Marketing Management Text and Cases

New Product Development & Adoption Process

11 Chapter
New Product
Development &
Adoption Process
© SHH Kazmi, 2007

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 New Product Development & Adoption Process

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

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 New Product Development & Adoption Process

New-to-the-world
High
New
The degree Product 20% 10%
Lines
of product
Newness Products
Revisions / Improvements
Newness
to the Company
26% 26%

to Existing Product Lines

Reduced Costs

11% 7% Product
Repositioning
Low

Low High
Newness to the target customers
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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

Phases Marketing Activities

Idea Generation Searching for new product ideas from internal and external sources.

Idea Screening Select the most promising ideas and drop those with only limited potential. Study
the needs and wants of potential buyers, the environment, and competition.

Concept Testing 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.
Business Analysis Assess the product’s potential profitability and suitability for the market-place.
Examine the company’s research, development, and production capabilities.
Ascertain the requirements and availability of funds for development and
commercialisation. Project ROI.
Product Determine technical and economic feasibility to produce the product. Convert the
Development product idea into a prototype. Develop and test various marketing mix elements.

Test Marketing Conduct market testing. Determine target customers’ Reactions. Measure its
sales performance. Identify Weaknesses in product or marketing mix.

Commercialisation Make necessary cash outlay for production facilities. Produce and market the
product in the target market and effectively communicate its benefits.

New product Development Phases

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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

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 New Product Development & Adoption Process

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

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 New Product Development & Adoption Process

New Product Adoption Process

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

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 New Product Development & Adoption Process

PLC stages Introduction Growth Maturity Decline

Adopter Innovators Early Early Late Laggards

groups   adopters majority majority  

Percentages (2.5%) (13.5%) (34.0%) (34.0%) (16.0%)

Product Lifecycle Phases of Adopter Groups

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 New Product Development & Adoption Process

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

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 New Product Development & Adoption Process

Stages in adoption process Stages in extended decision-making

Awareness Need recognition

Knowledge Information search

Evaluation Brand evaluation

Trial Purchase

Adoption Post purchase

evaluation

Adoption Process and Extended Decision- making

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 New Product Development & Adoption Process

Factors Affecting New Product Adoption Rate

The chances of a product’s 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. Type of Target Group
2. Number of People Involved in Decision-making
3. Extent of Marketing Efforts Involved
4. Need Fulfillment
5. Compatibility
6. Relative Advantage
7. Complexity
8. Observability
9. Triability
10. Perceived Risk © SHH Kazmi, 2007

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 New Product Development & Adoption Process

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. Innovators.
2. Early Adopters.
3. The Early Majority.
4. The Late Majority.
5. Laggards. © SHH Kazmi, 2007

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 New Product Development & Adoption Process

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.

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 New Product Development & Adoption Process

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 group’s norms. Laggards are tradition
bound, tend to be dogmatic and make decisions in terms of the past.

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 New Product Development & Adoption Process

Adopters and Non-adopters:

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

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 New Product Development & Adoption Process

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.

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