1. New Products
• New product strategy
• New product development
process
• Adoption and diffusion
• Product Life Cycle (PLC)

2. New Product Strategies
• Pioneering, New-to-the-world
– Never seen before
– High risk
• Technological
• Market/commercial
– High expense
– High potential return
• Incremental
– “Second but better”
– Medium risk
– Medium expense
– Medium potential return

3. New Product Strategies
• “Me-Too”
– Copy of existing competitor’s
product
– Low risk
– Low expense
– Low potential return
• MP3 Players
– Invention of player
– iPod, better than previous versions
• Design
• Coordination with downloading
service
– iPod clones

4. New Product Development Process
New-Product
Development Process
New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
2 Chapter 9
Cop yright ©2006 by S outh-Western , a division of Thomson L ear nin g. All 9
righ ts reserved

5. New Product Development Process
• Idea generation
– Sources of ideas: employees,
customers, collaborators, etc.
• Idea screening
– Technology, market, fit with current
strategies and products, etc.
• Business analysis
– Forecasting, pro forma accounting
• Development
– Prototype
– Scaleup
• Testing
– , , test markets
• Commercialization
– 5% success rate, 1-2% profitable

6. Percentage of Adopters
Adoption and Diffusion
Early Early Late
Innovators Adopters Majority Majority Laggards
2.5% 13.5% 34% 34% 16%
Time

7. Adoption and Diffusion
• Variables affecting adoption
– Complexity
– Compatibility
– Relative advantage
– Observability
– Trialability
• Diffusion
– Patterns
– Word-of-mouth, opinion leaders

8. Product Life Cycle
Introductory Growth Maturity Decline
Stage Stage Stage Stage
Sales
Dollars
Profits
0
Time

9. Product Life Cycle
• Introductory
– Growing industry sales, few
competitors, look to generate trial, seek
to gain distribution
• Growth
– Rapidly growing industry sales, more
competitors, price to penetrate, expand
distribution, trying to grab market share
• Maturity
– Industry sales level off at peak, market
shares stabilize, price for
profit, shakeout of competitors, widest
distribution, differentiate products
• Decline
– Industry sales drop, more shakeout, milk
remaining markets, cull distributors
• Note industry, length, possibility of new
growth