1. 11-1 CHAPTER DEVELOPING NEW PRODUCTS 11 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 11-2 LEARNING OBJECTIVES Developing New Products LO1Identify the reasons firms innovate. LO2Describe the different groups of adopters articulated by the diffusion of innovation theory. LO3Identify the factors that determine how fast innovation diffuses. LO4Explain the various stages involved in developing a new product or service. LO5Describe the various product life cycle concepts.

3. 11-3 InnovationInnovation and Value WHY DO FIRMS CREATE NEW PRODUCTS? Changing Customer Needs Market Saturation Managing Risk through Diversity Fashion Cycles

4. 11-4 1. What are the reasons why firms develop new products? Check Yourself

5. 11-5 Diffusion of Innovation

6. 11-6 Using the Diffusion of Innovation Theory Factors Affecting Product Diffusion Compatibility ObservabilityTrialability Relative Advantage

7. 11-7 1. What are the five groups depicted in the diffusion of innovation curve? 2. What factors enhance the diffusion of a good or service? Check Yourself

8. 11-8 How Firms Develop New Products

9. 11-9 Idea Generation

10. 11-10 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 Stockbyte/Getty Images

11. 11-11 Product Development PrototypeAlpha testingBeta testing ©Lars A Niki

12. 11-12 Market Testing Premarket tests Customers exposed Customers surveyed Firm makes decision Test marketing Mini product launch More expensive than premarket tests Market demand is estimated Dodge Commercial Digital Vision/Getty Images

13. 11-13 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 ©2006 Kellogg North America Company Courtesy The Coca-Cola Company ©The Arbor Strategy Group, Inc

14. 11-14 New Product Marketing Mix Promotion PlacePrice

15. 11-15 Evaluation of Results Satisfaction of technical requirements Customer acceptance Satisfaction of the firm’s financial requirements

16. 11-16 1. What are the steps in the new product development process? 2. Identify different sources of new product ideas. Check Yourself

17. 11-17 Product Life Cycle

18. 11-18 Stages in the Product Life Cycle

19. 11-19 Strategies Based on the Product Life Cycle: Some Caveats Theoretically they are bell shaped but in reality they can take many shapes Managers do not know exactly what the shape each product’s life cycle will take so there is no way to know precisely what stage they are in.

20. 11-20 1. What are the stages in the product life cycle? 2. How do sales and profits change during the various stages? Check Yourself

21. 11-21 Return to slide Diffusion of innovation is the process by which the use of an innovation spreads throughout a market group, over time and over various categories of adopters. Glossary

22. 11-22 Return to slide Innovation is the process by which ideas are transformed into new products and services that will help firms grow. Glossary

23. 11-23 Return to slide The product life cycle defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning. Glossary