New Product Development and Consumer Adoption Process
Consumer Product Adoption
Not all consumers have the same reaction when they “discover” a new product on the market. Some subjective aspects will appear on the first NPD (New Product Development) step of launching. Several factors influence the adoption process that comes from the recognition of the novelty (awareness) up to the first purchase (trial) and final adoption in a routine way of consumption.
Consumer Adoption Process:
- Awareness
- Interest
- Evaluation
- Trial
- Adoption
Some of these factors to be considered are:
- Previous brand recognition or past experiences
- Risk-aversion
- Degree of novelty
- Degree of improvement perceived to satisfy the need better
- Relative price positioning (versus direct and indirect substitutive products)
The company must consider at what stage or phase the different products operating in the markets are because the different strategies and marketing tactics, and the results in terms of sales and profits, depend on this.
Consumers respond differently when facing “innovation” in the market, which alters their consumption routine. In this process of adoption of “innovation,” the concepts of “risk aversion” and “adventurous spirit” are recurrent when new products are adopted to the habitual consumption process. This type of response corresponds to different profiles that can be classified as follows:
Consumer Profiles in Adoption:
1. Innovators (2.5% of total)
This is the first group to adopt the product when it appears on the market. They represent a minority (2.5%) of the total target or potential public estimated by the company for the penetration of the target market.
2. First Adopters (13.5% of total)
They do not represent a large number of users or total consumers with respect to the intended target (approximately 13.5%), as they do not need a large sample of use to consume or use the proposed product. It is a group that can become opinion leaders, impacting and influencing the following adopters of product consumption.
3. Second or Last Majority (34% of total)
It is an important, numerous consumer group that guarantees the stability of the business and the levels of market penetration. The profile of this potential consumer in the entry to consume is based on the adoption of the product once it is consolidated in the target market.
4. Strugglers or Laggards (16% of total)
This consumer profile can be defined as skeptical and reluctant to adopt new ways to meet their needs. They are traditionalist consumers, loyal and fair in their behaviour.
The decision to penetrate the market or segment with a specific product portfolio implies knowing perfectly which variables of the environment affect the target market and the characteristics of the penetration products themselves. One of the most important aspects to consider by the company when selecting the input products is the phase of the life cycle in which the products defined for penetration are found.
New Product Development
New product development has become one of the main growing strategies for manufacturers and distributors and a key success factor for developing markets and segments (new or actual ones). There are two main strategic objectives for investing in new product development:
- Long-Term Growth of the Company: Especially in mature markets where companies feel continuously threatened, losing sales and profits.
- Differentiation and Leadership Strategies: It is commonly perceived by the consumer as better brands, whether dynamic and innovative, offering better value for the range of products.
The introduction of new products can positively impact sales growth. Initially, profitability may not increase since substantial research, development, and launching costs associated with the venture must be recouped. Just following the same analysis, the new product launch must have at least the same average profit per unit as the current product portfolio.
Longer-term rates of return on investment which are at least equal to the current rate of return on capital employed are required from new products. A ‘new product’ can be defined in several different ways. A product can refer to a physical entity or a cluster of expected customer benefits, depending on whether the perspective adopted is that of the business or that of the market. From a business point of view, product innovation may represent a change in or addition to the physical entities that make up its product line. A new product is considered, conceptually, by the Oslo Manual (OCDE, 2005) as a worldwide agreement by marketing and researchers experts, as follows:
“An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”
“A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user-friendliness or other functional characteristics. Product innovations can utilize new knowledge or technologies, or can be based on new uses or combinations of existing knowledge or technologies.”
Reasons for New Product Failure:
There are many different reasons for new products failing to meet the expectations of the firms which launched them. Some major reasons for new product failure are as follows:
- Products lack useful/meaningful uniqueness
- Planning is poor during the introduction phase
- The introduction is badly timed, e.g., before the market is ready for the product
- Key important points are sometimes overlooked in the enthusiasm to go ahead
- Poor marketing and failure after launch
- The top management in the organization does not provide adequate support for the product
- Company politics, e.g., between various brand managers
- Unforeseen high product costs
Companies must be oriented to market in an open wide vision intended to transform the ‘consumer willingness’ and ‘consumer insights’ into real products. It is commonly used the funnel approaching or logical steps to develop the project.