Chapter 12 Study Guide

product life cycle

A good or service may pass through many stages as it established itself in the marketplace. Marketing managers refer to this as the

concept testing

Companies use different techniques to understand customer wants and needs. One such technique used is __?__, which is used to obtain consumers reactions to new product ideas before a prototype is actually developed.

-Concept is a brief written description of the product -Customers reactions determine whether or not it goes forward -Triggers the marketing research process

Concept testing

Time of adoption of the innovation LOOK AT CHART 1. innovators 2.5% 2. early adopters 13.5% 3. early majority 34% 4. late majority 34% 5. laggards 16%

Diffusion of innovation theory

promotions such as advertising and coupons Appropriate pricing

During test marketing, the potential elements of the marketing mix that may be used include which of the following?

laggards

During the decline stage of the product life cycle, __?__ who have not yet tried the product or service will be entering the market for the first time

pursue several strategies increase their customer base or defend their market share

During the maturity stage firms may __?__ to __?__. One such strategy may be to develop new features or reposition them

looking for new market segments in order to find new opportunities

In the maturity stage of the product life cycle, a firm may want to start

No exact time it takes to go through the cycle Consumer products typically shorter than business products Rate of technology shortens life cycle Products can stay in the mature stage "forever" Fads and Fashions

Length of Product Life Cycle

Sales grow at increasing rate Many competitors enter market Healthy profits Heavy brand advertising Goal to gain wide distribution Toward end of stage prices tend to fall Economies of scale

Market Growth Stage

Sales grow slowly, Profit is minimal Need to create awareness, stimulate trial Frequent product modification Skimming or Penetration pricing High failure rate Focus on Primary Demand Intensive personal selling to retailers and wholesalers

Market Introduction Stage

Sales increase at a decreasing rate Marketplace approaching saturation Emphasis on style over function Product lines are widened or extended Marginal competitors begin to drop out of the market Heavy sales promotion required Lots of promotion in the distribution channel Prices and profits begin to fall

Market Maturity Stage

1. Premarket tests 2. test marketing

Market Testing Tests

?

New-to-the-world products

decline exits the market

Once a product stops generating sales or profits, or sales and profits are very low, the product is in the __?__ stage of the product life cycle and eventually __?__

Stage 1: market introduction sales low Stage 2: market growth sales rise Stage 3: market maturity sales peak Stage 4: sales decline sales decline

Product life cycle stages and the 4Ps at each stage

how rapidly consumer tastes change or how rapidly substitute products are adopted

Rate of decline depends on

Signaled by long-run drop in sales Falling demand forces many out of the market Technology and 'Disruptive Innovation' speeding decline. Strategies; Deletion, Harvesting

Sales Decline Stage

Internal R&D R&D consortia Licensing Brainstorming Outsourcing Competitors products Customer input

Sources of Ideas:

A Tool for Marketers; Helps determine how to adjust the marketing mix over time. Helps analyze opportunities.

Summary of Product Life Cycle

Mini product launch More expensive than premarket tests Market demand is estimated

Test marketing

a single firm, and innovators are the ones to try the new offerings

The introduction stage of the life cycle for a new product or service category usually starts with

valid "rules" for detecting points in the cycle

The product life cycle concept has been proven to be a __?__ idea, and new analytical tools now provide __?__

avoid the high costs of product development for product ideas that do not meet customers' expectations

Through the effective use of concept testing, firms may be able to

Promote more frequent use of product Find new target markets Find new uses for the product Price the product below the market Develop new distribution channels

Ways to prevent a product slipping into decline

Sales rise Competitors rise

What are the key characteristics of the growth stage of the product life cycle?

a group session in which participants work together to generate new ideas

brainstorming refers to

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.

define alpha testing

Having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use.

define beta testing

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

define innovators

entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features. Also called product design

define product development (product design)

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.

define product life cycles

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.

define prototype

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.

define reverse engineering

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

reverse engineering

?

Innovation

1. Idea Generation: Development of viable new product ideas 2. Concept Testing: Testing the new product idea among a set of potential customers 3. Product Development: Development of prototypes and or the product 4. Market Testing: Testing the actual products in a few test markets 5. Product Launch: Full scale commercialization of the product 6. Evaluation of Results: Analysis of the performance of the new product and making appropriate modifications

New Product Development Process

timing the introduction such as scheduling the release of a movie to match school holidays

One of the most critical elements of success in new product launches is

-as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead -market pioneers can command a greater market share over a longer time period than later entrants can -More likely to develop brand loyalists

Pioneering advantage

While pioneers capture an early and commanding market share, imitators often enter the market, capitalize on the pioneer brand's weaknesses, and subsequently gain advantage in the market

Pioneering disadvantage

Customers exposed and surveyed Firm makes decision

Premarket tests

1. Prototype 2. Alpha testing 3. Beta testing

Product Development

Some Products Move Quickly through the Introductory stage: -Comparative advantage -Easy to use -Easy to communicate -Can be tried -Compatible

Product Life Cycles Vary in Length

Firms defend their market share

What is a key characteristic of the maturity stage?

targeting a niche segment or exiting the market

When a product is in the decline stage of the product life cycle, its firm will often choose between

Styles and features

When products reach the growth stage of the product life cycle, the market manager must study the customers and know their preferences in factors such as:

- a firm can use its own internal research and development (R&D) efforts - collaborate with other firms and institutions - license technology from research-intensive firms - Brainstorm - research competitors' products and services - conduct consumer research

Where new product ideas come from / Which of the following processes could be considered an acceptable method for generating ideas?

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

define concept

The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions.

define concept testing

Stage of the product life cycle when sales decline and the product eventually exits the market.

define decline stage

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

define diffusion of innovation

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.

define early adopters

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.

define early majority

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.

define first movers

Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category.

define growth stage

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

define innovation

Stage of the product life cycle when innovators start buying the product.

define introduction stage

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

define laggards

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

define late majority

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

define lead users

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.

define maturity stage

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

define pioneers (breakthroughs)

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

define premarket tests

Introduces a new product or service to a limited geographic area (usually a few cities) prior to a national launch.

define test marketing