New Products of Industry and Changes in Markets

September 12, 1962

Report Outline
Consumer Demand and Economic Growth
New Products in the American Economy
Research and the Progress of Industry
Special Focus

Consumer Demand and Economic Growth

Technological innovation, indispensable to sustained economic growth, is needed by American industry today as never before. An almost infinite variety of goods already competes for consumer attention. Unless attractive new products are developed, or unless many present products are improved or offered at lower prices, manufacturers will not have the necessary incentive for undertaking enlargement of plant facilities. Potentially huge markets here and abroad may remain untapped, and the expansion required to provide fuller employment may be impossible to achieve.

Because business leaders have been fully aware of both the opportunities and the hazards in the present situation, industrial research and development actually are going forward on an unprecedented scale. New products and processes and, equally important, new uses for existing products are being developed. Nevertheless, competition for the consumer dollar has never been more severe or consumer tastes more changeable. It has been estimated that, in the past two years alone, four out of five new products have failed to gain a market foothold; at that rate, industry in the next two years will pour some $4 billion into developing new products which consumers won't buy. “The cause seems to lie in the erratic and seemingly irrational behavior of the American consumer.”

Need for New Products to Stimulate Demand

Economists long have realized that, in the words of George Katona, “technological innovation & … represents & … the first condition necessary for extensive consumer investments” in manufactured goods. According to one theory, boom periods result from the sudden application of new ideas that for one reason or another, e.g., wartime restrictions, have been allowed to accumulate. Relative stagnation or recession, in turn, comes when not enough new products or new cost reductions are being generated to open up new markets in any major way.

ISSUE TRACKER for Related Reports
Consumer Behavior
Economic Development
Manufacturing and Industrial Production