M370 CH 12

apple

example of a first mover

product launch

most critical step in new product introduction

-internal R&D -R&D consortia -licensing -brainstorming -outsourcing -competitors products -customer input

ways firms generate ideas

-means to identify potential markets for their new products/services and predict their potential sales, even before they introduce the innovations -rate at which consumers are likely to adopt a new product or service

what does the theory around diffusion of innovation provide marketers and help them understand

2.5%

what percentage do innovators make up of the market

34%

what percentage of the total population are early majority

34%

what percentage of the total population are late majority

16%

what percentage of the total population do laggards make up

13.5%

what percentage of total population are early adopters

timing

what plays an important factor In product launch

bell shaped

what shape is the product life cycle in regard to sales and profits in theory

observability

when products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process

firms R&D department

where does alpha testing occur

-failure to asses market properly -may overextend their abilities by venturing into products or services that are inconsistent with brand image and/or value proposition

why Is the failure rate for new products so high

-innovation -changing customer needs -market saturation -managing risk through delivery -fashion cycles -improving business relationships

why do firms create new products?

concept

-an idea with potential is developed further into a concept -refers to a brief written description of the product, its technology, working principles, and forms-- what customer needs it would satisfy (may also include a visual)

innovators

-buyers who want to be the first on the block to have a new product or service -enjoy taking risks and are regarded as highly knowledgeable -firms who invest in latest tech -keep themselves very informed -help product gain acceptance

early majority

-few new products and services can be profitable until this large group buys them -members don't like to take as much risk and therefore tend to wait until bugs are worked out of particular product/service -number of competitors in the marketplace usually also has reached its peak so these buyers have many price and quality choices

product launch

-firm ready to introduce the product to entire market -requires tremendous financial resources and extensive coordination of all aspects of the marketing mix

licensing

-firms buy the rights to use a technology or ideas from other firms -firm banking on solution that already exists but has not been marketed

first movers

-first to create the market or product category, they become readily recognizable to consumers and this establish a commanding and early market share lead

early adopters

-generally don't like to take as much risk as innovators but instead wait a purchase the product after careful review -most go ahead and purchase because they enjoy novelty and often are regarded as opinion leaders for particular product categories

brainstorming

-group works together to generate ideas -key characteristics: no idea can be immediately accepted or rejected -members vote on best idea/combination of ideas at end

maturity stage

-industry sales reach peak so firms try to rejuvenate their products by adding new features or repositioning them -if these efforts succeed, the product achieves new life, if not it goes into decline -late majority enters market -lower prices and increased marketing costs erode profit margins

introduction stage

-innovators start buying the product -usually a single firm -initial loses to the firm due to high startup costs and low level of sales revenue as product takes off

laggards

-like to avoid change and rely on traditional products until no longer available -may never adopt a product/service

market saturation

-longer a product exists in marketplace = more likely that market will become saturated -when a product becomes fully distributed in a market -without new products, value of firm will ultimately decline

test marketing

-method for determining the success of a potential new product -introduces the offering to a limited geographical area (usually few cities) prior to launch -strong indicator of success because firms can track purchase behavior -uses all elements of marketing mix

decline stage

-product exists market (either position to niche segment of diehards or completely exit) -laggards enter market

growth stage

-product gains acceptance -demand and sales increase -more competitors emerge -early adopters and early majority enter market -market becomes more segmented and preferences are more varied -firms attempt to reach new consumers by studying their preferences and producing different product variations

late majority

-product has already achieved full market potential -sales tend to level off or may be in decline

changing customer needs

-sometimes firms identify problems and develop products or services that customers never knew they needed -when they add, firms can create and deliver value more effectively by satisfying changing needs of their current & new customers or by keeping customers from getting bored of current offerings

lead users

-those innovative product users who modify existing products according tot heir own ideas to suit their specific needs -help firms understand general market trends that might be on the horizon

managing risk through diversity

-through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can -firms with multiple products can better withstand external shocks like changes in consumer preferences or intensive competitive activity

pioneers (breakthroughs)

-truly new product introductions (new world products that create new markets) can add tremendous value -establish completely new markets or radically change the rules of competition as well as consumer preferences in a market

business analysis (added by kitz in product development process)

-who is target, what benefits is provided, how big is market, what share can we gain, how long will it take to be profitable? -where will it be sold, at what price, how much will we spend on promotion? -what are long range sales and profit goals? -does product meet internal rate of risk thresholds needed by company? -what are the risk assessments?

[(margin - ongoing costs) / (1- retention rate + interest rate)] - AC

CLV formula

continuous

R&D investments are generally considered _______ investments

compatibility

a diffusion process may be faster or slower, depending on various consumer features, including international cultural differences (adapting to different markets)

evaluation of results

after the product has been launched, marketers must undertake a critical post launch review to determine whether the product and it launch were a success or failure and what additional resources or changes to the marketing mix are needed, if any

premarket tests

conducted before a product or service is brought to the market to determine how many customers will try and then continue to use the product or service according to a small group of potential customers (essentially a focus group)

product life cycle

defines the stages that products move through as they enter, get established in, and ultimately leave marketplace

no -- if product exists in markets its because imitators capitalized on the weaknesses of pioneers

do all pioneers succeed?

product development/product design

entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features or a services features

national institute of health sponsoring foundations to conduct research for rare diseases, then research disseminated into the medical indsutry

example of R & D consortia

apple ipod

example of a pioneer (breakthrough)

vinyl records when iTunes and CDs came around

example of a product in the decline stage

those who wait overnight for a movie

example of innovators

wait until movie is on netflix

example of late majority purchaser

alpha testing

firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended

-satisfaction of technical requirements (ex- performance) -customer acceptance -satisfaction of firm's financial requirements (sales and profits)

firms can measure the success of a new product by 3 interrelated factors

diffusion of innovation theory

firms can predict which types of customers will buy their new product or service immediately after its introduction as well as later as the product is more and more accepted by the market

R&D; market

firms that want to be pioneers rely more extensively on ______ efforts, whereas those that tend to adopt a follower strategy are more likely to scan the _______ for ideas

prototype

first physical form or service description of a new product, still in rough or tentative form, which has the same properties as new product. but is produced through different manufacturing processes

R & D consortia

groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products

1) idea generation 2) concept testing 3) product development (product design) 4) market testing 5) product launch 6) evaluation of results

how firms develop new products

relative advantage

if a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick

fashion cycles

in industries that rely on fashion trends and experience short product life cycles-- including apparel, arts, books, and software markets-- most sales come from new products

reverse engineering

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

customer input

licensing to the customer in both B2B and B2C markets is essential for successful idea generation and throughout the product development process

internal R & D

many firms have departments in which scientists and engineers work to solve complex problems and develop new ideas

improving business relationships

new products do not always target end consumers; sometimes they function to improve relationships with suppliers

outsourcing

practice in which they hire an outside firm to help generate ideas and develop new products and services

1) introduction stage 2) growth stage 3) majority stage 4) decline stage

product life cycle

complexity and trailability

products that are relatively less complex are also relatively easy to try and therefore generally diffuse more quickly and lead to greater and faster adoption

-enable developer to predict the sale value of a product or service concept, possibly make changes to enhance sales value, and determine whether the idea is worth further development -helps firm avoid unnecessary cost of product development

pros of concept testing

innovation

refers to the process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow

concept testing

refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions

marketplace trends

stages of life cycle often reflect _________

diffusion of innovation

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

brand

the product lifecycle is not a _______ lifecycle

false

true/fasle: every product follows the same product life cycle

-purchase intention if product were readily available? -is product satisfying needs that other products are not?

two main questions that should be asked in concept testing

-premarket tests -test marketing

types of market testing

2) innovators 3) early adopters 4) early majority 5) late majority 6) laggards

types of purchasers

beta testing

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