Chapter 12

Customer acceptance

Did the consumers buy the product

Satisfaction of financial requirements

Did the product meet the revenue, sales, and profit expected?

Diffusion of innovation Curve

Different consumers adopt products at different stages

Product Development/Design

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

Product Launch

If testing returns with positive results, the firm is ready to introduce the product to the entire market. Requires tremendous financial resources and extensive coordination of all aspects of the marketing mix. Must implement 4 P's

Fashion cycles

In industries that rely on fashion trends and experience short product life cycles, most sales come from new products

Outsourcing

In some cases companies have trouble moving through these steps so they hire an external R&D department

Maturity Stage

Industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them. Market Saturation. High number of competitors and competitive products fighting for market share. Profits at a peak and starting to decline. Late Majority consumers

Diffusion of Innovation

Process by which the use of an innovation whether a product, service, or process, spreads throughout a market group, overtime and across various categories of adopters. Helps markets understand the rate at which consumers are likely to adopt a new product. Give them a means to identify potential markets for their new product and predict potential sales, even before they introduce the innovations

Concept Testing

Process in which a concept statement that describes a product is presented to potential buyers or users to obtain their reactions

Growth Stage

Product gains acceptance. Demand and sales increase. Few but increasing competitors. Consumers are early adopters and early majority. Profits are rising rapidly.

First Movers

Product pioneers that are the 1st 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. How hard it is to learn how to use the product. Get people to try a product to overcome hesitation.

Decline

Sales decline and the product eventually exists the market. Profits decline. Low number of competitors and products. Only Customers are laggards.

Prototype

The 1st physical form or service description of anew product, still in rough form, that has the same properties as a new product but is processed through different manufacturing processes, sometimes made individually

Market Saturation

The longer a product exists in the marketplace, the more likely it is that the market will become saturated. Without new products, the value of the firm will ultimately decline

Satisfaction of technical requirements

The product does what it is supposed to do

Managing Risk with 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

Changing Customer Needs

When firms add products, services, and processes to their offering, firms can create and deliver value more effectively by satisfying the changing needs of their current customers or by keeping customers from getting bored with the current offerings

Evaluation of results

1. Satisfaction of technical requirements: Product does what it is supposed to do. 2. Customer Acceptance: Did they buy the product 3. Satisfaction of financial requirements: Did product meet the revenue, sales, and profit expected

Caveats

1. Time in life cycle 2. Time in mature stage 3. Hope for decline phase: Product resurrection

Compatibility

A diffusion process may be faster or slower, depending on various consumer features. Don't have to change our daily behavior to integrate the new product into our lives

Competitors Products

A new product entry by a competitor may trigger a market opportunity for a firm

Alpha testing

Attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for what it was intended for, occurs in the R&D department

New to the world products

Brand new inventions or products that create new markets

Concepts

Brief written descriptions of a product, its technology, working principals, and forms, and what customer needs it would satisfy. Might also include images of what the product would look like

Innovators

Buyers who want to be the first to have a new product. Must have time to find the new products and money to buy them. Enjoy taking risks and are regarded as highly knowledgable. Small group. Crucial to the success of any new product because they help the product gain market acceptance

Premarket Test

Conducted before a product is brought to the market to determine how many customers will try and continue using the product

Laggards

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

The Product Life Cycle

Defines the stages that new products move through as they enter, get established in, and ultimately leave the market place and thereby offers marketers a starting point for their strategy planning. Stages often reflect marketplace trends. Product starts with negative profits from development

Idea generation

Development of viable new product ideas

Market Testing

Firm must test the market for the new product with a trial batch of products

Using the Diffusion of innovation theory

Firms can predict which types of customers will buy their new product immediately after its introduction as well as later as the product is more accepted by the market. Firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each consumer group

R&D Consortia

Firms join groups of other firms and institutions, possibly including governmental and educational institutions, to explore new ideas or obtain solutions for developing new products. The R&D investments come from the group as a whole, and the participants share the results

Brainstorming

Firms often engage in sessions during which a group works together to generate ideas. No idea can be immediately accepted or rejected. Vote on best ideas at the end of the session

Licensing

For many scientific and technological producers, firms buy the rights to use technology or ideas from other research intensive firms. Saves the high cost of in house R&D

Early Adopters

Generally don't like to take as much risk as innovators but instead wait and buy the product after careful review. Read reviews from innovators. Tend to enjoy novelty and often regarded as the opinion leaders for particular product categories

Beta Testing

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

Relative Advantage

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

Lead Users

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

Introduction Stage

Innovators start buying product. Sales low, low sales growth. Profits are negative or low. Only one or a few competitors. Costs are high.

Test Marketing

Introduces a new product to a limited area (a few cities) prior to a national product launch to see if customers will actually buy it

Reverse Engineering

Involves taking apart a competitors product, analyzing it, and creating an improved product that does not infringe on the companies patents

Late Majority

Last group of buyers to enter a new product market, when they do, the product has achieved its full market potential. Product sales tend to level off or may be in decline when they enter the market

Customer Input

Listening to the customer in both B2B and B2C markets is essential for successful idea generation

Internal R&D

Many firms have their own R&D departments, in which scientists work to solve complex problems and develop new ideas. The product development costs for these firms are high, and the resulting new product has a good chance of being a technological or market breakthrough. Firms expect such products to generate enough revenue and profits to make the costs of R&D worthwhile

Early Majority

Members don't like to take risks and wait until bugs are worked out of a product. Crucial because few new products can be profitable until this large group buys them. Represents the tipping point of a product being profitable or not. Have many price and quality choices because when they enter the market the number of competitors in the market place has usually reached its peak

Why do firms create new products

New market offerings provide value to both firms and consumers. Sustain a business. Risky due to failure rates: 90-95% of new products fail. Most "new" products are just remade or repositioned

Pioneers or Breakthroughs

New product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in the market. Can add tremendous value to firms

Improving business Relationships

New products do not always target end consumers, sometimes they function to improve relationships with suppliers

Innovation

Process by which ideas are transformed into new products that will help firms grow

Observability

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