Chapter 12 - Developing New Products

At each stage of the lifecycle, the ___ change in response to the marketplace.

At each stage of the lifecycle, the *marketing mix elements* change in response to the marketplace.

Because the market is saturated at the maturity stage of the PLC, many firms attempt to enter new ___, including ___ markets that may be less saturated.

Because the market is saturated at the maturity stage of the PLC, many firms attempt to enter new *geographic markets*, including *international* markets that may be less saturated.

*Stage 2* of the product life cycle is the

growth stage

To generate ideas for new products, firms can use (5)

*1.* its own internal research development efforts (R&D) *2. R&D Consortia* collaborate w/ other firms and institutions *3.* brainstorm *4.* research competitor's products and services *5.* conduct consumer research

The fusion of innovation curve divides purchasers into what (5) groups according to how soon they buy the product after it has been introduced

1. Innovators (2.5%) 2. early adopters (13.5%) 3. early majority (34%) 4. late majority (34%) 5. laggards (16%)

In their life cycles, products pass through what (4) stages?

1. Introduction 2. Growth 3. maturity 4. Decline

What are (5) reasons firms innovate (create new products)?

1. changing customer needs 2. market saturation 3. managing risk through delivery 4. fashion cycles 5. improving business relationships

What does a product launch involve?

1. confirms target market(s) and decides how the product will be positioned - based on research and tests 2. finalizes marketing mix variables, and marketing budget

Without innovation and its resulting new products and services, firms would have only (2) choices:

1. continue to market current products to current customers 2. take the same product to another market with similar customers

Innovators

1. enjoy taking risks 2. highly knowledgeable 3. well informed - subscribe to trade and specialty magazines, talk to other experts, review blogs and forums, attend seminars and special events 3. represent 2.5 percent of the total market

Why is the failure rate for new products so high? ()

1. failure to assess the market properly by neglecting to do appropriate product testing, targeting the wrong segment, and/or positioning 2. venturing into products or services that are inconsistent with their brand image and/or value proposition

The growth stage of the product life cycle is marked by what (4) things?

1. growing number of adopters 2. rapid growth in industry sales 3. increases in both the number of competitors and 4. the number of available product versions

Firms can measure the success of a new product using what (3) interrelated factors?

1. its satisfaction of technical requirements, such as performance 2. customer acceptance 3. its satisfaction of the firm's financial requirements

Firms with products in the decline state either position themselves in what possible (3) ways?

1. position themselves for a niche segment off diehard segments 2. position themselves for those with special needs 3. or completely exit the market

Market tests can take what (2) forms?

1. premarket testing 2. test marketing

These promotions are often coupled with (3)

1. temporary price reductions, 2. coupons, or 3. rebates

What are (3) ways for promoting?

1. trade promotions 2. introductory price promotions 3. trade shows

The theory surrounding diffusion of innovation helps marketers ___ (3) before they introduce the innovations

1. understand the *rate at which consumers are likely to adopt a new product or service* 2. gives them the means to *identify potential marketers* for their product or service 3. *predict their potential sales*

If retailers don't abide by the manufacturer's suggested retail price (MSRP), manufacturers can do what (2) things?

1. withhold benefits such as paying for all or part of promotion 2. refusing to deliver merchandise to noncomplying retailers

*Competitors' products:* A new product entry by a competitor may trigger a market opportunity for a firm, which can use ___ to understand the competitor's product and then bring an improved version to market

A new product entry by a competitor may trigger a market opportunity for a firm, which can use *reverse engineering* to understand the competitor's product and then bring an improved version to market

A particularly successful *customer input* approach is to analyze ___

A particularly successful customer input approach is to analyze *lead users*

After the product launch, marketers evaluate the results to determine whether the ___ and what ___

After the product launch, marketers evaluate the results to determine whether the *product* and its *launch was a success or a failure* and what *additional resources or changes* to the *marketing mix are needed*

Also, because the pioneer is the first product in the market, it often has a ___ and may be ___, leaving room for better and ___ competitive products

Also, because the pioneer is the first product in the market, it often has a *less sophisticated design* and may be *priced relatively higher*, leaving room for better and *lower-priced* competitive products

*CHECK* What are the reasons firms innovate?

Changing customer needs, market saturation, managing risk through diversity, and fashion cycles

Concept testing helps the firm avoid what?

Concept testing helps the firm avoid the *costs of unnecessary product development*

Despite market saturation, firms continually introduce new products with improved features or find new uses for existing products bc they need ___ and ___ to defend ___ from intense competition

Despite market saturation, firms continually introduce new products with improved features or find new uses for existing products bc they need constant *innovation* and *product proliferation* to defend *market share* from intense competition

During the growth stage, the market becomes more ___ and consumer preferences more ___, which increases the potential for new markets or new uses of the poduct

During the growth stage, the market becomes more *segmented* and consumer preferences more *varied*, which increases the potential for new markets or new uses of the poduct

During the maturity stage, marketing costs ___ as firms rigorously ___

During the maturity stage, marketing costs *increase* as firms rigorously *defend their market share* against competitors

Early adopters are crucial for ___

Early adopters are crucial for *bringing the other 3 buyer categories to the market*

*Step 6* of the new product development process is

Evaluation of Results

Firms that want to be pioneers rely more on extensively on ___ whereas those that adopt a follower strategy are more likely to ___.

Firms that want to be pioneers rely more on extensively on *R&D efforts* whereas those that adopt a follower strategy are more likely to *scan the market for ideas*

Firms with multiple products can better withstand ___, which including changes in consumer preferences or intensive competitive activity

Firms with multiple products can better withstand *external shock*, which including changes in consumer preferences or intensive competitive activity

*CHECK* What are the steps in the new product development process?

First, they generate ideas for the product or service. Second, firms test their concepts by either describing the idea of the new product or service to potential customers or showing them images of what the product would look like. Third, the design process entails determining what the product or service will actually include and provide. Fourth, firms test market their designs. Fifth, if everything goes well in the test market, the product is launched. Sixth, firms must evaluate the new product or service to determine its success.

For any firm, if the new *product launch* is a failure, it may be difficult for ___

For any firm, if the new *product launch* is a failure, it may be difficult for *product* or even the *firm to recover*

For many scientific and technological products, firms buy the rights to use the ___ or ___ from other research-intensive firms through ___.

For many scientific and technological products, firms buy the rights to use the *technology* or *ideas* from other research-intensive firms through a *licensing agreement*.

However, even in mature markets, firms may be able to ___

However, even in mature markets, firms may be able to *find new market segments*

Ideas with potential are developed further into ___, which in this context refer to brief written descriptions of the: (5)

Ideas with potential are developed further into *concepts*, which in this context refer to brief written descriptions of the: 1. product 2. its technology 3. working principles 4. working forms 5. what customer needs it would satisfy

If manufacturers can create demand for the products among consumers, consumer will ___ which induces ___

If manufacturers can create demand for the products among consumers, consumer will *go to retailers asking for it,* which induces *retailers to carry the product*

How are these 3 factors interrelated?

If the product is *not performing sufficiently, poor customer acceptance* will result, which in turn leads to *poor financial performance*

If the products aren't sold and stocked by ___, no amount of promotion to consumers will sell the products

If the products aren't sold and stocked by *retailers*, no amount of promotion to consumers will sell the products

In many cases, imitators capitalize on the ___ of pioneers and subsequently ___

In many cases, imitators capitalize on the *weaknesses* of pioneers and subsequently *gain advantage in the market*

In the later phases of the maturity stage, the market has become quite ___, and practically all potential customers already have adopted the product

In the later phases of the maturity stage, the market has become quite *saturated*, and practically all potential customers already have adopted the product

In the maturity stage, firms try and rejuvenating their products by ___ or ___. If theses efforts succeed, the product ___ If not, it ___

In the maturity stage, firms try and rejuvenating their products by *adding features* or *repositioning* If theses efforts succeed, the product *achieves new life* If not, it *it goes into decline* and eventually *exits the market*

In theory, the product life cycle curve is bell shaped with regard to ___ and ___. In reality, however, each product or service category has its own ___ shape.

In theory, the product life cycle curve is bell shaped with regard to *sales* and *profit* In reality, however, each product or service category has its own *individual* shape.

Innovators are crucial to the ___, though, because they help the products gain ___

Innovators are crucial to the *success* of any new product or service, though, because they help the products gain *market acceptance*

*CHECK* What are the five groups on the diffusion of innovation curve?

Innovators, early adopters, early majority, late majority, laggards.

*CHECK* Identify different sources of new product ideas.

Internal research and development (R&D) efforts, collaborate with other firms and institutions, license technology from research-intensive firms, brainstorm, research competitors' products and services, and/or conduct consumer research;

*CHECK* What are the steps in the new product development process?

Introduction, growth, maturity, decline

It is sometimes easier to start with a ___ MSRP and then over time ___ it than it is to introduce the new product at a ___ price and the try to ___ it.

It is sometimes easier to start with a *higher* MSRP and then over time *lower* it than it is to introduce the new product at a *low* price and the try to *raise* it.

Manufacturers use promotion to generate ___.

Manufacturers use promotion to generate *demand* for new products with consumers

New products do not always target end consumers; sometimes they function to ___

New products do not always target end consumers; sometimes they function to *Improve relationships with suppliers*

New-to-the-world products are not adopted by everyone at the same time, but rather spread through a population in a process known as ___

New-to-the-world products are not adopted by everyone at the same time, but rather spread through a population in a process known as *diffusion of innovation*

One of the key characteristics of a *brainstorming* session is that ___ The moderator of the session may channel participants' attention to ___ and ___, ___, or ___.

One of the key characteristics of a brainstorming session is that *no idea can be immediately accepted or rejected* The moderator of the session may channel participants' attention to *specific product features* and *attributes*, *performance*, or *packaging*

Because pioneering products and brands face an uphill task of ___ They pave the way for followers because, who can spend less marketing efforts creating ___ and focus directly on creating ___

Pioneering products and brands face an uphill task of *establishing the market alone*. They pave the way for followers because, who can spend less marketing efforts creating *demand for the product line* and focus directly on creating *demand for their specific brand*

Pioneers (breakthroughs) establish completely new ___ or radically change both the ___ or ___

Pioneers (breakthroughs) establish completely new *markets* or radically change both the *rules of competition* or *consumer preferences in a market*

Potential buyer's reactions to concept testing enable the developer to estimate the ___ of the product or service concept, and determine if ___

Potential buyer's reactions to concept testing enable the developer to estimate the *sales value* of the product or service concept, and determine if *the idea is worth pursuing*

Product prototypes are usually tested though ___ and ___ testing

Product prototypes are usually tested though *alpha* and *beta* testing

*Complexity and Trialability:* Products that are relatively ___ are also easy to try. These products will generally diffuse more ___ and leader to ___ adoption than those that are not so easy to try

Products that are relatively *less complex* are also easy to try. These products will generally diffuse more *quickly* and leader to *greater/faster* adoption than those that are not so easy to try

*CHECK* Identify different sources of new product ideas.

Profits and sales grow until maturity and then begin to decline

Promotion for new products is required at ___

Promotion for new products is required at *each link in the supply chain*

Regardless of where on the continuum a new product lies, firms have to ___

Regardless of where on the continuum a new product lies, firms have to *innovate*

*CHECK* What factors enhance the diffusion of a good or service?

Relative advantage, compatibility, complexity and trialability

Sometimes manufacturers promote new products in advance of the product launch to ___ and ___

Sometimes manufacturers promote new products in advance of the product launch to *create excitement* w/ potential customers and *measure likely demand* to ensure they have an appropriate supply available

Studies have found that market pioneers can ___

Studies have found that market pioneers can *command a greater market share over a longer time period*

Studying lead users helps firms understand ___

Studying lead users helps firms understand *general market trends* that might be just on the horizon

The firm likely starts with exploratory research, such as ___ or ___, to test the concept, and then will undertake conclusive research through ___ or ___

The firm likely starts with exploratory research, such as *in-depth interviews* or *focus groups*, to test the concept, and then will undertake conclusive research through *Internet* or *mall-intercept surveys*

The fusion of innovation curve shows that the number of users of an innovative product or service spreads through the population over a period of time and generally follows a ___-shaped curve

The fusion of innovation curve shows that the number of users of an innovative product or service spreads through the population over a period of time and generally follows a *bell-shaped curve*

The goal of this segmentation is to (2)

The goal of this segmentation is to *ride the rising sales trend* and *firmly establish the firm's brand*

*New Product Marketing Mix: Place* The manufacturer coordinates the ___ and ___ of the new products with its ___ to ensure that it is available for sale ___ (x3)

The manufacturer coordinates the *delivery* and *storage* of the new products with its *retailers* to ensure that it is available for sale *(1) when* the customer wants it, *(2) where* the customer is expecting to find it, and *(3) in sufficient quantities* to meet demand

The most challenging part of applying the PLC concept is that ___

The most challenging part of applying the PLC concept is that *manager don't know exactly what shape each product's LC will take, so there's no way to know precisely what stage a product is in.*

The product life cycle offers a useful tool for managers to analyze the types of ___

The product life cycle offers a useful tool for managers to analyze the types of *strategies required over the life of their product*

The test results help the firm determine ___

The test results help the firm determine *integrated communications (promotion) strategies*

They also face intense competition on ___ as the average price of the product ___ substantially compared with the shifts during the previous two stages of the life cycles

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 cycles

The early majority is crucial because ___

This early majority is crucial because *few new products and services can be profitable until this large group buys them*

Through innovation, firms can often create a broader portfolio of products, which helps them ___ and ___

Through innovation, firms can often create a broader portfolio of products, which help them *diversify their risk* and *enhance firm value* better than a single product

Trade promotions often combine ___, ___, and ___ to get wholesalers or retailers to purchase the new product

Trade promotions often combine *introductory price promotions, special events*, and *personal selling* to get wholesalers or retailers to purchase the new product

What can firms predict by using the diffusion of innovation theory?

Using the diffusion of innovation theory, firms can predict *which types of customers buy their p or s, and at what time after it has been introduced to the market*

When early majority customers enter the market, the number of ___ has reached its peak, so buyers have many ___ and ___

When early majority customers enter the market, the number of *competitors in the marketplace* has reached its peak, so buyers have many *prices* and *quality choices*

*Observability:* When products are easily observed, their benefits or uses are easily ___, which enhances the diffusion process.

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

When setting the MSRP, manufacturers also consider the price at which the new products are sold to the ___.

When setting the MSRP, manufacturers also consider the price at which the new products are sold to the *retailer*.

With this knowledge, firms can develop effective ___, ___, and ___ to push acceptance among each customer group.

With this knowledge, firms can develop effective *promotion, pricing*, and other marketing strategies to push acceptance among each customer group.

*Market Saturation:* Without new products or services, the value of a firm will ultimately ___

Without new products or services, the value of a firm will ultimately *decline*

*Compatibility:* a diffusion process may be faster or slower, depending on various ___, including ___.

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

during this stage, firms attempt to reach new consumers by ___ and producing ___, which enable them to ___ the market more precisely

during this stage, firms attempt to reach new consumers by *studying their preferences* and *producing different product* variations, which enable them to *segment* the market more precisely

firms pursue various strategies during this stage to increase ____ and/or ___ other tactics include entry into ___ and ___ and developing ___

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* and *market segments* and *developing new products*

*Relative Advantage:* if a product or service is perceived to be better tn substitutes, then the diffusion rate will be relatively ___

if a product or service is perceived to be better tn substitutes, then the diffusion rate will be relatively *quick*

if the early adopted group is relatively small, the ___

if the early adopted group is relatively small, the *number of people who ultimately adopt the innovation likely will be small*

it is useful to think of the degree of newness or innovativeness on a ___ from ___

it is useful to think of the degree of newness or innovativeness on a *continuum* from *new-to-the-world*

*Stage 3* of the product life cycle is

maturity

new-to-the-world products are called ___ or ___

new-to-the-world products are called *pioneers* or *breakthroughs* and

pioneers have the advantage of being ___ as the first to create the market or product category, they become readily ___ to consumers and thus establish a commanding and early ___

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*

retailers may also receive a ___ from the manufacturer to get products in the door or to gain more or better shelf space for their products

retailers may also receive a *slotting allowance* from the manufacturer to get products in the door or to gain more or better shelf space for their products

*New Products' Marketing Mix: Price* setting price is a ___ decision

setting price is a *supply-chain wide* decision

*Stage 4* of the Product life cycle is

the decline stage

*stage 1* of the product life cycle is

the introduction stage

the introduction stage is characterized by ___ to the firm due to its high ___ and low ___ as the product begins to take off

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

when the late majority enter the market, thee product has achieved its ___ and sales tend to ___ or ___

when the late majority enter the market, thee product has achieved its *full market potential* and sales tend to *level off* or may be in *decline*