[Document title]

[Document subtitle]

Serhat Yakar

[Course title]

Table of Content

INTRODUCTION....................................................................................................... 2
Developing New Products....................................................................................... 3
The Total Product Concept...................................................................................... 4
The Product Life-Cycle............................................................................................ 5
The Diffusion of New Products and Innovations......................................................6
The Adoption of New Products and Innovations.....................................................7
CASE STUDY......................................................................................................... 10
BIBLIOGRAPHY...................................................................................................... 13

Table of Figures
Figure
Figure
Figure
Figure

1: Levitts Total Product Concept...........................................................4

2: Product life cycle................................................................................. 5
3: The time dimension............................................................................. 8
4: The normal distribution of adoption.................................................9

INTRODUCTION
In this study I will look at the key functions of the business enterprise; innovations and
the development of new products that help company to compete with its rivals.
In recent years, one of the most striking things in aspect of a consumer is the number
of new products there are to consume. Every trip to the shopping mall or supermarket may
reveal something new. It is not possible to count the exact number of new products coming
into the market. There are thousands of products on the supermarket shelves and these
represent very small proportion of all new product ideas that are actually tested.
As nearly all large companies are in the process of introducing new goods and services
into the market, the scale of this activity worldwide is quite colossal. Therefore, so is the scale
of the waste involved, of time, materials and human brainpower. This is an important issue
that needs to be dealt with separately. In the following topics, the way in which new products
and innovations marketed to the consumer and how the consumer responds them will be
mentioned.

Developing New Products

There are many more failures than successes and even the biggest and most successful
companies have them. Sony had the Betamax video cassette recorder, Polaroid had the
Polavision instant movie camera and even Apple had many failed products. These companies
were large enough and had enough profitable lines in existence to absorb the losses, but many
smaller companies in their position went bankrupt.
There are various pressures on all companies constantly to increase the number of new
products in their field. One of these is the declining birth rate in the industrialised world since
the baby boom ended in the mid-1970s. There are simply fewer new consumers in the
potential market place. New products have to be sold more and more, therefore, to existing
customers. Another source of pressure is the constant technological innovation in all areas of
goods and services that companies have to be aware of and adapt to. Related to this is a
radical shortening of the lead time available for profiting on technological and product
innovations.
For instance, Du Ponts invention of nylon in the thirties gave them decades on the
competition and Polaroids introduction of instant photography in the sixties gave them
several years. Six months is now considered a long time. For some industries, like pop music,
computer software and womens fashions, innovation is a matter of life or death, but even
where no products are involved there is still great pressure on most organisations now, even in
the public sector to introduce innovations in the way they are seen to operate. This may take
the form of changing the organisational structure, the training of management, the
development of staff, or even changing the personality of the chief executive, in order to focus
on different ways of doing things.
There is nothing new about this view of innovation. Peter Drucker (2011) has been
writing about it for most of the past half century. For example:
. . . every managerial unit of business should have responsibility for innovation and definite
innovation goals. It should be responsible for contributing to innovation in the companys
product or service. In addition it should strive consciously to advance the art in the particular
area in which it is engaged: selling or accounting, quality control or personnel management.
Another more recently business guru, Rosabeth Moss Kanter (2013), has concluded
after a survey of 105 innovations in leading American companies, that competitive advantage
derives from the encouragement of idea power.
What has changed in recent years is the awareness of senior management that
innovation is not just a luxury or an interesting theory, or even a specialised function of the
Research and Development division, but a universal necessity. This change has not been
brought about by the sudden appearance of a new breed of enlightened senior managers but
by the hard realities of intense, everincreasing, global competition and an economic and
political climate, especially in the UK and North America, of quick profits and low public
spending.
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The Total Product Concept

It is vital for marketers to bear in mind that the simple question what is the product we
are marketing? will usually have a complex answer as mentioned by Suranjan Das (2011).
Therefore Levitts total product concept is a useful way of thinking about this question. Levitt
(1980) saw a product as being a combination of various attributes that increase in complexity
through four phases, as follows:
1. Generic product

The substantive content (the car, the shoes, the hamburger, the life insurance) that forms
the core of the product that reaches the market.
2. Expected product

The generic attributes plus the buyers minimal expectations of it (price, packaging,
delivery and so on).
3. Augmented product

The generic and expected attributes plus those attributes the marketer has included to
differentiate the product from its competitors (bonuses or gifts, like free tapes with a VCR,
training in new software with a computer system, an extra rumple treatment to make a baggy
suit even baggier).
4. Potential product

Generic, expected and augmented attributes and plus where the new products and
innovations come in. So the potential product is what is possible but not yet attained.

Figure 1: Levitts Total Product Concept

The Product Life-Cycle

All products, it is frequently claimed, have a limited lifetime of protability as
highlighted by Levitt (1965). The very market success that makes something protable
guarantees its being a target for the competition and, of course, the greater the protability the
greater the competition. Some products simply become obsolete through advancing
technology (radio valves), though others may survive in drastically reduced markets
(horseshoes) and still others may nd a new niche market (nylon stockings).
However, it does seem that some products appear to have an indenite lifespan. For
instance, most of the biscuits; Halley, Potibr or ULKER go back for over a century. It might
be questioned though to what extent these are still the same products; Halley are now also
being marketed as Halley Mini and as another example Metro and Hobby chocolates are also
marketed as ice cream. In a sense it might be fair to say that, even if a recognisable product is
around for a long time, periodically it has to re-invent itself as times, tastes and technology all
change.
The life-cycle of a product is often depicted graphically as an evenly distributed
normal curve, as in below graph with ve different stages along the way.

Figure 2: Product life cycle

The ve stages of the life cycle will be common to all products, but the shape of the
curves will differ depending on the product, the market and a whole host of environmental
factors. It is simply a convenient model for thinking about the process and bears about as
much relation to a particular product as a fashion model does to a particular woman.

Producers will usually have a range of products in the market at any given time,
covering the ve stages of the life cycle. The amount of resources spent on marketing,
advertising and promoting a product will depend on where it is on the product life cycle.
Activity will naturally be highest at the phases of Introduction and Growth. This activity will
then be reduced as the product is accepted by the market in the Maturity phase and hits its
sales peak in the Saturation phase. Sometime during the phase of Decline the producer will
need to make a decision about the cost effectiveness of maintaining the product on the market,
or removing it from sale.

The Diffusion of New Products and

Innovations
The accepted denition of diffusion is: the process by which an innovation is
communicated through the certain channels over time among the members of a social
system.
Three main types of innovation have been identied, continuous, dynamically continuous
and discontinuous. Before we consider each of these types though, it would be as well to
remind ourselves that the great majority of new products and ideas are not diffused at all; they
simply disappear. Others may be diffused but not very far. This has been the fate of several
bright hopes of the information technology industry which have performed far below
expectation.

A continuous innovation involves a modication to an existing product which

therefore requires only a relatively minor change in consumer behaviour to use.
Examples would be new models of cars, new avours of yoghurt or low fat cheese.
The great majority of consumer innovations would fall into this category.
A dynamically continuous innovation requires a little more change in consumer
behaviour. It might include both the modication of an existing product or the creation
of a new one, such as compact disc players, telephone answering machines or whole
foods.
A discontinuous innovation involves a new product whose use requires some new
form of behaviour by the consumer that is behaviour that is discontinuous from
existing behaviour. These are the rarest form of innovations usually the result of great
technological discoveries but the ones with the greatest social and psychological
impact. Examples would include the telephone, car, radio, television, personal
computer and microwave oven.

The importance of being able to predict the very small number of successful innovations
in any category is obvious. There is, of course, no standard recipe but it is widely agreed that
there are ve product characteristics which determine consumer response as indicated by
Everett M. Rogers (1995).

Relative advantage
Compatibility
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Complexity
Trialability
Observability

Relative advantage: This is the rst and perhaps the most important factor to be considered.
To what extent does the innovation represent an improvement over existing products? An
improvement, that is, in the perception of the consumer. Debit cards seemed like a good idea
to the banks and retail companies which introduced them, but so far the consumer does not
seem to share their enthusiasm. On the other hand, the fax machine has been a great success
because of its clear relative advantage over mail and courier services, allowing consumers to
transmit documents in a matter of seconds, as opposed to hours or days, for a fraction of the
cost.
Compatibility: This deals with the issue of how well the innovation ts with the potential
consumers existing values, attitudes, interests and behaviour. For instance, introducing new
bacon products to the Middle East is unlikely to be a winner. On the other hand a non-alcohol
lager might be worth considering.
Complexity: This refers to the perceived difculty in using a product. The easier it looks to
use the more likely will people be to try it. That is probably why self-assembly products
always come in boxes with pictures of condent, smiling punters effortlessly assembling
whatever it is. The reality of course is quite different. For instance, that is what puts a brake
on the sale of home computers as opposed to, say, microwave ovens.
Trialability: Is it possible to try out, or sample, the product on a limited basis? This is a
simple matter if the product is a detergent or a breakfast cereal, or even a magazine. It is
obviously more difcult with consumer durables, though cars can be test driven, computer
systems leased and television sets displayed.
Observability: This factor is sometimes called communicability because it is concerned with
how easily the benets of the innovation can be conveyed to potential consumers. In this
respect products which are tangible have an advantage over services, and socially visible
products (telephones, cars, clothing or the Sony Walkman) have an advantage over privately
used products (for example, in health and hygiene).

The Adoption of New Products and

Innovations
The process of diffusion and adoption may effectively be explained by considering the
dimension of time as shown below.
-

Different generations grow up with different innovations. So where the Grandfather

would have learned to type on a manual machine, the Son might well have learned on
an electric machine and the Grandson on a word processor a form of dynamic
discontinuity. What would be natural to the Grandson would require some effort by the
Father and might be totally beyond the Grandfather.
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Some innovations like the telephone the car and the radio have become so widely
diffused and they are granted to be in use by all three generations that grew up with
them.
Some innovations are so user friendly for even a generation which did not grow up
with them and this innovations are adopted by generations rapidly. For instance,
refrigerator, television, dishwasher vs.
Some innovations may achieve appreciable penetration to the market thanks to their
usefulness especially for the young people. For instance, most have the families with
young user had VCD player.

Figure 3: The time dimension

The dimension of time is also important in considering global markets. Different

countries have different timetables of diffusion and adoption of innovations. Even more
important are the different individual timetables as shown below.

Figure 4: The normal distribution of adoption

Innovators are thought to be adventurous consumers willing to take social and

financial risks, like the person who bought the first telephone
Early adopters, who are more linked in to their community and have a relatively high
status within it
Early majority, members are more cautious about the innovation
Late majority, members are frankly sceptical about it
Laggards, are downright suspicious about it and wonder, loudly,

One of the most important things about the curve model above is that the adoption of
innovations is a process that continuous over time and never immediate. The process
invariably takes longer than producers would wish or anticipate, and quitting the field too
soon probably accounts for a sizeable proportion of innovations that are not successfully
adopted.

CASE STUDY
In automotive industry, manufacturers have to launch new models every 4 or 6 years
and if a new model doesnt satisfy the customer needs a loss of profit is unavoidable.
Regarding this topic I examined how automotive manufacturers successfully meet the
requirements of the market. In this context, development steps of new automobile will be
mentioned.
New product development is both a costly and risky undertaking and this handicap can
be minimised by adhering to a New Product Development Process.
Basically, the objective of this process is to identify new product opportunities that can
be successfully commercialised with the greatest return on the invested funds.
Process:
1. New Product Objective and Strategy

There are several types of pro-active approaches to NPD:

An R&D strategy
A marketing strategy approach
Internal organisation/management structures
Acquisition (firm buys new products to bring to market)

The automotive industry approach to npd is most likely based on a combination of R&D
strategy and marketing approaches.
At this stage marketing research conducted among auto owners may reveal the need
for a specific car. For instance, big family cars with same characteristics of sedan; very small
cars like motorcycle with more safety.
2. Sources of New Product Ideas

Various sources of new product ideas should be considered e.g. customers, company
personnel, dealer network, competitors, government agencies, old products etc. Use of market
research techniques (groups, interviews, desk research etc.) should be noted.
The idea screening stage should be identified as a critical decision point, a decision to
proceed beyond this stage has major implications for resource allocation. Scoring models
should be mentioned and benefits noted.
3. Product Development

Starting with the product idea, the product development stage generates product
features from key benefits, positions the proposed product and estimate the products
potential.
Key benefits may be identified in a statement called the Core Benefit Proposition and
this statement facilities identification of essential product features.
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The ideal CBP states;

-

What is being offered to consumers;

What they will derive from it,
And why this is important

The CBP serves as the driving force behind R&Ds development and engineering of a
product ensuring that this delivers the desired benefit.
The market segmentation process facilities development of the initial CBP proposition by
clustering potential customers by benefits wanted in the form of Ideal Choice criteria.
Having established the Ideal Choice criteria, automotive manufacturers then need to
ascertain which product features are necessary to fulfil the CBP and whether these features
will make the product unique in the eyes of targeted consumers.
Automotive manufacturers need to know:

How customers will perceive the new product

How they will compare it with existing products
The probability that it will be purchased

Consumer Perceptions, to determine these perceptions, automotive manufacturers

managers must prepare a list of product features relevant to the CBP.
Once they have a list of features, automotive manufacturers can then determine how much
relative importance customers attach to each use rating scales of relative importance in market
research amongst potential buyers, e.g. for cats

Safety
Kilometres per litre
Comfort
Style-design
Size
Luggage space
Shape
Seating capacity

The car manufacturer can then develop Perceptual Maps on determinant attributes and
competitive brands can be mapped on each attribute of importance.
Market Research required to gauge consumers view of competitive brands on determinant
attributes.
Consumer Preferences

Consumers describe their ideal product using the same attributes as used in the
previous step and then locate these ideal points on the perceptual map.

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Probability of Purchase

The space map shows which segments are most likely to buy which brands, proximity to the
centre of a circle relative to the proximity of other brands determines to probability of a
purchase.
Perceptions and preference analysis should satisfactory estimate of sales potential.
4. Product Design

This step requires the interaction of marketing and engineering to determine the mix of
physical characteristics needed to make the CBP operational.
Marketing research at this stage will allow the company to find the best shape, size,
combination of materials. Also the research among possible suppliers for new car types may
allow to choose the best supplier.
5. Test

This is a very important part of the NPD. If the product doesnt pass the test, its
commercialisation is doomed to failure. Product testing should be used to make sure the
product delivers the desired benefits and to provide information to help refine the product
and/or reduce its costs. The range of tests include Laboratory Test, Panel of Experts and
consumer tests.
Simulated Test Marketing and Field Test Markets provide feedback from the market on likely
response to the new product and market sensitivity to various marketing mix configurations.
6. Commercialisation
The last step in NPD, this requires a detailed plan complete with sales forecasts and
budgets covering a period of several years. Various commercialisation strategies might be
discussed, national launch, launch region by region, distribution channel test market, etc.
The key issue regarding choice of commercialisation strategy is that there is trade-off
between risk, the need to plan cash flow for the introduction, and the speed with which
competitors are likely to react.
7. Evaluation

Marketing research can also help the company to identify if the product fits the
established strategy, help to identify opportunities for future growth, new modifications, etc.

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BIBLIOGRAPHY
Das, S. (2011, October 04). Total Product Concept.
Drucker, P. F. (2011). Management: Tasks, Responsibilities, Practices. NY: Routledge, Taylor
and Francis Group.
Everett, M. R. (1995). ATTRIBUTES OF INNOVATIONS AND THEIR RATE OF
ADOPTION. In M. R. Everett, DIFFUSION OF INNOVATIONS (pp. 204-251). New
York: The Free Press.
Kanter, R. M. (2013, February). COMPETITIVENESS AT A CROSSROADS.
Levitt. (1980). Marketing Success through the differentiation of anything. Harvard Business
Review.
Levitt, T. (1965, November). Exploit the Product Life Cycle.

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