How New Products Are Diffused through a Marketplace - Essay Example

New Product Development Submitted by: XXXX XXXXX Number: XXXXXXX of XXXXXXX XXXXXXX XXXXXXX XXXXXXX Date of Submission: XX – XX – 2009 Number of words: 1242 (Excluding the Bibliography) Explain how new products are diffused through a marketplace, and identify the different groups involved in the process Diffusion of new products into a market place needs careful analysis and strategic planning. These strategies can be effective if a right choice is made regarding the target markets and where the products need to be introduced (Johnson, Scholes and Whittington, 2006). Authors and experts in the field have developed a ‘diffusion of innovation process’, which explains how a new product spreads throughout a market over time. This theory is very essential as all products require going through these stages, as not everyone in the markets will be on the same readiness to buy products at the same time. In simpler words, the willingness to buy a product at a particular time is different for different people. The first ever contribution to the field was provided by Everett Rogers in 1962. He defined diffusion as ‘the process by which an innovation is communicated through certain channels over time among the members of a social system’. The figure below provides a brief understanding of the diffusion of innovation process curve. This curve categorises people and organisations according to the willingness of the people to buy the product and adoption of the innovations. Figure: The diffusion of innovation process (Jobber, 2004) To further gain a better understanding of the various stages that have been displayed above the following sub sections will deal with the characteristics of the each of the groups. As has been noted in the figure, and as suggested by Roger, the five broad characteristics for each of the categories are as under: a) Innovators: The people who fall under this category are generally very venturesome. The people who fall into this category generally tend to be different and like to have the latest versions of all new products and are willing to be the first to experiment the new products. These people tend to be the younger population of the markets. The general characteristics of these groups are that they are highly educated, with high levels of confidence, and highly affluent financially. The fact that the groups are affluent financially, allows them to be able to test with the products and take chances. Considering the innovators of organisations, generally fall into the companies with better educated management. The reasons for these groups to adopt newer innovations is the fact of their own god track record in introducing newer products to the markets and the need to be updated with the latest in the markets. b) Early Adopters: This is the second group of people in the market. These groups do not tend to be very venturesome like the innovators. These people need the confidence that someone else has tried the product before investing into the products. These people also have similar characteristics like that of innovators, i.e. they are well educated, and financially affluent. These groups also are self confident and are willing to take up the risk of buying products that have not gained market acceptance. This group along with the innovators in some manner tend to be the opinion leader for products and have a strong influence on the choice of others on the products. These groups in some way are a filter of the products that are accepted by the innovators to the general public and the majority. c) Early and Late Majority: These groups form the majority of the markets. The early majority of people are cautious individuals who prefer to ensure that the product has gained an acceptance in the market by proving themselves. These people are very safe spenders and need the products to prove themselves before they would be wiling to spend on investing in the product. Following the early majority are the Late Majority. These people tend to be even more cautious about the money they spend and wait for the product to be accepted by the early majority of the markets before buying the product. These people might be faced with a number of social forces which tend to delay them from buying any new product. d) Laggards: This group of people fall into the traditional category. They tend to be very picky about the products they invest in and generally tend to by products which are a part of the ‘traditional products’. The major characteristics of this group are that they are more towards the older category of the population and tend to be less well – educated than the other groups. The diffusion of innovation process is very easily linked to the product life cycle. According to Jobber (2003, p.229), “a product is anything that is capable of satisfying customer needs”. It is essential to understand that the needs of a customer change over time. These changes in the needs of the customers, to a great extent lead to the changes in the products as well. The various groups and categories that have been discussed above can be linked to the product life cycle as well. The figure below provides for a detailed understanding of the product life cycle (Jobber, 2004). Also the explanation of each of the stages is provided and a link between the category of people and the life cycle of the products is also discussed. Figure 2: Product Life Cycle (Jobber, 2004) Stages of Product Life Cycle: Introduction: Here the companies generally tend to operate in a number of losses, mainly because of the fact that the company has huge sums of monies that have been invested into the development and the promotion of the product. In case the product does not show a promising growth, the companies also have a chance of terminating the product at this stage. This is where the innovators tend to buy the products and work as the testers for the companies. Growth: Here in this stage the sales and profits of the product grow at faster rates. The start of this stage generally finds the products gaining in terms of profits and sales and a rapid acceptance is seen within the markets. This is majorly due to the fact that there are new entrants within the market, which creates the product demand to be reduced. It is in this stage that the early adopters are willing to buy the products and test them. Maturity: Here the sales of the product tend to peak and then flatten out. This is majorly due to saturation. This stage in the life cycle of a product requires a lot of advertising, product improvements, sales promotion offers, dealer discounts, and price cutting. The early and late majority come into the scene at this stage and tend to provide the fuel to the growth stage. Decline: Here there is an intense decline in the demand for the product and this is majorly due to the high levels of growth of technology. Also another major determinant that causes the decline of a product is the change in consumer tastes. Also the products are faced with a complete decline in the profitability (Barkhouse, 2009). It is also essential to note that the laggards enter the markets either during this period or also in some cases as the late majority. Thus a lot of care needs to be taken by companies while trying to diffuse the new products into markets. A clear understanding of the diffusion of innovation discussed above will provide the marketers with a chance to gain an understanding of where their products stand and how well the products are performing. Bibliography Barkhouse, D., 2009, ‘Week 4: Product life Cycle’, Accessed on 6th July 2009, Retrieved from: http://www.barkhouse.me.uk/MBA/Module%205/week%204/Week%204%20DQ%203.htm Jobber, D., 2004, Principles and Practice of Marketing, 4th Edition, McGraw – Hill, Berkshire Johnson, G., Scholes, K. and Whittington, R., 2006, Exploring Corporate Strategy, 7th edn, Prentice Hall, Essex Read More