Ch. 12
-Groups work together to generate ideas -No idea can be immediately dismissed
Brainstorming
-Reverse engineering -"Me Too" or copycat products
Competitors' Products
-Concept is a brief written description of the product; its technology, working principles, and forms; and what customer needs it would satisfy -Customers reactions determine whether or not it goes forward -Triggers the marketing research process -If effective, firms may be able to avoid the high costs of product development for product ideas that do not meet customers' expectations INCLUDE: -visual image of an imagined or projected product to bring an idea to life -customer needs it satisfies
Concept Testing
-As much as 85% of new business to business products come from customers -Lead users modify existing products according to their own specific needs
Customer Input
Firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market.
Declining stage (of the product life cycle) -4
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.
Diffusion of innovation
Will wait a week or two and read several reviews before buying -Tend to be opinion leaders of particular product categories -Are less risk seeking than innovators
Early adopters (2)
Will wait till they are sure it works well and that they will be able to use it
Early majority (3)
-Satisfaction of technical requirements -Customer acceptance -Satisfaction of the firm's financial requirements -Performance
Evaluation of Results
-Relative advantage-->EX: the iPod was readily accepted by consumers in part b/c it was an easy way to listen to music anywhere, with big advantages over portable CD players. -Compatibility -Observability -Complexity and trialability
Factors Affecting Product Diffusion (Using the Diffusion of Innovation Theory)
-Idea Generation-->Development of viable new product ideas -Concept Testing-->Testing the new product idea among a set of potential customers -Product Development-->Development of prototypes and/or the product -Market Testing-->Testing the actual products in a few test markets -Product Launch-->Full-scale commercialization of the product -Evaluation of Results-->Analysis of the performance of the new product and making appropriate modifications
How Firms Develop New Products (Product development process)
While pioneers capture an early and commanding market share, _____ often enter the market, capitalize on the pioneer brand's weaknesses, and subsequently gain advantage in the market
Imitators
The process by which ideas are transformed into new products and services that will help firms grow.
Innovation
Would line up outside the store to be the first to buy it -Highly knowledgeable (about the product/service) -Trend starters -Risk takers
Innovators (1)
-High product development costs -Often the source of technological products -Often the source of breakthrough products -Most expensive
Internal R&D
May never buy one; if they do, it may not happen until something newer has come along
Laggards (5)
Will buy it after most of their friends have it
Late majority (4)
-Firms purchase the rights to technology or ideas from other research0intensive firms -University research centers also often provide such licenses
Licensing
scientific; technological
Licensing typically occurs most frequently with products that are ____ and ____ and have complex patents and copyrights
Manufacturers encourage retailers to sell at a specified price known as _______
Manufacturer's suggested retail price
-Trade shows -Short-term price reductions
Manufacturers may want to promote a new product and encourage retailers to carry the product; therefore, the manufacturer may use promotions such as:
*Premarket tests -Customer exposed -Customers surveyed -Firm makes decision -EX: when a company shows potential customers the marketing mix variables and then are surveyed if they would buy/use the product again *Test marketing -Mini product launch -More expensive than premarket tests -Market demand is estimated -EX of potential elements of marketing mix that may be used: advertising, coupons
Market Testing
-Promotion -Place -Price -Timing
New Product Marketing Mix
Are new product introductions, especially new-to-the-world products that create new markets. -radically change competition and consumer preferences. -Establish an early market share lead -More readily recognizable to consumers
Pioneers (or breakthroughs)
-Prototype-->first physical form or service description of a new product, still in rough form, that has the same properties as the product -Alpha testing-->Improve the quality of the product and ensure beta readiness-->Normally performed by test engineers, employees, and sometimes "friends and family". Focuses on testing that would emulate ~80% of the customers. -Beta testing-->if a customer is asked to use a product prototype-->Tested in the "real world" with "real customers" and the feedback can cover every element of the product. -Process of balancing: marketing, engineering, manufacturing
Product Development
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. -A good or service may pass through many stages as it establishes itself in the marketplace
Product Life Cycle
During intense competition, a firm needs constant innovation and product ______ to defend its market share from competition
Proliferation
-Lower costs and risks; firms join together -Form research consortiums -Benefits spread to all firms -EX: pharmaceutical industry research
R&D Consortia
One advantage of product innovation is that a firm can expand into different product categories. The point of the ______ strategy is that if some products in one category are competing poorly, others in another category could be doing very well
Risk diversification
Retailers may not only need to make a profit on each sale, but they may also receive a ______ as an encouragement to give better shelf space to new products
Slotting allowance
-Internal R&D -R&D consortia -Licensing -Brainstorming -Outsourcing -Competitor' products -Customer input
Sources of ideas (Idea Generation)
1. Firm confirms its target market 2. Firm decides how the product will be positioned 3. Firm finalizes the remaining marketing mix variables for the new product
Steps involved in new product launch
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 typical consumers would be early adopters and early majority -product gains acceptance -demand and sales increase
The growth stage (of the product life cycle) -2
For a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering. -Few or no competitors exist -Profits are low -Low sales and negative profits (losses) -Typical consumers belong to the innovator category of adopters
The introduction stage (of the product life cycle) -1
is characterized by the adoption of the product by the late majority and intense competition for market share among firms. -Intense competition on price -Marketing costs increase -Good profitability -Industry sales reach their peak -Firms try to rejuvenate their products by adding new features or repositioning them
The maturity stage (of the product life cycle) -3
Innovator; early adopter
While the _____ is first to adopt the item, often in its more extreme form, the _____ is often the first non-celebrity a consumer knows who adopts next
-Changing customer needs -Market saturation -Managing risk through diversity -Fashion cycles -Improving business relationships
Why do firms create new products?
-Continue to market current products to current customers -Take current products to new markets
Without innovation, what options would be available to firms?
