Mark exam 3 chp 12

Long-term reasons that compel firms to introduce new products and services

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product development process

1) Idea generation 2) Concept testing 3) Product development 4) Market testing 5) Product launch 6) Evaluation of results

Compatibility

A diffusion process may be faster or slower, depending on various consumer features, including international cultural differences. Electrolux's latest bagless vacuums offer a key innovation: They solve the age-old problem of how to empty the chamber without having a cloud of particles fly out by compacting the dirt into a "pellet." To make the product more compatible with the needs of people in different cultures, it is made in various sizes.

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. -EX: Ipod

Trade promotion

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

Evaluation of results

After the product has been launched, marketers must undertake a critical postlaunch review to determine whether the product and its launch were a success or failure and what additional resources or changes to the marketing mix are needed, if any. Many firms use panel data to improve the probability of success during the test marketing phase of a new product introduction.

Product development

Also called product design; 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. -EX: Prototype

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.

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.

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 stage -Growth stage -Maturity stage -Decline stage

Brainstorming

Firms often engage in _____________ sessions during which a group works together to generate ideas. One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or rejected.

Licensing

For many other scientific and technological products, firms buy the rights to use the technology or ideas from other research-intensive firms through a _________ agreement.

Beta 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.

Relative Advantage

If a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick. As advertising for Swiffer products emphasizes, its mops and dusters promise to make cleaning faster, easier, and more efficient. In featuring real families, it seeks to highlight the relative advantage for all types of cleaners.

Product launch

If the market testing returns with positive results, the firm is ready to introduce the product to the entire market. This most critical step in the new product introduction requires tremendous financial resources and extensive coordination of all aspects of the marketing mix. For any firm, if the new product launch is a failure, it may be difficult for the product—and perhaps the firm—to recover.

Outsourcing

In some cases, companies have trouble moving through these steps alone, which prompts them to turn to outside firms such as IDEO, a design firm based in Palo Alto, California.

Lead users

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

Test Marketing

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

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.

Customer input

Listening to the customer in both B2B and B2C markets is essential for successful idea generation. Because customers for B2B products are relatively few, firms can follow their use of products closely and solicit suggestions and ideas to improve those products either by using a formal approach, such as focus groups, interviews, or surveys, or through more informal discussions.

Trade shows

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

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.

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.

Complexity and Trialability

Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try.

Introductory price promotions

Short-term price discounts designed to encourage trial.

Idea generation

Source of ideas -Internal R&D -R&D Consortia -Licensing -Brainstorming -Outsourcing -Competitors' products -Customer input

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. -The ________ stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms.

Introduction stage

Stage of the product life cycle when innovators start buying the product. -The _______________ stage for a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering.

Decline stage

Stage of the product life cycle when sales decline and the product eventually exits the market. -Firms with products in the _______ stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market. The few laggards who have not yet tried the product or service enter the market at this stage.

Growth stage

Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category. -The ______ stage of the product life cycle is marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions.The market becomes more segmented and consumer preferences more varied, which increases the potential for new markets or new uses of the product or service.

Market testing

The firm has developed its new product or service and tested the prototypes. Now it must test the market for the new product with a trial batch of products. These tests can take two forms: premarket testing and test marketing.

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. -EX: SUV

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 a 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 a service is presented to potential buyers or users to obtain their reactions. -EX: Presentation

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. -EX: Kindle, 13.5%

Innovators

Those buyers who want to be the first to have the new product or service. -EX: electric car, 2.5%

Observability

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

Laggards

consumers who like to avoid change and rely on traditional products until they are no longer available. -EX: VCR

Slotting allowances

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

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. Here, the R&D investments come from the group as a whole, and the participating firms and institutions share the results.

Internal R&D

in which scientists work to solve complex problems and develop new ideas.

Competitors' products

new product entry by a competitor may trigger a market opportunity for a firm, which can use reverse engineering to understand the competitor's product and then bring an improved version to market.