Market Development Using New Products and New Customers: ARole for Perceived Risk

Abstract

Analyses the breakfast cereal market as a basis on which to conduct a study of risk in new product development. Argues that the main alternatives for increased consumer demand, namely, product development, converting non‐users and encouraging existing users to use more, have associated risks in the consumer′s mind. The hypothesis that non‐purchases will perceive more risk than purchasers was tested and accepted; financial risks were particularly important. Suggests that a reduction of these risks through changes in the marketing mix might be more cost effective than developing new products to stimulate consumer demand, since breakfast cereal consumers are highly brand loyal with 48 per cent never changing their cereal and 69 per cent saying that they were not really bothered about trying a new cereal. Non‐purchasers were found to consider low price and trial sizes as more useful risk reducers than purchasers. Unfortunately, consumers stated that the most useful ways to reduce risk for a new product was past experience with the brand name. This suggests that only those companies already in the breakfast cereal market stand any chance of developing successful new products.