Hence, the concludes the definition of Hierarchy of Effects Theory along with its overview.
This model is known as a “hierarchy†because the number of
consumers moving from one stage to the next reduces, as you move through
the model. There may be a lot of consumers that see the product advert
but not everyone will make a purchase. It takes a lot of work to take a
consumer from awareness to the final stage of purchase, so businesses
need to ensure that they try their utmost to get customers from
conviction to complete the final stage of purchase.
2.5.1 EMPIRICAL REVIEW
Most companies invest in New Product Development (NPD) to ensure
future success in the market. However, new products are often more
likely to fail than to succeed. Many observers cite failure rates as
high as 90 to 95 percentage (e.g. business week 1993; Matthews 1997
Young 1998). Hoban (1998) uses as much more restrictive definition of
new products and says that up to one third of new product are
successful. Whatever the failure rate, a substantial amount of NPD
spending can be wasted, by one estimate, 46 percent of all new product
development costs go into products which fail (Power et al 1993).
Further, little is spent on new product development in the first place
various estimate place. NPD spending in USA comapneis at between one and
four percent of gross sales (Hollings worth 1998 Gorski 1994;
respectively). Low spending and high new product failure rates can
easily put companies at a big disadvantage in the increasingly
competitive market place. The industry in recent years has been
characterized by rapidly changing consumer tastes (e.g. Sloan 1998,
Tyler 1998) addressing changing tastes with new product is essential in
maintaining customer loyalty, so that good NPD becomes a key factor in
new products, with exports valued at US $6 billion in 1995 (Bo 1996).
About 70 percent of total exports consisted of processed items. However,
recently exports have been hit by tough price competition from lower
wage Asian countries (Bp 1996, Nation 1997).
To remain
competitive internationally, companies will have to focus more on value
added products in the future, which will require increased investment in
Research & Development. NPD is also becoming important in domestic
markets. Modern retailing and changing consumer preferences foster
demand for products with better quality, longer shelf life, and better
packaging. Foreign brands which were previously imported from a high
income minoprity are now manufactured locally and affordable to the
average. Even if the most innovative NPD is not done inside, major
companies, local subsidiaries and joint ventures (JVS) have access to
new product developed anywhere in the Multi National Companies (MNC).
Many MNCs have major research and development facilities in Asia, some
have local facilities in Thailand, so that product can easily be adapted
to local markets. This has all forced some local companies to upgrade
research and development, but many have not. Thus, the level of NPD
expertise is quite varied, even though Thailand, as a whole is not
particularly strong in research & development (Suwannaporn and
Speece 1998).
However, the manner by which individual firms
manage their product development activities, as well as the underlying
NPD processes themselves, differs enormously between firm (Cooper 1994).
Moreover, NPD as a process is in itself in a state of constant
revision, adaptation and change (Jones 1997) and this change is an
evolutionary one which reflects the changing nature of the organization,
and the increasingly sophisticated technological and competitive
environment in which firms operate. Greater organizational, competitive
and industrial complexity and the increasing pace of industrial change
are forcing firms to be more flexible and responsive to market changes
(Cooper 1994; Rothwel; 1994).
