Marketing Chapter 12

premarket testing

consumers exposed in a lab, customers are surveyed, and firm makes a decision

4 factors affecting rate of diffusion

relative advantage, compatibility, observability, and complexity and triability

trade promotions

advertising to wholesalers or retailers to get them to purchase new products, often through special pricing incentives

alpha testing

an attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended; occurs in the firm's research and development (R&D) department; lab testing

middle majority

both the early and late majorities; make up 68% of the model

concepts

brief written descriptions of a product or service; its technology, working principles, and forms; and what customer needs it would satisfy

product launch

build up inventory, set up relationships with retailers, complete other elements of marketing mix

why do firms create new products?

changing customer needs, market saturation, managing risk through diversity, fashion cycles, improving business relationships

premarket test

conducted before a product or service is brought to market to determine how many customers will try and then continue to use it

laggards

consumers who like to avoid change and rely on traditional products until they are no longer available

product development

entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or service's features; also called product design; prototype, alpha testing, and beta testing

beta testing

having potential consumers examine a product prototype in real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use; testing with consumers

diffusion

how quick or slow people adopt a product

how do firms develop new products

idea generation, concept testing, product development, market testing, product launch, evaluation of results

extending time in PLC

increase frequency of use by same consumers, increase number of users by expanding into different target markets with the same product, find new uses by identifying new applications of the product

lead users

innovative product users who modify existing products according to their own ideas to suit their specific needs

source of ideas

internal R&D, R&D consortia, brainstorming, outsourcing, competitors' products, consumer input

trade show

major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry

product life cycle concept

most products follow a similar pattern of growth and decline, length varies, pattern/shape is similar, is descriptive (what has happened) but not predictive (what is going to happen), best used for product categories not brands

pioneers

new product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market; also called breakthroughs

stages in the product life cycle chart

page 10 in notes

graph for product life cycle

plots dollars in sales revenue on profit

2 types of market testing

premarket testing and test marketing

first movers

product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead

evaluation of results

satisfaction of technical requirements, customer acceptance, and satisfaction of the firm's financial requirements

introductory price promotions

short-term price discounts designed to encourage trial

early majority

a group of consumers in the diffusion of innovation model that represents approximately 34 percent of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them

product life cycle

defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning; introduction, growth, maturity, decline

slotting allowance

fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products

test marketing

introduces a new (mini) product or service to a limited geographical area (usually a few cities) prior to a national launch; more expensive than premarket tests; market demand is estimated

reverse engineering

involves taking apart a competitor's product, analyzing it, and creating an improved product that does not infringe on the competitor's patents, if any exist

maturity stage

stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them; sales increase at a decreasing rate; saturated markets; annual model appear; lengthened product lines; service and repair assume important roles; heavy promotions to consumers and dealers; marginal competitors drop out; niche marketers

introduction stage

stage of the product life cycle when innovators start buying the product; high failure rates; little competition; limited distribution; high marketing and production costs; negative profits with slow sales increases; promotion focuses on awareness and information; communication challenge is to stimulate primary demand

decline

stage of the product life cycle when sales decline and the product eventually exits the market; long-run drop in sales; large inventories of unsold items; elimination of all nonessential marketing expenses; "organized abandonment"

growth stage

stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category; increasing rate of sales; entrance of competitors; market consolidation; initial healthy profits; aggressive advertising of the differences between brands; wider distribution

prototype

the first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes, sometimes even crafted individually

late majority

the last group of buyers to enter a new product market; when they do, the product has achieved its full market potential

manufacturer's suggested retail price (MSRP)

the price that manufacturers suggest retailers use to sell their merchandise

innovation

the process by which ideas are transformed into new products and services that will help firms grow

diffusion of innovation

the process by which the use of an innovation, whether a product or service, spreads throughout a market group over time and over various categories of adopters

concept testing

the process in which a concept statement that describes a product or service is presented to potential buyers or users to obtain their reactions; brief written description is developed and presented to consumers for their reaction then financial analysis and reviewed for safety and legal issues

early adopters

the second group of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation; generally don't like to take as much risk as innovators but instead wait and purchase the product after careful review

innovators

those buyers who want to be the first to have the new product or service