11-1

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

The degree of product Newness

Newnessto the Company

Newness to the target customers

New-to-the-worldHigh

Low

Reduced Costs

Product Repositioning

to Existing Product Lines

Products

20%

26%

10%

7%

26%

Low High

11%

NewProductLines

Revisions / Improvements

Organising for New Product DevelopmentFor 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.

New product Development Phases

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 Development

Determine technical and economic feasibility to produce the product. Convert the 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.

Idea GenerationThe 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 ScreeningThe 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 TestingConcept 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 AnalysisIt 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.

Product DevelopmentThis 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 MarketingTest 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

CommercialisationThe decision to commercialise involves the largest costs to a company.

New Product Adoption ProcessNew 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.

Product Lifecycle Phases of Adopter Groups

 

PLC stages Introduction Growth Maturity Decline

Adoptergroups

Innovators 

Earlyadopters

Earlymajority

Latemajority

Laggards 

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

Adoption DecisionThe adoption of an innovation requires that an individual or a group of

consumers decide buying a new product.

Adoption Process and Extended Decision- making

Stages in adoption process Stages in extended decision-making

Awareness

Knowledge

Evaluation

Trial

Adoption

Need recognition

Information search

Brand evaluation

Purchase

Post purchaseevaluation

Factors Affecting New Product Adoption RateThe 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

Time Factor and Diffusion ProcessTime 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.

InnovatorsInnovators 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.

LaggardsLaggards 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.

Adopters and Non-adopters: 1. Early adopters

2. Later adopters

3. 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.