Chapter 5

Product
Innovation

©2022 | Basic Marketing

by Salman Zaheer
Digital version of the book is available for FREE: https://archive.org/details/basic-marketing-2020
1
Printed copy can be obtained from: https://www.readings.com.pk/pages/BookDetails.aspx?BookID=1370613
Chapter-5

Table of Contents

Opening Scenario: Home Appliances & Consumer Electronics

• New Products
• New Product Development Process
• Innovation
• Product Life-Cycle (PLC)

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Chapter-5

Opening Scenario

Home Appliances & Consumer Electronics

• In today's era we are using electronics in one form or another.
• From the 18th century to 20th about thirty people have
made different contributions to bring electronics in their
current form.
• Vacuum Tube, Transistor and Integrated circuit.
• There are various sectors in electronics, E-commerce, Mobile,
Consumer electronics, TV broadcasting and Video Games
industry.
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Opening Scenario

• Japan, South Korea and US lead the world with

their R&D.
• Top companies are Sony, Toshiba and Panasonic
from Japan while Samsung and LG from Korea
and Microsoft, Apple, Intel and IBM from USA.
• While Japan was torn by Second World War, a
salesman Akito Morita and a technical expert
Masaru Ibuka joined to form a small company in
Tokyo in 1946 eventually named Sony.
• They worked together for almost 50-years.
• Taking the firm to one of world's largest 4
electronics manufacturing company.
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Opening Scenario

• Sony created many new products as the company's

focus was on innovation and utilizing new
technologies.
• For example, they came to know about transistor
technology and utilized it to innovate TVs, video
recorders, radios and calculators, electric rice cooker
and first camcorder.
• In 1960 it opened an office in US and flew a Japanese
flag for first time since WW2 in US.
• Morita suffered a stroke in 1993 and retired the next
year, Sony also declared its first loss in 1993. 5
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Opening Scenario
• Sony introduced Vaio computers in 1997, made robot
dog AIBO in 1999.
• Company has multiple divisions but it is also facing
intense competition in each product category.
• According to some critics, losses are because company
relied on its past success and became proud, as a result
failed to cope with changing consumer needs.
• “Consumer electronics went through a difficult phase
when traditional [Sony] product categories like
analogue TV and Walkmans were disrupted by new
products with better capabilities provided by new
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companies
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Opening Scenario

• Samsung invested in new TV technologies

quickly and Apple in smartphones and tablets.
• Sony remained very slow to respond considering
even LED TVs relatively not important but when
it realized, then it had to invest heavily which
resulted in losses.
• Samsung started as a retailer in 1938 and
entered electronics in late 1960s. It also became
world's biggest mobile phone manufacturer in
2012 by replacing Nokia.
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Opening Scenario

• Steve Jobs cofounded Apple. The company introduced

first PCs in 1970s and Macintosh in 1984.
• From mid-to-late 1990s Apple’s sales were halved and
its PC market share was dropped to 2%.
• His own interest and passion helped him cash on mp3
players market with an iPod in 2001.
• Another six years later Apple jumped into smart-phones
with first iPhone.
• Apple came up with was a tablet-PC in 2010 called iPad.
• Steve Jobs resigned as CEO in 2011 and also died same
year.
• Apple's brand continued to grow in top ranks and 8
company has recorded sales of $260 billion in 2019.
Chapter-5

New Products
• Try asking your grandparents how school life was in their era.
Mobile phone and a laptop might fill most needs of today's
students, but most of our grandparents may have used entirely
different technology to study.
• The arrival of digital age has allowed technology utilization to sell
products within seconds of development completion.
• In Pakistan there used to be only one channel till 1990 and it would
end all its transmissions at 11pm, with nothing being aired till 6am.

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Before mobile
phones, telephone
sets were primarily
used for
communication.
Getting a
connection wasn't
that convenient
either.

Handwritten copies
were uncommon,
instead traditional Even at higher education level,
tablets were utilized fountain or ball pens were rare,
by students for instead reed pens were used
notes taking and along with manual dipping in ink
home-work, these after almost every word or small
had to be washed sentence.
everyday that was an 10
additional chore.
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Benefits of New Products

• Technological change is so fast that many existing products are
becoming obsolete.
• Atari was once the video games industry leader in early 1980s but
then lost because it didn't innovate.
• Nintendo and Sega took its place from late 80s to early 90s.
• They couldn't have kept the crown for long as just another decade
later Sony became the new king.
• New products satisfy ever-changing consumer wants.
• People seek variety especially in products like shoes and clothes.
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Benefits of New Products

• Without new products firms sales would
decline.
• Kodak was founded in 1888 and once held
a very dominant position in 'camera film'
and also developed the world's first ever
digital camera.
• Fujifilm, a Japan based firm that was
second major producer of films, it
diversified and innovated, as a result Camera 'film rolls' enjoyed their
grew its profits. peak in 2000 but due to rise of
digital cameras, this business
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shrunk to 10% within ten-years.
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New Product Types

• Defining a new product is difficult.
• Marketers often define newness of product in terms of the
degree of difficulty or learning required by customer to be able
to use the product.
• A company may have many different types of new products,
simply extending existing lines, jumping into new product
categories, refining an existing product or coming up with a
real new-to-the-world product.
New to the World Products: Products that are new for entire
population.
• These are very rare and are also risky a for company to develop
as it is difficult to educate the consumers about its benefits.
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New Product Types

New product lines: Whenever a company launches a new product but
that product already exists in the world, then it is considered 'new
product line'.
• Microsoft's move into mobile phones is an addition of a new
product line.
• Unilever's Dove expanded from beauty soap to shampoo, hair
care conditioners, moisturizers and deodorants under the same
umbrella brand of Dove.
Adding to existing lines: Extension is simply adding more products of
same type in the existing portfolio.
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• For example, Unilever's launch of multiple soap brands.
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New Product Types

Cannibalization: When launching a new product
starts taking way sales or market share of
previously launched product of the same
company.
Products Improvements (and cost reduction):
Minor product refinement.
• Various brands of ketchups and mayonnaise
such as Young's have now started adding
caps on its packing so customers can easily
utilize it as opposed to cutting it with
scissors and then having difficulty in 15
reserving.
Chapter-5

New Products Failures

Reasons behind failures:
• Company's failure to match consumer needs with its own product,
• Overestimation of market size,
• Poor design,
• Incorrect positioning,
• Wrong timing,
• Priced too high,
• Ineffective promotion,
• High development cost,
• Insufficient or no after-sales service or support etc. 16
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New Products Failures

• Speaking of wrong timing, do you know who invented the
first tablet-PC?
• People assume it was Apple's iPad in 2010, not only
Microsoft had created a tablet in 2000, many other
companies and people had designed even well before
that.
• Dane Foods Limited launched Danish cookies in Pakistan
but due to different weather conditions it required special
packing.
• Customers didn't buy it because of extra price and
product was eventually taken off in early 2000. 17
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New Products Failures

Serendipity: Occurrence of events by chance, usually meant
for something good, such as a new discovery.
• The famous antibiotic Penicillin, microwave oven and
x-ray images.
• Thomas Edison, known for invention of light bulb had
over 1,000 patents for inventions.
• These came as a result of the team that he had hired
of young mathematicians, scientists and engineers
including Henry Ford and Nikola Tesla.
• These inventions were a result of whole team's
collaborative efforts.

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New Product Development Process

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New Product Development Process

• Investment increases as the process moves
from idea generation to launch.
• These processes are not necessarily followed as
given, because of multiple reasons it is quite
common to see these steps overlapping.
• At one time a team might be improving a
product concept and at the same time someone
might come up with a new idea as well.
• It is actually beneficial for the company to let Google has major market share in online
teams work at multiple steps for time saving search but has also developed various
and increased efficiency and effectiveness. other new products as Gmail, Google
Maps, and also went on to acquire
Android and YouTube. 21
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1. Idea Generation and Screening

• Idea Generation: Systematic search for new product ideas.

• A company has two broad idea sources, internal and
external.
• Internal idea sources include employees.
• 3M is a US firm with a lot of innovations. Initially, a
weak glue was accidently developed by one employee
but then another person thought that it could actually
be used for bookmarking and so Post-It Notes were
born. It was also an internal idea.
• Another way to estimate the type of new product
required is to forecast the upcoming technology. 22
Chapter-5

1. Idea Generation and Screening

• External idea sources may include retailers,
consultants, other companies or even customers
who themselves may suggest new products.
• Example, Lego launched a 'train set‘ upon
customer's suggestion.
• P&G gets more than half of ideas from external
sources.
Kahoot apps allow faculty
• Crowdsourcing: form of gathering new ideas is members to create quiz and let
that a company would go online and ask participants compete making
customers to submit new ideas. education fun.
• Chances of getting new to world products are 23
relatively low via crowdsourcing.
Chapter-5

1. Idea Generation and Screening

Reverse Engineering: It means taking apart a product that
exists in market, then recreating it with modifications, in this
way no copyright violation is done.
Solving Problem (or finding opportunity): Since every
product fulfils a need, therefore most products of the
world have been developed this way by finding an issue, a
problem and then simply solving it.
• Another approach to finding ideas is asking about
problems with an existing product.
• They may develop an improved mobile phone without
these problems or alternately a company may provide 24
an additional accessory that may be helpful.
Chapter-5

Idea Screening: Before moving on to the

second stage of concept development a
company has to evaluate every idea.
• It is to be checked and screened to ensure
that it is in line with the company goals,
realistic and worth all the effort.
• Sometimes product development costs
might be high, or it could be unsafe for
consumers, or sometimes government
regulatory procedures might be lengthy
so the company may drop an idea.
Final Fantasy-7 was the most expensive
video game ever developed, a record it
maintained for 14-years from 1997 to 2011.
Some of the ideas discussed to develop its
story were initially postponed in 'idea
screening' stage, but later on used to make
three additional games. Due to success of
FF7 a remake was released in 2020. 25
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2. Concept Development and Testing

New Product Concept: Detailed version of new-product idea in

meaningful consumer terms.
• For example, a concept for battery powered car for seating of
two car mileage, price, color, space etc.
Concept Testing: Asking potential customers questions about
pictures or descriptions of new product.
• Instead of actual product only the concept of new product is
tested with groups of target consumers to find out if
concepts have strong consumer appeal e.g. 5% say they’ll
definitely try new product.
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3. Marketing Strategy (Business Analysis)

• Designing a marketing strategy for a new product based on
its concept.
• The new product development process there is always a
phase of acceptance or rejection (a simple yes/no) from
company management.
• At this phase too it'll be checked whether that the
surviving idea after concept development and testing has
potential to be a viable product for company.
• If 'marketing strategy' is approved then company starts
exerting more effort in prototype development.
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4. Prototype Development / Design

Prototype: Physical form of a product created

individually often utilising materials to be used
in final product, usually a full working model.
• Purpose of prototype is to see if the
product actually fulfils the purpose
(consumer need) for which it was initially
intended.
Louis Vuitton has test lab in Paris
• Feedback gives the company a very good where products are continuously
being tested by machines. A purse is
idea about whether the product needs any being opened and closed thousands
changes of times to see if it is of that high
quality. 28
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4. Prototype Development / Design

Spiral Development (or Probe-and-Learn): It is a

continuous process of improvement during the
product development phase. Build a product
prototype, give it to potential customers so
they test it and give feedback, then based on
their response revise or improve the product.
• New products at times also get issues in James Dyson made over 5,000
acceptance and may take a lot of time before prototypes to create a better
vacuum cleaner. Now, his
reaching masses. company Dyson is one of UK's
largest companies and even has
cordless vacuums.
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5. Test Marketing and Launch

Test Marketing: Stage in new product development in which a

product and its marketing plan are tested in real settings but in
limited zones (or on limited customers).
• Standard Test Markets: Small number of test areas.
• Controlled Test Markets: Selected number of stores are
paid to carry new products.
• Simulated Test Markets: Artificially created zone. Its result
may not be as precise because usually people don't react
normally when they are being monitored.
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5. Test Marketing and Launch

• Blind Test: For testing purposes a potential customers is provided with few
products of same category but of different brands, without displaying the
brand name of the products to test which brand's offering they would
prefer without knowing the name.
• A service provider can also see what type of a new service may
provide more sales.
• Online test marketing is also a very economical idea as sometimes
companies introduce new products on their websites.
• For an advertising agency creating a new ad may take just a few
weeks while for a complex product like car or a new software it might
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take years in development.
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5. Test Marketing and Launch

Commercialization: Launch of a new product.
Planned Market Rollout is releasing step by step in different zones.
• It also allows the company to balance their cash flows.
• For example, a software is released in Japan in January 2021, but a
month later in February in US and then in March in Europe.
• The company spends on promotions in Japan in December then upon
release of the product cash is recovered through sales.
• This cash is further utilized for promotion in US and then again after
release of product in US cash replenishes which is then further used for
promotions in Europe. 32
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Innovation

Innovation is the process by which ideas are

transformed into new products. As Nissan LEAF
became the world's first 100% electric car. They
promoted it as an "Innovation for the planet –
innovation for all".
Types of Innovation
• Continuous Innovation: Improving an already existing
products/ services or technology.
• For example, Qarshi has a famous herbal medicine
Johar Joshanda that is helpful in cold, flu and
cough. 33
Chapter-5

Innovation
Types of Innovation
Discontinuous or Radical Innovation: A breakthrough
innovation that makes existing products obsolete and
replaces them.
• Netflix has driven many video rental businesses
out and Uber has cost jobs of several traditional
cab services.
• Google Maps has made need for printed maps
obsolete.
• Landline telephones to mobile phones and now
smartphones is another discontinuous
innovation.
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Diffusion of Innovation

"Diffusion is the process by which an innovation is communicated

through certain channels over time among the members of a social
system".
•Diffusion of Innovation: A chart that shows how new innovations
penetrates in population by dividing them into different adoption
groups: Innovators, early adopters, early majority, late-majority and
laggards.
• Diffusion of Innovation shows a rough percent of population that
falls into five different types of new product adopters.

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Chapter-5

Diffusion of Innovation
• Innovators: A group of
consumers that first adopt a new
product, usually 2.5% of
population.
• Early Adopters: A group of
consumers that is usually second
to adopt a product, about 13.5%
of population. Crossing these
first two adopter groups is like
'crossing the chasm’ or the
difficult phase. 36
Chapter-5

Diffusion of Innovation
• Early Majority: Third group to adopt new product, they are about 34% of market. its
members prefer to wait a bit so that products relative acceptance is known and if
there are any problems with the product those are fixed by the company.
• Late Majority: A group of sceptical consumers who are slow to adopt a new product
but eventually do so to save money or in response to social pressure.
• Laggards: A group of consumers who are last to adopt an innovation, about 16%
population.

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Product Life Cycle (PLC)

• Product Life Cycle: The course of a product's sales and profit over its
lifetime, from introduction, growth, maturity and decline.
• These phases reflect its total sales and profit.
• One big advantage of a new product can be that if it lacks any
competition and customers really like it then a company can charge
higher prices and profits.
• Remember it is Product Life Cycle and not brand life cycle. However,
PLC concept can be applied to a
• Product class e.g. gasoline powered automobiles, hybrids.
• Product form e.g. SUVs, hatch-back. 38
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Chapter-5

Product Life Cycle (PLC)

Introduction: A product is newly introduced into the market and since it is
unknown so the company spends a lot on advertising trying to convince
people of its benefits.
Growth: Sales rise quite rapidly during growth stage as product is now
becoming more known in wider circles.
Maturity: Sales receive peak during this phase of maturity. A vast product
line is provided and extensive distribution is developed to meet the
demands by customers.
Decline: Possible reasons for decline are change in customer taste or
technological advances as from telephone to mobile and then to 40

touch-screen smartphones.
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Expanding the PLC

• Promoting new uses of existing product helps in
prolonging the PLC.
• For example, Rooh Afza promoted in its ads that
you should try using it on various desserts like
custard and even on ice-cream for enhanced
flavour.
• Another option is to encourage frequency of
usage as many soap brands try to do.

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Chapter-5

Expanding the PLC

• Ethics should be kept in mind while selling products.
• For example, interest based banking ads are found
abundantly even though Allah has clearly mentioned that
it is forbidden and will result in loss of remaining wealth.
• Various other brands would opt for planned obsolescence
meaning they deliberately release a new product after
very small time gap just to convince people to buy more
and earn more profits.
• Such products have only JND (Just-Noticeable Difference)
that is when the difference in a new product is so little that
it is barely noticeable.
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Expanding the PLC

Examples of products in different
stages:
• Introduction: 8k resolution TVs
• Growth: Ultra HD (4k) TVs,
Tablet-PCs
• Maturity: Soft drinks, automobiles
• Decline: Cassette players, bottle
openers

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PLC Shapes
• PLC Shapes: Different possible outcomes of a new product launch
and its penetration into market.
• Boom or Classic: Consider it very ideal as according to it the
product remains in maturity for a long time, so no new
products are needed and still sales are maintained. Example:
over eighty years as Dalda, Rooh Afza, Lipton, Lux, Lifebuoy
and Coca-Cola.
• Bust (failed product): When a product does not properly
take off and dies soon. Vast majority of new products fall in
this PLC.
• Fad: Fad is a temporary period of unusually high sales driven
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by consumer enthusiasm and immediate product/brand
popularity but usually an equally quick decline.
Chapter-5

PLC Shapes
• Extended Fad: In some cases a product gains
sudden boost then sales fall to a certain level and
then that level is maintained.
• Seasonal (or Fashion): Many new products keep on
entering and exiting fashion but once invented
keep on returning back after a slump.
• Revival (or Nostalgia): Usually after a product is
almost at end, some consumers like to use it for
nostalgia (to be lost in the past in memories).

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 ُ‫ﺟَ زَ ا ُﻛ ُم ﷲ‬

THANK YOU!

©2022 | Basic Marketing

by Salman Zaheer
Digital version of the book is available for FREE: https://archive.org/details/basic-marketing-2020
Printed copy can be obtained from: https://www.readings.com.pk/pages/BookDetails.aspx?BookID=1370613