MKT 3000 - CH 12

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Compatibility

A diffusion process may be faster or slower, depending on various consumer features, including international cultural differences.

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.

INNOVATORS

Are those buyers who want to be the first on the block to have the new product or service. These buyers enjoy taking risks and are regarded as highly knowledgeable. Innovators are crucial to the success of any new product or service, though, because they help the product gain market acceptance.

PRODUCT LIFE CYCLE

Defines the stages that products move through as they enter, get established in, and ultimately leave the marketplace. It thereby offers marketers a starting point for their strategy planning. The stages of the life cycle often reflect marketplace trends, such as the healthy lifestyle trend. In their life cycles, products pass through four stages: 1. INTRODUCTION, 2. GROWTH, 3. MATURITY, and 4. DECLINE.

PRODUCT DEVELOPMENT or 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.

- PREMARKET TESTING

Firms conduct premarket tests before they actually bring a product or service to market to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers.

3. MATURITY (2)

Firms pursue various strategies during this stage to increase their customer base and/or defend their market share. Other tactics include: - Entry into new markets - Because a market is saturated, firms may attempt to enter new geographical markets, including international markets, that may be less saturated. - Market segments - Despite market saturation, firms continually introduce new products with improved features or find new uses for existing products because they need constant innovation and product proliferation to defend market share from intense competition. Firms continually introduce new products to ensure that they are able to retain or grow their respective market shares.

4. DECLINE

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. The few laggards who have not yet tried the product or service enter the market at this stage.

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

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.

CONCEPT

Refers to a brief written description of the product; its technology, working principles, and forms; and what customer needs it would satisfy.

EARLY ADOPTERS The second subgroup that begins to use a product or service innovation.

They generally don't like to take as much risk as innovators do but instead wait and purchase the product after careful review. Thus, this market waits for the first reviews of the latest movie before purchasing a ticket, though they likely still go a week or two after it opens. This group, which represents about 13.5% of all buyers in the market, spreads the word. As a result, early adopters are crucial for bringing the other three buyer categories to the market. If the early adopter group is relatively small, the number of people who ultimately adopt the innovation likely will also be small.

PROTOTYPE

Is the first physical form or service description of a new product, still in rough or tentative form, which has the same properties as a new product but is produced through different manufacturing processes—sometimes even crafted individually. ***Product prototypes are usually tested through alpha and beta testing.

3. MATURITY (1)

It is characterized by the adoption of the product by the late majority and intense competition for market share among firms. Marketing costs (e.g., promotion, distribution) increase as these firms vigorously defend their market share against competitors. They also face intense competition on price as the average price of the product falls substantially compared with the shifts during the previous two stages of the life cycle. Lower prices and increased marketing costs begin to erode the profit margins for many firms. In the later phases of the maturity stage, the market has become quite saturated, and practically all potential customers for the product have already adopted the product. Such saturated markets are prevalent in developed countries.

EARLY MAJORITY It represents approximately 34% of the population.

It is crucial because few new products and services can be profitable until this large group buys them. If the group never becomes large enough, the product or service typically fails. Its members don't like to take as much risk and tend to wait until the bugs are worked out of a particular product or service. This group probably rents the latest "Hunger Games" movie during the first week it comes out on video. Early majority members experience little risk because all the reviews are in, and their costs are lower because they're renting the movie instead of going to the theater. When early majority customers enter the market, the number of competitors in the marketplace usually also has reached its peak, so these buyers have many price and quality choices.

2. GROWTH

It 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. Also during the growth stage, firms attempt to reach new consumers by studying their preferences and producing different product variations—varied colors, styles, or features—which enable them to segment the market more precisely. The goal of this segmentation is to ride the rising sales trend and firmly establish the firm's brand, so as not to be outdone by competitors.

LATE MAJORITY (34% of the market)

It is the next group of buyers to enter a new product market. When they do, the product has achieved its full market potential. Perhaps these movie watchers wait until the newest movie is easy to find at Red Box or put it low on their Netflix queue, to be delivered after the other consumers interested in watching it have already seen it. By the time the late majority enters the market, sales tend to level off or may be in decline.

PIONEERS OR BREAKTHROUGHS

New products that establish a completely new market or radically change both the rules of competition and consumer preferences in a market. Ex.: Apple iPod is a pioneer product. Pioneers have the advantage of being first movers; as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead.

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.

CONCEPT TESTING

Refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions. These reactions enable the developer to estimate the sales value of the product or service concept, possibly make changes to enhance its sales value, and determine whether the idea is worth further development.

- TEST MARKETING A method of determining the success potential of a new product. Test marketing costs more and takes longer than premarket tests, which may provide an advantage to competitors that could get a similar or better product to market first without test marketing. For this reason, some firms might launch new products without extensive consumer testing and rely instead on intuition, instincts, and guts.

Test marketing introduces the offering to a limited geographical area prior to a national launch. It is a strong predictor of product success because the firm can study actual purchase behavior, which is more reliable than a simulated test. A test marketing effort uses all the elements of the marketing mix: It includes promotions such as advertising and coupons, just as if the product were being introduced nationally, and the product appears in targeted retail outlets, with appropriate pricing. On the basis of the results of the test marketing, the firm can estimate demand for the entire market.

1. INTRODUCTION

The introduction stage for a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering. The introduction stage is characterized by initial losses to the firm due to its high start-up costs and low levels of sales revenue as the product begins to take off. If the product is successful, firms may start seeing profits toward the end of this stage.

DIFFUSION OF INNOVATION

The process by which the use of an innovation—whether a product, a service, or a process—spreads throughout a market group, over time and across various categories of adopters.

LAGGARDS (Make up roughly 16% of the market)

These consumers like to avoid change and rely on traditional products until they are no longer available. In some cases, laggards may never adopt a certain product or service. When the sequel to The Hunger Games: Catching Fire eventually shows up on their regular television networks, they are likely to watch it.

MARKET TESTING

When a firm tests the market for the new product with a trial batch of products. These tests can take two forms: - PREMARKET TESTING, and - TEST MARKETING.

Observability

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


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