1. 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

2. 8-2 How Firms Develop New Products 1 2 3 4 5 6 LO3

3. 8-3 1. Idea Generation Source of Ideas Customer Input Internal R&D Licensing Brainstorming Competitor’s Products LO3

4. 8-4 High product development costs Often the source of technological products Often the source of breakthrough products Internal R&D LO3

5. 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

6. 8-6 Groups work together to generate ideas No idea can be immediately dismissed Brainstorming IDEO Website LO3

7. 8-7 Reverse engineering “Me Too” or copycat products Competitors’ Products LO3

8. 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

9. 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

10. 8-10 3. Product Development 1. Prototype 2. Alpha testing 3. Beta testing LO3

11. 8-11 4. Market Testing Dodge Commercial Premarket tests Customers exposed Customers surveyed Firm makes decision Test marketing Mini product launch More expensive than premarket tests Market demand is estimated LO3

12. 8-12 5. Product Launch Kellogg’s Drink’n Crunch Portable Cereals An inner cup contains the cereal and the outer cup contains the milk Minute Maid Premium Heart Wise Orange Juice Each 8 oz. serving of the juice contains 1 gram of plan sterols that can reduce cholesterol levels Aquafresh Floss ‘N’ Cap Fluoride Toothpaste The cap of the toothpaste contains floss LO3

13. 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

14. 8-14 New Product Marketing Mix New Product PromotionPlacePriceTiming LO3

15. 8-15 6. Evaluation of Results Satisfaction of technical requirements Customer acceptance Satisfaction of the firm’s financial requirements LO3

16. 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