Chapter 8: Marketing

Laggards

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

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. Exhibit 8.7B on pg 274 for the characteristics of every stage

Lead users

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

Pioneers

New product introductions that establish a complete new market or radically change both the rules of copetition and consumer preferences in marker; also called breakthroughs.

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.

Introduction stage

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

Decline stage

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

Growth stage

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

Strategies for extending the product life cycle

- Develop new uses for products - Modify the product: Change Quality, Boost performance, Alter appearance - Increase frequency of use - Increase the number of users - Find new users - Reposition product - Tweak marketing strategy

What are some characteristics of innovators?

- Enjoy taking risks - Regarded as highly knowledgeable - Not price sensitive

What are the ways to generate ideas for new products?

- Internal R&D - Collaborate with other firms and institutions - License technology from research-intensive firms - Brainstorm - Research competitors' products and services AND/OR - Conduct consumer research

What are some characteristics of early adopters?

- Wait and purchase product after careful review - Enjoy novelty - Often regarded as the opinion leaders for particular product categories

What does a product launch involve?

1. Based on the previous stages, the firm confirms its target market(s) and decides how the product will be positioned 2. The firm finalizes the remaining marketing mix variables for the product, including the marketing budget for the first year. In addition to the 3 other Ps, this includes timing of the launch.

Reasons for innovation

1. Changing customer needs 2. Market saturation 3. Managing risk through diversity 4. Fashion cycles 5. Value creation

What are the two choices that marketers have if there is no innovation?

1. Continue to market current products to current customers 2. Take the same product to another market with similar customers

The product development process

1. Idea Generation 2. Concept Testing 3. Product development 4. Market testing 5. Product launch 6. Evaluation of results

What are the two forms of market testing?

1. Premarket testing 2. Test marketing

What are the factors affecting product diffusion?

1. Relative advantage - If a product is perceived to be better than substitutes, then diffusion will be relatively quick 2. Compatibility - Is the product compatible with the target market's mindset and behaviour? 3. Observability - When products are easily observed, their benefits or uses are easily communicated to others, thus enhancing the diffusion process 4. Complexity and trialability - Products that are easy to understand and try will diffuse more quickly

What are two things that are required by disruptive products?

1. Require a higher level of learning from consumers 2. Offer much more benefits than predecessor products

Why do new products fail in the market place?

1. They offer consumers too few benefits compared with existing products 2. They are too complex or require substantial learning and effort before consumers can use them 3. Bad timing

Early majority

A group of consumers in the diffusion of innovation model that represents approximately 34% of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out

What is the difference between alpha and beta testing?

Alpha testing is done in-house whereas beta testing is done by getting potential customers to use the product

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 R&D department.

Product

Anything that is of value to a consumer and can be offered through a marketing exchange

Concepts

Brief written descriptions of a product or service; its technology, working principles and forms; and what customer needs it would satisfy. Could include visual images as well.

Premarket testing

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

Product development

Entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product; also called product design.

Why is early majority group so crucial?

Few new products and services can be PROFITABLE until this large group buys them

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.

How do firms manage risk through diversity by innovating?

If some products in a portfolio are doing poorly, others may be doing well.

Test marketing

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

Reverse engineering

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

What is the most critical step in the product development process?

Product launch. If the new product launch is a failure, it may be difficult for the product and perhaps the firm to recover

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

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

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

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

Why are innovators crucial to the success of any new product?

They help the product gain MARKET ACCEPTANCE.

Innovators

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