Chapter 11: Developing & Managing Products

Explain the 5 product characteristics that can be used to predict & explain the rate of acceptance & diffusion of a new product.

1) Complexity- The more complex the product, the slower is its diffusion. 2) Compatibility- Incompatible products diffuse more slowly than compatible products. 3)Relative Advantage- The degree to which a product is perceived as superior to existing substitutes. 4) Observability- The degree to which the benefits or other results of using the products can be observed by others & communicated to target customers. 5) Trialability- The degree to which a product can be tried on a limited basis.

List & describe the 7 sources of new-product ideas (step 2 Idea Generation)

1) Customers- The marketing concept that customers' wants & needs should be the springboard for developing new products. 2) Employees- Employees know a company's products & processes better than anyone else. 3) Distributors- A well-trained sales force routinely asks distributors about needs that are not being met. 4) Competitors- No firms rely solely on internally generated ideas for new products. 5) Research & Development- Product development goes beyond applied research by converting applications into marketable products. R& D is carried out in 4 distinct ways: Basic research. Applied research. Product development-A marketing strategy that entails the creation of marketable new products, the process of converting applications for new technologies into marketable products. Product Modification- which makes cosmetic or functional changes to existing products. 6) Consultants- Outside consultants are always available to examine a business & recommend product ideas. 7) other experts-this can be done by "crowdsourcing." The goal of brainstorming is to get a group to think of unlimited ways to vary a product or solve a problem.

List the 7 step process of new product development process.

1) New product strategy. 2) Idea generation. 3) Idea screening. 4) Business Analysis 5) Development 6) Test Marketing 7) Commercialization

Explain the 6 categories of New Products.

1) New-to-the-world products.(aka discontinuous innovations)= Creates an entirely new market & are the smallest category of new products. 2) New product lines= Allow a firm to enter an established market. 3)Additions to existing product lines= New products that supplement a firm's established product line. 4) Improvements or revisions of existing products= May be significantly or only slightly changed. 5) Re-positioned products= Targeted at new markets or market segments. 6) Lower-priced products= Provide performance similar to competing brands at a lower price.

Describe the 5 characteristics & rate of adoption

1) Relative Advantage- represents the advantage the new product has over relative substitutes 2) compatibility- Represents the compatibility with thephysical setup up, lifestyle , and value the product has with its costumer. is easy to hook up , is it easy to use 3)simplicity- directions are easily to follow for easy adoption. e.g- toaster VS washer machine settings 4)communicability- is it easy to demonstrate or display. the easier the better. 5)Trialability- trial size packages which allows customers try without fully committing.

Explain the 2 types of communication aid the diffusion process.

1) Word-of-mouth communication- Opinion leaders discuss new products with their follower & with other opinion leaders. - within & across groups, including social media & viral communication, speeds diffusion. 2) Communication directly from the marketer to potential adopters- Different appeal are used to target the different categories of adopters. - Messages directed toward early adopters should normally use different appeals than messages directed toward the early majority.

Define New Product

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

A software company launches a basic program, but it already has additional software that has more advanced features. What type of product would this be?

Addition to existing product lines.

Explain the 6th step Target Marketing

After products & marketing programs have been developed, they are usually tested in the marketplace. Target Marketing- the limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. This allows the following to occur: -Allows management to evaluate alternative strategies and to assess how well the various aspects of the marketing mix fit together. -Frequently takes one year or longer and costs can exceed $1 million. -Exposes the new product and its marketing mix to competitors before its introduction. -Competitors can "jam" testing programs with their own promotions by introducing their own sales, promotion, pricing, or advertising campaign. There are 3 alternatives to test marketing: 1) Scanner-based research 2) Simulated (laboratory) market testing- The presentation of advertising & other promotional material for several products including a test product, to members of the product's target market. 3) the internet.

Explain the Business Analysis stage.

Business Analysis- the second stage of the screening process where preliminary figures for demand, cost, sales, and profitability are calculated. •The newness of the product, the size of the market, and the nature of the competition all affect the accuracy of revenue projections. •Analyzing overall economic trends and their impact on estimated sales is especially important in product categories that are sensitive to fluctuations in the business cycle.

What is the goal of idea generation?

Create a long list of ideas.

Which of the following is the most expensive exercise that a company undertakes?

Create a long list of ideas.

Explain the Decline stage of PLC

Decline stage- A long-run drop in sales. -Large inventories of unsold items. - Elimination of all nonessential marketing expenses. -Discontinue purchasing the products. The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted. Many convenience products and fad items lose their market overnight.

Explain the (5th step), The Development Stage

Development- The stage in the product development process in which a prototype is developed & a marketing strategy is outlined. This stage includes: -Developing a prototype. -Sketching a marketing strategy. - Deciding on packaging, branding, & labeling. - Mapping out preliminary promotion, price, & distribution strategy. -Examining manufacturing feasibility.

Explain the growth stage of PLC

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. -In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms. -Profits rise rapidly, peak, and begin declining as competition increases. -Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy. -Adequate distribution is a major key to establish a strong market position and product success.

Which of the following is not part of the product life cycle?

Inception stage

Define Innovation & Diffusion

Innovation- A product perceived as new by a potential adopter. Diffusion- The process by which the adoption of an innovation spreads.

When adopting technology products, Jennifer tends to be a variety seeker and likes to try new products. She is likely to be a(n):

Innovator

Explain the 5 categories of adopters.

Innovators- Are eager to try new ideas & products, almost as an obsession. Early adopters- A desire to earn the respect of others is a dominant characteristic among early adopters. Early majority- The next 34% to adopt. They weight the pros & cons before adopting a new product & rely on group information. Late majority- The next 34% to adopt. They adopt a new product because most of their friends have already adopted it. Laggards- The final 16% to adopt. By the time laggards adopt an innovation, it has probably been outmoded. Marketers typically ignore laggards, who do not seem to be motivated by promotion & personal selling.

Explain the introductory stage of the PLC

Introductory state- The full-scale launch of new product into the marketplace. -During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product. Has the following: High failure rates. -little competition -frequent product modification -limited distribution -high marketing & production costs.

What happens to new product ideas that survive the initial screening process?

It moves on to step 4: business analysis stage, where preliminary figures for demand, cost, sales, & profitability are calculated.

What are the following actions companies must do to most likely succeed in developing & introduction new products.

Make the long-term commitment needed to support innovation and new-product development. Use a company-specific approach, driven by corporate objectives and strategies, with a well-defined new-product strategy at its core. Capitalize on experience to achieve and maintain competitive advantage. Establish an environment—a management style, organizational structure, and degree of top management support—conducive to achieving company-specific new-product and corporate objectives.

Explain the maturity stage of PLC.

Maturity stage-a period during which sales increase at a decreasing rate. -Saturated markets -Annual models appear= May appear during the maturity stage for shopping & specialty products. -Lengthened product lines= To appeal to additional market segments. -Service and repair assume important roles. -Heavy promotions to consumers and dealers= Is required to maintain market share. -Marginal competitors drop out= As prices & profits continue to fall, marginal competitors drop out of the market. -Niche marketers emerge= Target, narrow, well-defined segments of a market emerge.

which of the following is not a category of adopters?

Mid Majority

If Ford decides to manufacture and sell electric vehicles into the market, what type of development would it be?

New product lines.

Define & explain the 1st step (New-product strategy)

New-product strategy- A plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation. A new-product strategy is part of the organization's overall marketing strategy. It sharpens the focus and provides general guidelines for generating, screening, and evaluating new-product ideas. It must specify the roles that new products must play in the organization's overall plan.

Define & describe Product Life Cycle (PLC)

PLC- A concept that provides a way to trace the stages of a product's acceptance, from its introduction (birth) to its decline (death). - this concept can be used to analyze a brand, a product form, or a product category. - The PLC is a descriptive tool to help see where the product is and what meaningful steps to take. This is not a predicting tool.

Explain product category

Product Category- all brands that satisfy a particular type of need. - The time a product spends in any 1 stage of the life cycle may vary dramatically. -Product categories have the longest life cycle.

Why do some products succeed and others fail?

Products fail for the #N of reasons : 1) They simply don't offer any discernible benefit compared to existing products. 2) Poor match between product features & customer desires. 3) There is an overestimation of market size, incorrect targeting or positioning, a price too high or too low, inadequate distribution, poor promotion, or simply, an inferior product. -Absolute failure occurs when a company cannot recoup its development, marketing, and production costs—the product actually loses money for the company. -A relative product failure results when the product returns a profit but fails to achieve sales, profit, or market share goals.

What is Simultaneous product development?

The development process works best when all of the involved areas work together rather than sequentially.

Explain the 7th step : Commercialization

The final stage in the new-product development process. Commercialization- the decision to market a product. Commercializing a product sets several tasks in motion: - Ordering production material & equipment. -Starting production. -Building Inventories. -Shipping the product to filed distribution points. -Training the sales force. -Announcing the new product to the trade. -Advertising to potential customers.

Explain (step 3) Idea Screening

This step happens after new ideas are generated , they must pass through screening. Idea Screening-: the first filter in the product development process, which eliminates ideas that are inconsistent with the organization's new-product strategy or are obviously inappropriate for some other reason. What is often used for the screening stage to rate the concept/product alternatives is the Concept tests. Concept test- evaluate a new-product idea, usually before any prototype has been created. The CT are considered fairly good predictors of success for line extensions. They have also been relatively precise predictors of success for new products that are not copycat items, are not easily classified into existing product categories, and do not require major changes in consumer behavior—such as Betty Crocker Tuna Helper. However, in inaccurate in predicting the success of new products that create new consumption patterns.

Which of the following is not a step in the new product development process?

Validation

Explain the importance of New Products.

a). New products are important to sustain growth, increase revenues & profits, & replace obsolete items. b) Some companies spend a considerable amount of money each year developing new products. c) It can be difficult to decide when to replace a successful product. d) The introduction of a new product is a monumental undertaking w/a lot of open-ended questions. (trade-offs, risks, complex decisions).

Which of the following products likely rated low on compatibility when it was first introduced in the market?

clothes washer

which of the following is key characteristics impacting the rate of adoption?

compatibility

which of the following is true during the growth stage?

competitors enter the market

Launch of products that no other company has ever made is called?

new-to-the-world products.

What are innovations?

products that are perceived to be new by the consumers.

what occurs in the maturity stage?

sales stabilize

Which of the following is a characteristic of products that are easy to understand, resulting in a faster adoption?

simplicity

Explain the implications for marketing management.

•The diffusion process and the PLC concept all have implications for marketing managers •The new-product development process is sometimes illustrated as a decay curve, with roughly half of the ideas approved at one stage rejected at the next •The implication of the diffusion process to marketing managers is that the message may need to change over time.