt the new product.

Time of Adoption
There are five categories of adopters classified by time of adoption: 1. 2. 3. 4. 5. Innovators. Early Adopters. The Early Majority. The Late Majority. Laggards.

Innovators
Innovators constitute, on an average the first 2.5 per cent of all those consumers who adopt the new product and are technology enthusiasts.

Early Adopters
Early adopters tend to be opinion leaders in local reference groups and represent, on an average the next 13. 5 per cent who adopt the new product.

The Early Majority

The early majority tend to be deliberated and cautious with respect to innovations and represents 34.0 per cent.

The Late Majority

The late majority (34.0 per cent) are somewhat sceptical about innovative products. They are conservative, wary of progress, rely on tradition and generally adopt innovations in response to group norms and social pressure, or due to decreased availability of the previous product rather than positive evaluation of the innovation.

Laggards
Laggards represent the last 16.0 per cent of adopters. Like innovators, they are the least inclined to rely on the groups norms. Laggards are tradition bound, tend to be dogmatic and make decisions in terms of the past.

Adopters and Non-adopters:

1. 2. 3. Early adopters Later adopters Non-adopters

Rate of Diffusion
Rate of diffusion of a new product refers to the cumulative level of adoption of an innovation over time among groups. Culture may have an important influence on the diffusion of innovation. Two concepts are worth considering in this regard: cultural context and cultural homogeneity.