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Why Do Firms Introduce New Products

Why Do Firms Introduce New Products 23
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Published Date:17-07-2017
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New Products Session 12 Marketing Management Prof. Natalie Mizik Agenda  What is a New Product?  Why do firms introduce new products?  Why do some good product ideas go bad?  What factors affect customers’ adoption of new products?  Creativity in NPD 2 Prof. Natalie Mizik – 2010 MIT 15.810New to the World? Total Total Fresh Stripe 2 in 1 toothpaste & mouthwash Sparkling White Sensation Whitening Sensitive Maximum Strength Tartar Control Tartar Control Plus Whitening Baking Soda & Peroxide Whitening Tartar Control with Baking Soda & Peroxide Cavity Protection Star Wars Barbie toothpaste Looney Tunes toothpaste My First Colgate Toothpaste with Barney Only about 5 - 10% of new products are truly new 3 Prof. Natalie Mizik – 2010 MIT 15.810Types of New Products M A R K E T Newness H L M Cost L Reductions Repositionings Not Very New 11% 7% Product Line M Extensions 26% Moderately New New Product New to the World Lines 10% H Very New 20% 4 Prof. Natalie Mizik – 2010 MIT 15.810 F I R M CUSTOMER Why Do Firms Introduce New Products?  Support additional usage  Better meet needs of slightly different sub-segments through differentiation  Address needs of potential emerging segments  Encourage variety seeking  Enhance sales of current products  Counter encroachment by alternative products  Control shelf space COMPETITION  Alter brand image  Replacing and improving mature products is a key success factor for a firm COMPANY 5 Prof. Natalie Mizik – 2010 MIT 15.810The low-carb trend 9 4000 Aspen Edge by Coors 8 (March 2004) 7 3000 6 5 2000 4 3 Michelob Ultra 1000 2 (Sept. 2002) 1 1972 2000 2001 2002 2003 2004 2005 Image by MIT OpenCourseWare. Prof. Natalie Mizik – 2010 MIT 15.810 Number of low-carb new products % of Americans on Atkins/South Beach dietEnhance Sales of Current Products Asymmetric Dominance Effect competitor Attribute 1 A target B decoy C Attribute 2 Adding a dominated alternative can increase the probability of choosing the dominating alternative. (Huber, Payne and Puto 1982) 7 Prof. Natalie Mizik – 2010 MIT 15.810At the Movies… Compromise Effect The share of a product is enhanced when it is the intermediate option in the choice set and is diminished when it is an extreme option. (Simonson 1989) Prof. Natalie Mizik – 2010 MIT 15.810 Why do Products Fail? Project Newprod: A study of over 200 industrial products  “Better mousetrap nobody wanted” 28% of failures  “Me-too product meeting competitive brick wall” 24%  “Technical dog product” 15%  “Competitive one-upmanship” 13%  “The price crunch” 15%  “Environmental ignorance” 7% Source: Cooper and Calantone (1979). 9 Prof. Natalie Mizik – 2010 MIT 15.810Why Good Ideas Go Bad? Why Good Ideas Go Bad? Problems with Product Quality or Product Attributes 10 Prof. Natalie Mizik – 2010 MIT 15.810Why Good Ideas Go Bad? Problems with Product Quality or Product Attributes 10 Prof. Natalie Mizik – 2010 MIT 15.810Problems with Distribution (Place) Problems with Promotion 12 Prof. Natalie Mizik – 2010 MIT 15.810What percentage of new products fail? Industrial 1990 - 50% 50% PDMA 1990 - 42% PDMA 1995, 2004 - 41% AC Nielsen 2003 -80% AC Nielsen 2001 -93% Deloitte and Touche 1998 - 95% 100% 0% Prof. Natalie Mizik Prof. Natalie Mizik – – 2010 MIT 15.810 2010 MIT 15.810S-Shaped Diffusion Curve of New Products Personal Computers Personal Computers 35000 Cordless Phones 30000 14000 12000 25000 10000 20000 8000 15000 6000 10000 4000 5000 2000 0 0 1975 1980 1985 1990 1995 2000 1975 1980 1985 1990 1995 2000 14 Prof. Natalie Mizik – 2010 MIT 15.810Product Life Cycle and the Chasm 34% 34% Late Early Majority Majority 1 1 2 /2% 13 /2% 16% Innovators Early Laggards Adopters Time of adoption for innovations Reference: Geoffrey A. Moore (1991), Crossing the Chasm, HarperBusiness. 15 Prof. Natalie Mizik – 2010 MIT 15.810Factors Affecting Customer Adoption  Advantage “Apple iPod Grabs 82% US Retail Market Share”  Compatibility Oct 12, 2004 (The Register)  Complexity  Observability  Risk  Divisibility Prof. Natalie Mizik – 2010 MIT 15.810Strategy: Product Life Cycle Sales Profit Introduction Growth Maturity Decline Time Image by MIT OpenCourseWare. 17 Prof. Natalie Mizik – 2010 MIT 15.810 Sales and profits () Main Takeaways: New Products  Why do firms introduce new products?  Think of the 5Cs…  Why do some good product ideas go bad?  Think of the 4Ps…  What factors affect customers’ adoption of new products?  Think of ACCORD 18 Prof. Natalie Mizik – 2010 MIT 15.810HW 4: Why has No One thought about THIS yet? Due: Session 13 Describe a product (or service), which does not exist on the market today, but would benefit consumers, and has potential for commercialization.  Who are your potential consumers (i.e., your target market)?  What benefit/value does your product provide to the consumers?  What is the best way to inform consumers, promote & advertise it?  What should your price be? Why?  How do you propose to distribute your product?  What do you think are the major challenges/ possible problems with bringing this product to the market? (1-2 page max) Prof. Natalie Mizik – 2010 MIT 15.810Creativity in NPD … an Alternative View Prof. Natalie Mizik – 2010 MIT 15.810