Chapter 11: Developing and Managing Products

global issues in new product development

-Increasing globalization of markets and competition provides a reason for multinational firms to consider new-product development from a world-wide perspective. -A firm that starts with a global strategy is better able to develop products that are marketable worldwide. -Companies cannot sell their prod-ucts at affordable prices and still make a profit in many countries.

why some products succeed and others fail

-a poor match between product features and customer desires. -they do not offer any discernible benefit compared to existing products. -absolute failure occurs when a company cannot recoup its development, marketing, and production costs. -a relative product failure results when the product returns a profit but fails to achieve sales, profit, or market share goals. -The most important factor in successful new-product introduction is a good match between the product and market needs as the marketing concept would predict.

simultaneous product development

-a team-oriented approach to new-product development -allows firms to shorten the devel-opment process and reduce costs

concept test

-evaluates a new-product idea, usually before any prototype has been created. Typically, researchers get consumer reactions to descriptions and visual representations of a proposed product. -fairly good predictors of success for line extensions. -usually inaccurate in predicting the success of new products that create new consumption patterns and require major changes in consumer behavior

commercialization

-final stage in the new-product development process, the decision to market a product -ordering production materials and equipment, starting production, building inventories, shipping the product to field distribution points, training

product life cycles

-introduction, growth, maturity, decline -A biological metaphor that traces the stages of a product's acceptance, from its introduction (birth) to its decline (death). Used to analyze a brand, product form, or a product category. -A tool to help marketers forecast future events and suggest appropriate strategies.

new product development process

-new product strategy -idea generation -idea screening, business analysis -development -test marketing -commercialization -new product

introductory stage

-represents the full-scale launch of a new product into the marketplace, marketing costs in stage are normally high for several reasons: high dealer margins, advertising expenses, production costs, etc -sales grow slowly, Promotion strategy in the introductory stage focuses on developing product awareness and informing consumers about the product category's potential benefits

test marketing

-the limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation -allows management to evaluate alternative strategies and to assess how well the various aspects of the marketing mix fit together. -Test marketing frequently takes one year or longer, and costs can exceed $1 million.

development

-the stage in the product development process in which a prototype is developed and a marketing strategy is outlined -firm should start sketching a marketing strategy. The marketing department should decide on the product's packaging, branding, labeling,

six categories of new products

1. New-to-the-world products:create an entirely new market 2. New product lines: allow product to enter an established market. 3. Additions to existing product lines: includes new products that supplement a firm's established line. 4. Improvements or revisions of existing products: "new and improved" product may be significantly or only slightly changed. 5. Repositioned products: existing products targeted at new markets or market segments, or ones repositioned 6. Lower-priced products: products that provide performance similar to competing brands at a lower price.

idea generation

New-product ideas come from many sources, including customers, employees, distributors, competitors, R&D, consultants, and other experts.

marketing implications of the adoption process

Word-of-mouth communication within and across groups, including social media and viral communication, speeds diffusion. The second type of communication aiding the diffusion process is communication directly from the marketer to potential adopters

decline stage

a long-run drop in sales, the rate of decline is governed by how rapidly consumer tastes change or substitute products are adopted

product development

a marketing strategy that entails the creation of marketable new products; the process of converting applications for new technologies into marketable products

maturity stage

a period during which sales increase at a decreasing rate, as prices and profits continue to fall, marginal competitors start dropping out of the market.

new product

a product new to the world, the market, the producer, the seller, or some combination of these

innovation

a product perceived as new by a potential adopter.

product characteristics

complexity: degree of difficulty involved in understanding and using a new product. compatibility: degree the new product is consistent with existing values and product knowledge relative advantage: degree a product is perceived as superior to existing substitutes observability: degree the benefits or other results of using the product can be observed by others and communicated to target customers. trialability: degree to which a product can be tried on a limited basis.

idea screening or screening

eliminates ideas that are inconsistent with the organization's new-product strategy or are obviously inappropriate for some other reason.

brainstorming

get a group to think of unlimited ways to vary a product or solve a problem. Group members avoid criticism of an idea, no matter how ridiculous it may seem.

product category

includes all brands that satisfy a particular type of need, such as shaving products, passenger automobiles, or soft drinks.

five categories of adopters in diffusion process

innovators:the first 2.5 percent of all those who adopt the product, are more self-confident. early adopters:the next 13.5 percent to adopt the product, rely much more on group norms and values. early majority: next 34 percent to adopt are called the early majority, likely to collect more information and evaluate more brands late majority: the next 34 percent, adopts a new product because most of their friends have already adopted it, tend to be older and lower income laggards: final 16 percent to adopt are called laggards. Like innovators, laggards do not rely on group norms, have the longest adoption time and the lowest socioeconomic status.

new product strategy

links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.

stimulated (laboratory) market testing

the presentation of advertising and other promotional materials for several products, including a test product, to members of the product's target market

diffusion

the process by which the adoption of an innovation spreads. Five categories of adopters participate in the diffusion process.

growth stage

the second stage of the product life cycle, when sales typically grow at an increasing rate; many competitors enter the market; large companies may start to acquire small pioneering firms; and profits are healthy Distribution becomes a major key to success, Profits rise rapidly

business analysis

the second stage of the screening process where preliminary figures for demand, cost, sales, and profitability are calculated