Marketing Final week 10
What % of adopters are the first group known as innovators?
2.5%
dynamically continuous innovation
A change in an existing product that requires a moderate amount of learning or behavior change. For example, in the 1960s, teeny boppers screamed and swooned as they listened to the Beatles on a continuous-play eight-track tape (requiring the purchase of an eight-track tape player, of course). Then came cassette tapes to listen to the Eagles (oops, now a cassette player is needed). In the 1980s, consumers could hear Metallica songs digitally mastered on compact discs (that, of course, required the purchase of a new CD player).
patent (technical development - NPD)
A legal mechanism to prevent competitors from producing or selling an invention, aimed at reducing or eliminating competition in a market for a period of time. Because patents legally prevent competitors from producing or selling the invention, this legal mechanism may reduce or eliminate competition in a market for many years so that a firm gains some time to recoup its investments in technical development.
continuous innovation
A modification to an existing product that sets one brand apart from its competitors, such as when Samsung and others reinvigorated the TV market by offering thinner sets that featured high-definition viewing. The consumer doesn't have to learn anything new to use a continuous innovation.
knockoff (continuous innovation)
A new product that copies, with slight modification, the design of an original product. For example, companies may copy the haute couture clothing styles of top designers and sell them at lower prices to the mass market.
Creativity
A phenomenon whereby something new and valuable is created. Creative outcomes can take on many forms, but most often we experience them as something we can see, hear, smell, touch, or taste.
discontinuous innovation
A totally new product that creates major changes in the way we live. Consumers have to learn a great deal to be able to effectively use a discontinuous innovation because no similar product has ever been on the market. Major inventions, such as the airplane, the car, and the TV, are the sort of innovations that radically changed modern lifestyles.
research and development (R&D)
A well-defined and systematic approach to how innovation is done within the firm. In fact, R&D investment in and of itself is often a central metric for organizational commitment to innovation. In any firm new product development is fueled by investment in R&D.
Laggards
About 16 percent of adopters, are the last in a population to adopt a new product. Laggards are typically lower in income level and education than other adopter categories and are bound by tradition. By the time laggards adopt a product, it may already be su-perseded by other innovations.
Late majority
About 34 percent of the population, are older, are even more conservative, and typically have lower-than-average levels of education and income. The late majority adopters avoid trying a new product until it is no longer risky. By that time, the product has become an economic necessity for them, or there is pressure from peer groups to adopt.
bleeding edge technology
An innovative technology that is not yet ready for release to the market as a whole, potentially because of issues related to reliability and stability, but is in a suitable state to be offered for beta testing to evaluate consumer perceptions of its performance and identify any potential issues in its usage.
Innovation
Any product that consumers perceive to be new and different from existing products.
Early Adopters
Approximately 13.5 percent of adopters, buy product innovations early in the diffusion process but not as early as innovators. Unlike innovators, early adopters are concerned about social acceptance, so they tend to gravitate toward products they believe will make others think they are cutting-edge or fashionable. Others in the population often look to early adopters for their opinions on various topics, making early adopters critical to a new product's success. For this reason, marketers often heavily target them in their advertising and other communications efforts.
What stage is the starting point (at the bottom) of the adoption pyramid?
Awareness
simulated market test (market test or test market - NPD)
Because of the potential problems and expense of market tests, marketers instead may use special computer software to conduct a simulated market test that imitates the introduction of a product into the marketplace allowing the company to see the likely impact of price cuts and new packaging—or even to determine where in the store it should try to place the product. The process entails gathering basic research data on consumers' perceptions of the product concept, the physical product, the advertising, and other promotional activity. The test market simulation model uses that information to predict the product's success much less expensively (and more discreetly) than a traditional test market.
Which step does this definition refer to in the new product process... "a review of the sales, costs and profit projections for a new product to determine whether these factors satisfy the company's objectives."
Business analysis
The final stage of the new product process is known as...
Commercialization
If Gillette introduced a new 7 blade razor, it would be considered what kind of innovation?
Continuous
If we test market a new product in a few retailers that have agreed to carry new products for a fee, then this is known as which type of test marketing?
Controlled test marketing
If a product is so innovative that is changes lifestyles and how consumers solve that particular need, then it is known as ___ innovation.
Discontinuous
How many new products fail?
Experts suggest that between one-third and one-half of all new products fail.
Adoption (Product Adoption Process)
FIFTH STEP: In the adoption stage, a prospect actually buys the product (hooray, a sale!) Does this mean that all individuals or organizations that first choose an innovation are permanent cus-tomers? No, and that's a mistake many firms make. Marketers need to provide follow-up contacts and communications with adopters to ensure they are satisfied and remain loyal to the new product over time.
Awareness (Product Adoption Process)
FIRST STEP: Awareness that the innovation exists at all is the first step in the adoption process. To educate consumers about a new product, marketers may conduct a massive advertising campaign: a media blitz. This strategy works for new products when at least some consumers see a new product as something they want and need and just can't live without.
Trial (Product Adoption Process)
FOUTH STEP: Trial is the stage in the adoption process when potential buyers will actually experience or use the product for the first time. To stimulate trial of these new products, the company sent out five specially equipped Mountain Dew Kickstart trucks on an eight-month tour to college campuses and sports stadiums to offer samples to consumers. This sort of trial of a product like Kickstart can result in high rates of adoption by the target market, provided its members enjoy the product
"The process of screening new-product ideas in order to identify good ideas and discard poor ones as soon as possible" - is the definition for...
Idea screening
tipping point
In the context of product diffusion, the point when a product's sales spike from a slow climb to an unprecedented new level.
commercial success
Indicates that a product concept is feasible from the standpoint of whether the firm developing the product believes there is or will be sufficient consumer demand to warrant its development and entry into the market.
technical success
Indicates that a product concept is feasible purely from the standpoint of whether or not it is possible to physically develop it, regardless of whether it is perceived to be commercially viable.
What term is used for the last set of adopters in the adoption curve?
Laggards
beta test
Limited release of a product, especially an innovative technology, to allow usage and feedback from a small number of customers who are willing to test the product under normal, everyday conditions of use.
Innovators
Make up roughly the first 2.5 percent of adopters. This segment is extremely ad-venturous and willing to take risks with new products. Innovators are typically well educated, younger, better off financially than others in the population, and worldly.
In terms of the rate of adoption of new products, which of these is NOT a key factor?
Marketing mix design
crowdfunding (commercialization - NPD)
Online platforms that allow thousands of individuals to each contribute small amounts of money to fund a new product from a startup company. Under this model, even small contributions add up when hundreds or thousands of people like an idea and pitch in.
initial idea generation or ideation (NPD)
PHASE 1: In this phase of product development, marketers use a variety of sources to come up with great new product ideas that provide customer benefits and that are compatible with the company mission. Sometimes ideas come from custom-ers. Ideas also come from salespeople, service providers, and others who have direct customer contact.
product concept development and screening (NPD)
PHASE 2: The second step of product development in which marketers test product ideas for technical and commercial success. When screening, marketers examine the chances that a new product concept might be successful while they weed out concepts that have little chance to make it in the market. They estimate technical success when they decide whether the new product is technologically feasible—is it possible to actually build this product? Then they estimate commercial success when they decide whether anyone is likely to buy the product.
marketing strategy development (NPD)
PHASE 3: The third phase in new product development is to develop a marketing strategy to introduce the product to the marketplace. This means that marketers must identify the target market, estimate its size, and determine how they can effectively position the product to address the target market's needs. Marketing strategy development includes planning for pricing, distribution, and promotion expenditures both for the introduction of the new product and for the long run.
business analysis (NPD)
PHASE 4: Once a product concept passes the screening stage, the next phase is a business analysis. The step in the product development process in which marketers assess a product's commercial viability. Even though marketers have evidence that there is a market for the product, they still must find out if the product can make a profitable contribution to the organization's product mix. The business analysis for a new product begins with assessing how the new product will fit into the firm's total product mix.
technical development (NPD)
PHASE 5: If a new product concept survives the scrutiny of a business analysis, it then undergoes technical development, in which a firm's engineers work with marketers to refine the de-sign and production process.
market test or test market (NPD)
PHASE 6: This means the firm tries out the complete marketing plan—the distribution, advertising, and sales promotion—in a small slice of the market that is similar to the larger market it ultimately hopes to enter with full force. On the negative side, market tests are extremely expensive. A market test also gives the competition a free look at the new product, its introductory price, and the intended promotional strategy—and an opportunity to get to the market first with a competing product. On the positive side, when they offer a new product in a limited area, marketers can evaluate and improve the marketing program. Sometimes, market tests uncover a need to improve the product itself. At other times, market tests indicate product failure, providing an advanced warning that allows the firm to save millions of dollars by "pulling the plug."
commercialization (NPD)
PHASE 7: The final step in the product development process in which a new product is launched into the market, and it requires full-scale production, distribution, advertising, sales promotion—the works. For this reason, commercialization of a new product cannot hap-pen overnight. A launch requires planning and careful preparation. Commercialization is expensive, but the Internet makes it much easier for start-ups to obtain the funding they need to get their new products into the market.
Observability
Refers to how visible a new product and its benefits are to others who might adopt it. The ideal innovation is easy to see.
adoption pyramid
Reflects how a person goes from being unaware of an innovation through stages from the bottom up of awareness, interest, evaluation, trial, adoption, and confirmation. At every stage in building the pyramid, people drop out of the process, so the proportion of consumers who wind up actually using the innovation on a consistent basis is a mere fraction of those who are exposed to it.
Researchers identify five characteristics of innovations that affect the rate of adoption:
Relative advantage, compatibility, complexity, trialability, and observability.
Early Majority
Roughly 34 percent of adopters, avoid being either first or last to try an innovation. They are typically middle-class consumers and are deliberate and cau-tious. Early majority consumers have slightly above-average education and income levels. When the early majority adopts a product, we no longer consider it new or different—that is, when it gets into their hands, it is, in essence, "established."
Interest (Product Adoption Process)
SECOND STEP: In this stage, a prospective adopter begins to see how a new product might satisfy an existing or newly realized need. Interest also means that consumers look for and are open to information about the innovation.
confirmation (Product Adoption Process)
SIXTH STEP: Favorable experiences make it more likely that the customer will become a loyal adopter as initially positive opinions result in confirmation. Marketers understand that reselling the customer in the confirmation stage is often quite important. They provide advertisements, sales presentations, and other communications to reinforce a customer's choice.
When using a geographic test marketing, we try to choose a city that is ___ to the overall population.
Similar
Evaluation (Product Adoption Process)
THIRD STEP: In the evaluation stage, we weigh the costs and benefits of the new product. As we've seen in the case of impulse products, sometimes little evaluation may occur before someone decides to buy a good or service.
prototypes (technical development - NPD)
Test versions of a proposed product. Prospective customers may evaluate these mock-ups in focus groups or in field trials at home. Prototypes also are useful for people within the firm. Those involved in the technical development process must determine which parts of a finished good the company will make and which ones it will buy from other suppliers.
convergence (type of discontinuous innovation)
The coming together of two or more technologies to create new systems that provide greater benefit than the original technologies alone.
Relative Advantage
The degree to which a consumer perceives that a new product provides superior benefits. In the case of the microwave oven, consumers in the 1960s did not believe that the product provided important benefits that would improve their lives. But by the late 1970s, that perception had changed because more women had entered the workforce.
Complexity
The degree to which consumers find a new product or its use difficult to understand.
Trialability
The ease of sampling a new product and its benefits. Just about every store that sold microwaves invited shoppers to visit the store and sample an entire meal a microwave cooked. Finally, consumers began to understand what the product even was and what it could do!
Compatibility
The extent to which a new product is consistent with existing cultural values, customs, and practices. By anticipating compatibility issues early in the new-product-development stage, marketing strategies can address problems in planning communications and consumer education programs, or there may be opportunities to alter product designs to overcome some consumer objections.
new product development (NPD)
The phases by which firms develop new products, including idea generation, product concept development and screening, marketing strategy development, business analysis, technical development, test marketing, and commercialization.
According to the lecture, the number one success factor in new products is...
The point of difference
Product adoption
The process by which a consumer or business customer begins to buy and use a new good, service, or idea. After they spend months or even years to develop a new product, the real challenge for firms is to get consumers to buy and use the product and to do so quickly and in sufficient quantities so they can recover the costs of product development and launch.
Diffusion
The process by which a product spreads throughout a population.
Value co-creation
The process by which an organization creates worth through collaborative participation by customers and other stakeholders in the new product development process: ex: Lego Idea. It's important to note that such a value co-creation approach is in stark contrast to "traditional" approaches in which firms develop products behind a curtain and send them to market, hoping that customers connect with the intended value proposition of the new offering.