Adoption Process of New Products

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Adoption Process of New Products

The growth rate and total sales level of new products rely heavily on two

related consumer behavior concepts: the adoption process and the diffusion

process.

The adoption process is the mental and behavioral procedure an individual

consumer goes through when learning about and purchasing a new

product. The process consists of these stages:

1. Knowledge: A person learns of a product's existence and gains some

understanding of how it functions.

2. Persuasion: A person forms a favorable or unfavorable attitude about a

product.

3. Decision: A person engages in actions that lead to a choice to adopt or

reject a product.

4. Implementation: A person uses a product.

5. Confirmation: A person seeks reinforcement and may reverse a decision

if exposed to conflicting messages.

The rate (speed) of adoption depends on consumer traits, the product, and

the firm's marketing effort. Adoption will be faster if consumers have high

discretionary income and are willing to try new offerings; the product

presents little physical, social, or financial risk; the product has an

advantage over other items already on the market; the product is a

modification of an existing idea and not a major innovation; the product is

compatible with current consumer life-styles; the attributes of the product

can be easily communicated; the importance of the product is low; the

product can be tried in small quantities; mass advertising and distribution

are used; the product is consumed quickly; or the product is easy to use.

The diffusion process describes the manner in which different members ofthe target market often accept and purchase a product. It spans the time

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from product introduction until market saturation:

1. Innovators are the first consumers to buy a new product. They are

venturesome, willing to accept risk, socially aggressive, communicative,

and cosmopolitan. It is necessary to determine which innovators are opinion

leaders?those who influence others to purchase. This group represents 2.5

per cent of the target market.

2. Early adopters are the next consumers to buy a new product. They enjoy

the leadership, prestige, and respect that early purchases bring. These

consumers tend to be opinion leaders. They adopt new ideas but use

discretion. This group represents 13.5 per cent of the market.

3. The early majority is the first part of the mass market to buy a product.

They have status in their social class and are outgoing, communicative, and

attentive to information cues. This group represents 34 per cent of the

target market.

4. The late majority is the second part of the mass market to buy a product.They are less cosmopolitan and responsive to change. The late majority

includes people with lower economic and social status, those past middle

age, and skeptics. This group represents 34 per cent of the market.

5. Laggards are last to purchase. They are price conscious, suspicious of

change, low in income and status, tradition bound, and conservative.

Laggards do not adopt a product until it reaches maturity. Some firms

ignore them because it can be difficult to market a product to this small

group. However, a market segmenter may do well by concentrating on

products for laggards. This group represents 16 per cent of the market.

Pricing Strategies

Pricing strategies for products or services encompass three main ways to

improve profits. These are that the business owner can cut costs or sell

more, or find more profit with a better pricing strategy. In the downturn of

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2008-11, and since, when costs are likely already at their lowest and sales

are hard to find, adopting a better pricing strategy is a key option to stay

viable.

Merely raising prices is not always the answer, especially in a poor

economy. Too many businesses have been lost because they priced

themselves out of the marketplace. On the other hand, too many business

and sales staff leave "money on the table". One strategy does not fit all, so

adopting a pricing strategy is a learning curve when studying the needs

and behaviors of customers and clients.[1]

Models of pricing

Cost-plus pricing

Cost-plus pricing is the simplest pricing method. The firm calculates the

cost of producing the product and adds on a percentage (profit) to that

price to give the selling price. This method although simple has two flaws;

it takes no account of demand and there is no way of determining if

potential customers will purchase the product at the calculated price.

This appears in two forms, Full cost pricing which takes into consideration

both variable and fixed costs and adds a % markup. The other is Direct cost

pricing which is variable costs plus a % markup, the latter is only used in

periods of high competition as this method usually leads to a loss in the

long run.

Creaming or skimming

In market skimming, goods are sold at higher prices so that fewer sales are

needed to break even. Selling a product at a high price, sacrificing high

sales to gain a high profit is therefore "skimming" the market. Skimming is

usually employed to reimburse the cost of investment of the original

research into the product: commonly used in electronic markets when a

new range, such as DVD players, are firstly dispatched into the market at a

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high price. This strategy is often used to target "early adopters" of a

product or service. These early adopters are relatively less price-sensitive

because either their need for the product is more than the need to

economise, they understand the value of the product better than others orsimply because they are too rich to be affected by the high prices.

This strategy is employed only for a limited duration to recover most of

investment made to build the product. To gain further market share, a

seller must use other pricing tactics such as economy or penetration. This

method can have some setbacks as it could leave the product at a high

price against the competition.

Limit pricing

A limit price is the price set by a monopolist to discourage economic entry

into a market, and is illegal in many countries. The limit price is the price

that the entrant would face upon entering as long as the incumbent firm

did not decrease output. The limit price is often lower than the average

cost of production or just low enough to make entering not profitable. The

quantity produced by the incumbent firm to act as a deterrent to entry is

usually larger than would be optimal for a monopolist, but might still

produce higher economic profits than would be earned under perfect

competition.

The problem with limit pricing as a strategy is that once the entrant has

entered the market, the quantity used as a threat to deter entry is no

longer the incumbent firm's best response. This means that for limit pricing

to be an effective deterrent to entry, the threat must in some way be made

credible. A way to achieve this is for the incumbent firm to constrain itself

to produce a certain quantity whether entry occurs or not. An example of

this would be if the firm signed a union contract to employ a certain (high)

level of labor for a long period of time.

Loss leader

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A loss leader or leader is a product sold at a low price (ie at cost or below

cost) to stimulate other profitable sales. this would help the companies to

expand its market share as a whole.

Market-oriented pricing

Setting a price based upon analysis and research compiled from the target

market. This means that marketers will set prices depending on the results

from the research. For instance if the competitors are pricing their products

at a lower price, then it's up to them to either price their goods at an above

price or below, depending on what the company wants to achieve .

Penetration pricing

Setting the price low in order to attract customers and gain market share.

The price will be raised later once this market share is gained.

Price discrimination

Setting a different price for the same product in different segments to the

market. For example, this can be for different ages, such as classes, or for

different opening times,

Premium pricing

Premium pricing is the practice of keeping the price of a product or service

artificially high in order to encourage favorable perceptions among buyers,

based solely on the price. The practice is intended to exploit the (notnecessarily justifiable) tendency for buyers to assume that expensive items

enjoy an exceptional reputation, are more reliable or desirable, or

represent exceptional quality and distinction.

Predatory pricing

Aggressive pricing (also known as "undercutting") intended to drive out

competitors from a market. It is illegal in some countries.

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Contribution margin-based pricing

Contribution margin-based pricing maximizes the profit derived from an

individual product, based on the difference between the product's price and

variable costs (the product's contribution margin per unit), and on ones

assumptions regarding the relationship between the products price and

the number of units that can be sold at that price. The product's

contribution to total firm profit (i.e. to operating income) is maximized

when a price is chosen that maximizes the following: (contribution margin

per unit)X(number of units sold)..

Psychological pricing

Pricing designed to have a positive psychological impact. For example,

selling a product at $3.95 or $3.99, rather than $4.00.

Dynamic pricing

A flexible pricing mechanism made possible by advances in information

technology, and employed mostly by Internet based companies. Byresponding to market fluctuations or large amounts of data gathered from

customers - ranging from where they live to what they buy to how much

they have spent on past purchases - dynamic pricing allows online

companies to adjust the prices of identical goods to correspond to a

customers willingness to pay. The airline industry is often cited as a

dynamic pricing success story. In fact, it employs the technique so artfully

that most of the passengers on any given airplane have paid differentticket prices for the same flight.

Price leadership

An observation made of oligopolistic business behavior in which one

company, usually the dominant competitor among several, leads the way in

determining prices, the others soon following. The context is a state of

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limited competition, in which a market is shared by a small number of

producers or sellers.

Target pricing

Pricing method whereby the selling price of a product is calculated to

produce a particular rate of return on investment for a specific volume of

production. The target pricing method is used most often by public utilities,

like electric and gas companies, and companies whose capital investment

is high, like automobile manufacturers.

Target pricing is not useful for companies whose capital investment is low

because, according to this formula, the selling price will be understated.

Also the target pricing method is not keyed to the demand for the product,

and if the entire volume is not sold, a company might sustain an overall

budgetary loss on the product.

Absorption pricing

Method of pricing in which all costs are recovered. The price of the productincludes the variable cost of each item plus a proportionate amount of the

fixed costs and is a form of cost-plus pricing

High-low pricing

Method of pricing for an organization where the goods or services offered

by the organization are regularly priced higher than competitors, but

through promotions, advertisements, and or coupons, lower prices are

offered on key items. The lower promotional prices are designed to bring

customers to the organization where the customer is offered the

promotional product as well as the regular higher priced products.

Premium decoy pricing

Method of pricing where an organization artificially sets one product price

high, in order to boost sales of a lower priced product.

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Marginal-cost pricing

In business, the practice of setting the price of a product to equal the extra

cost of producing an extra unit of output. By this policy, a producer

charges, for each product unit sold, only the addition to total cost resulting

from materials and direct labor. Businesses often set prices close to

marginal cost during periods of poor sales. If, for example, an item has a

marginal cost of $1.00 and a normal selling price is $2.00, the firm selling

the item might wish to lower the price to $1.10 if demand has waned. The

business would choose this approach because the incremental profit of 10

cents from the transaction is better than no sale at all.

Value-based pricing

Pricing a product based on the perceived value and not on any other factor.

Pricing based on the demand for a specific product would have a likely

change in the market place.

Pay what you want

Pay what you want is a pricing system where buyers pay any desired

amount for a given commodity, sometimes including zero. In some cases, a

minimum (floor) price may be set, and/or a suggested price may be

indicated as guidance for the buyer. The buyer can also select an amount

higher than the standard price for the commodity.

Giving buyers the freedom to pay what they want may seem to not make

much sense for a seller, but in some situations it can be very successful.

While most uses of pay what you want have been at the margins of the

economy, or for special promotions, there are emerging efforts to expand

its utility to broader and more regular use.

Freemium

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Freemium is a business model that works by offering a product or service

free of charge (typically digital offerings such as software, content, games,

web services or other) while charging a premium for advanced features,

functionality, or related products and services. The word "freemium" is aportmanteau combining the two aspects of the business model: "free" and

"premium". It has become a highly popular model, with notable success.

Odd pricing

In this type of pricing, the seller tends to fix a price whose lastmost digits

are odd numbers. This is done so as to give the buyers/consumers no gap

for bargaining as the prices seem to be less and yet in an actual sense are

too high. A good example of this can be noticed in telephone promotions of

some countries like Uganda where instead of writing the price as sh. 40000,

they write it as sh. 39999. This pricing policy is common in economies

using the free market policy.

Nine Laws of Price Sensitivity and Consumer Psychology

In their book, The Strategy and Tactics of Pricing, Thomas Nagle and Reed

Holden outline nine "laws" or factors that influence how a consumer

perceives a given price and how price-sensitive they are likely to be with

respect to different purchase decisions.

They are:

1. Reference Price Effect buyers price sensitivity for a given

product increases the higher the products price relative to perceived

alternatives. Perceived alternatives can vary by buyer segment, by

occasion, and other factors.

2. Difficult Comparison Effect buyers are less sensitive to the price

of a known or more reputable product when they have difficulty

comparing it to potential alternatives.

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3. Switching Costs Effect the higher the product-specific investment

a buyer must make to switch suppliers, the less price sensitive that

buyer is when choosing between alternatives.

4.

Price-Quality Effect buyers are less sensitive to price the morethat higher prices signal higher quality. Products for which this effect

is particularly relevant include: image products, exclusive products,

and products with minimal cues for quality.

5. Expenditure Effect buyers are more price sensitive when the

expense accounts for a large percentage of buyers available income

or budget.

6. End-Benefit Effect the effect refers to the relationship a given

purchase has to a larger overall benefit, and is divided into two parts:

Derived demand: The more sensitive buyers are to the price of the

end benefit, the more sensitive they will be to the prices of those

products that contribute to that benefit. Price proportion cost: The

price proportion cost refers to the percent of the total cost of the end

benefit accounted for by a given component that helps to produce

the end benefit (e.g., think CPU and PCs). The smaller the given

components share of the total cost of the end benefit, the less

sensitive buyers will be to the component's price.

7. Shared-cost Effect the smaller the portion of the purchase price

buyers must pay for themselves, the less price sensitive they will be.

8. Fairness Effect buyers are more sensitive to the price of a product

when the price is outside the range they perceive as fair or

reasonable given the purchase context.

9. The Framing Effect buyers are more price sensitive when they

perceive the price as a loss rather than a forgone gain, and they have

greater price sensitivity when the price is paid separately rather than

as part of a bundle.

Human Resource Management: DefinedHuman Resource Management has come to be recognized as an inherent

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part of management, which is concerned with the human resources of an

organization. Its objective is the maintenance of better human relations in

the organization by the development, application and evaluation of policies,

procedures and programmes relating to human resources to optimize theircontribution towards the realization of organizational objectives.

In other words, HRM is concerned with getting better results with the

collaboration of people. It is an integral but distinctive part of management,

concerned with people at work and their relationships within the enterprise.

HRM helps in attaining maximum individual development, desirable

working relationship between employees and employers, employees and

employees, and effective modeling of human resources as contrasted with

physical resources. It is the recruitment, selection, development, utilization,

compensation and motivation of human resources by the organization.

Human Resource Management: Objectives

To help the organization reach its goals.

To ensure effective utilization and maximum development of human

resources.

To ensure respect for human beings. To identify and satisfy the needs of

individuals.

To ensure reconciliation of individual goals with those of the organization.

To achieve and maintain high morale among employees.

To provide the organization with well-trained and well-motivated

employees.

To increase to the fullest the employee's job satisfaction and self-

actualization.

To develop and maintain a quality of work life.

To be ethically and socially responsive to the needs of society.

To develop overall personality of each employee in its multidimensional

aspect.

To enhance employee's capabilities to perform the present job.

To equip the employees with precision and clarity in transaction of

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business.

To inculcate the sense of team spirit, team work and inter-team

collaboration.

Human Resource Management: Functions

In order to achieve the above objectives, Human Resource Management

undertakes the following activities:

1. Human resource or manpower planning.

2. Recruitment, selection and placement of personnel.

3. Training and development of employees.

4. Appraisal of performance of employees.

5. Taking corrective steps such as transfer from one job to another.

6. Remuneration of employees.

7. Social security and welfare of employees.

8. Setting general and specific management policy for organizational

relationship.

9. Collective bargaining, contract negotiation and grievance handling.

10. Staffing the organization.

11. Aiding in the self-development of employees at all levels.

12. Developing and maintaining motivation for workers by providing

incentives.

13. Reviewing and auditing manpower management in the organization

14. Potential Appraisal. Feedback Counseling.

15. Role Analysis for job occupants.

16. Job Rotation.

17. Quality Circle, Organization development and Quality of Working Life.

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Features of Human Resource Management HRM

Following is the nature or features of Human Resource Management HRM :-

1. HRM as a Process

HRM is a process of four functions :-

1. Acquisition of human resources : This function includes Human

Resource Planning, Recruitment, Selection, Placement and Induction

of staff.

2. Development of human resources : This function includes

Training and Development and Career development. The knowledge,

skills, attitudes and social behavious of the staff are developed.

3. Motivation of human resources : This function includes giving

recognition and rewards to the staff. it also includes Performance

Appraisal and handling the problems of staff.

4. Maintenance of human resources : This function includes

providing the best working conditions for employees. It also looks

after the health and safety of the staff.

2. Continuous Process

HRM is not a one-time process. It is a continuous process. It has to

continuously change and adjust according to the changes in the

environment, changes in the expectations of the staff, etc. HRM has to give

continuous training and development to the staff due to changes in

technology.

3. Focus on Objectives

HRM gives a lot of importance to achievement of objectives.

The four main objectives HRM has to achieve are :-

1. Individual objectives of the staff.

2. Group or Departmental objectives.

3. Organisational objectives.

4. Societal objectives.

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4. Universal Application

HRM has universal application. That is, it can be used for business as well

as for other organisations such as schools, colleges, hospital, religiousorganisations, etc.

5. Integrated use of Subsystems

HRM involves the integrated use of sub-systems such as Training and

Development, Career Development, Orgnisational Development,

Performance Appraisal, Potential Appraisal, etc. All these subsystems

increase the efficiency of the staff and bring success to the organisation.

6. Multidisciplinary

HRM is multidisciplinary. That is, it uses many different subjects such as

Psychology, Communication, Philosophy, Sociology, Management,

Education, etc.

7. Developes Team Spirit

HRM tries to develop the team spirit of the full organisation. Team spirit

helps the staff to work together for achieving the objectives of the

organisation. Now-a-days more importance is given to team work and not

to individuals.

8. Develops Staff Potentialities

HRM develops the potentialities of the staff by giving them training and

development. This will make the staff more efficient, and it will give them

more job satisfaction.

9. Key Elements for solving problems

Today, we have rapid technological, managerial, economic and social

changes. These changes bring many problems. HRM continuously tries to

solve these problems.

10. Long Term Benefits

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HRM brings many long term benefits to the individuals (staff), the

organization and the society. It gives many financial and non-financial

benefits to the staff. It improves the image and profits of the organization.

It also provides a regular supply of good quality goods and services atreasonable prices to the society.

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Functions of SEBI are of two types

1. Regulatory functions

2. Developmental functions

1. REGULATORY FUNCTION

a). Registration of brokers and sub-brokers and other players in the market

b). Registration of collective investments schemes and Mutual Funds

c). Regulation of stock exchanges and other self-regulatory organisations

(SRO) merchant banks etc

d) Prohibition of all fraudulent and unfair trade practices

e) Controlling Insider Trading and take over bids and imposing penalties for

such practices

2. DEVELOPMENT FUNCTIONS

a) Investor education

b) Training of intermediaries.

c) Promotion of fair practices and Code of conduct for all S.R.O.s

d) Conducting Research and Publishing information useful to all market

participants

Functions. Various functions of or types of assistance to be provided by the

IDBI are as follows:

(i) Direct Financial Assistance:

The IDBI provides direct financial assistance to the industrial concerns in

the form of (a) granting loans and advances; and (b) subscribing to,

purchasing or underwriting the issues of stocks, bonds or debentures.

(ii) Indirect Financial Assistance:

The IDBI provides indirect financial assistance to the small and medium

industrial concerns through other financial institution, such as, StateFinance Corporations, State Industrial Development Corporations,

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Cooperative banks, regional rural banks, commercial banks. The Assistance

to these institutions include :(a) refinancing of loans given by the

institutions; subscribing to their shares and bonds; (c) rediscounting of bills.

(iiI) Development Assistance:

The creation of the Development Assistance Fund is the special feature of

the IDBI. The Fund is used to provide assistance to those industries which

are not able to obtain funds in the normal course mainly because of heavy

investment involved or low expected rate of returns. The financial

resources of the Fund mainly come from contributions made by the

government in the form of loans, gifts, donations, etc; and from other

sources. Assistance from the Fund requires the prior approval by the

government.

(iv) Promotional Function:

Besides providing financial assistance, the IDBI also undertakes various

promotional activities such as marketing and investment research, techno-

economic surveys. It provides technical and administrative advice for

promotion, expansion and better management of the industrial concerns.

What are the functions of the ICICI?

i. It provides long-term and medium-term loans in rupees and foreign

currencies.

ii. It participates L* the equity capital of the industrial concerns.

iii. It underwrites new issues of shares and debentures.

iv. It guarantees loans raised by private concerns from other sources.

v. It provides technical, managerial and administrative assistance to

industrial concerns.

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What are the functions of SIDBI?

SIDBI provides assistance to the small-scale industries sector in the country

through the existing banking and other financial institutions, such as, State

Financial Corporations, State Industrial Development Corporations,

commercial banks, cooperative banks and RRBs. etc. The major functions of

SIDBI are given below:

I. It refinances loans and advances provided by the existing lending

institutions to the small-scale units.

II. It discounts and rediscounts bills arising from sale of machinery to

and manufactured by small-scale industrial units.

III. It extends seed capital/soft loan assistance under National Equity

Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital

schemes.

IV. It grants direct assistance and refinance loans extended by primary

lending institutions for financing exports of products manufactured by

small-scale units.

V. It provides services like factoring, leasing, etc. to small units.

VI. It extends financial support to State Small Industries Corporations for

providing scarce raw materials to and marketing the products of the

small-scale units.

VII. It provides financial support to National Small Industries Corporation

for providing; leasing, hire purchase and marketing help to the small-

scale units.

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Adoption Process of New Products