Chapter 12 (Principles of Marketing)
Commercialization
At this stage, the product is ready for full-scale manufacturing and marketing. Commercialization of a major new product can mean substantial expenses for the firm as it: Establishes marketing strategies Funds production Acquaints the sales force, marketing partners, and customers with the new product
Companies tailor their marketing strategies based on the stage of a particular product in the product lifecycle. Despite their best efforts at extending the product lifecycle, marketers may have to cut product lines and eliminate unpromising products to avoid wasting resources.
Companies tailor their marketing strategies based on the stage of a particular product in the product lifecycle. Despite their best efforts at extending the product lifecycle, marketers may have to cut product lines and eliminate unpromising products to avoid wasting resources.
Development
Development refers to the conversion of a new product idea into a visible product. A prototype version of the product is developed, or a smaller test product run is initiated. Financial outlays increase substantially at this stage.
A firms' strategy choice depends on:
Its existing product mix The match between current offerings and the firm's overall marketing objectives The current market positions of its products
Factors Affecting Rates of Adoption
Marketers can influence the speed of the consumer adoption process by manipulating five characteristics of product innovation: 1. Relative advantage An innovation that appears to be far superior to previous ideas offers a greater relative advantage and increases the product's adoption rate. 2. Compatibility An innovation consistent with the values and experiences of potential adopters attracts new buyers at a relatively rapid rate. 3. Complexity Relative difficulty of understanding how innovation influences the speed of acceptance Generally, consumers move slowly in adopting new products they find difficult to understand or use. 4. Possibility of trial use An initial free or discounted trial of a good or service allows adopters to reduce their risk of financial loss. 5. Observability When potential buyers can observe an innovation's superiority in a tangible form, the adoption rate increases.
Extending the Product Lifecycle
Marketers usually try to extend each stage of their products' lifecycle as long as they can. Product lifecycles can stretch indefinitely as a result of decisions designed to: Increase the frequency of use by current customers During the maturity stage, total sales can continue to rise if current customers buy more frequently than they did formerly. For customers who buy products during certain seasons of the year, marketers can boost purchases by persuading those people to buy the product year-round. Product lifecycles can stretch indefinitely as a result of decisions designed to (cont'd): Increase the number of users for the product To extend the product lifecycle, marketers want to increase the overall market size by attracting new customers. Find new uses New applications for mature products include oatmeal to reduce cholesterol and aspirin to promote heart health. Change package sizes, labels, or product quality
Idea Generation
New product development begins with ideas from many sources: Customers Sales force Research and development specialists Competing products Suppliers Retailers Independent inventors
The New Product Development Process Each step
Requires decisions about whether to proceed further or abandon the project Involves more financial investment Most companies develop new products by following the six steps in order. Although, the lines between the steps may become blurred.
Screening
Screening separates ideas that have commercial potential from those that cannot meet company objectives. Some organizations use checklists of development standards to determine whether a project should be considered further.
Test Marketing
The company may decide to test market the product to: Determine consumer reactions Verify that the product will perform well in real life Industries that rely heavily on test marketing: Snack foods Automobiles Movies
Lean and Six Sigma
These two quality-improvement tools are common in today's marketplace. Lean is focused on identifying and eliminating waste in production systems. Six Sigma targets defects and unnecessary variations
Business Analysis
This stage consists of assessing the new product's: Potential market Growth rate Competitive strengths Marketers must also evaluate the compatibility of the proposed product with organizational resources.
benchmarking
a method of measuring quality by comparing performance against industry standards Involves three main activities: Identifying manufacturing or business processes that need improvement Comparing internal processes to those of industry leaders Implementing changes for quality improvement Requires both internal and external analysis: Internal: analyzing the company's own activities to determine strengths and weaknesses External: gathering information about the benchmark partner to learn why the partner is perceived as the industry's best
New Product Adoption
adoption process: a series of stages from first learning about the new product to trying it and deciding whether to purchase Awareness: Individuals first learn of the new product but lack full information about it. Interest: Potential buyers begin to seek information about it. Evaluation: Potential buyers consider the product's benefits. Trial: Consumers make trial purchases to determine the product's usefulness. Adoption/Rejection: If the results of the trial purchase are satisfactory, consumers decide to use the product on a regular basis.
market development strategy
concentrates on finding new markets for existing products
Introductory Stage
first stage of the product lifecycle, in which a firm works to stimulate sales of a new product The public becomes acquainted with the item's merits and begins to accept it.
product diversification strategy
focuses on developing entirely new products for new markets
innovators
people who are first to make trial purchases
early adopters
people who are quick to purchase the latest product once it is somewhat established
The Product Mix
product line: a group of related products sold under the same brand product mix: an assortment of product lines and individual product offerings product mix breadth: the number of different product lines a firm offers product line depth: the number of variations in each product line
market penetration strategy
seeks to increase sales of existing products in existing markets
Quality of Services
service encounter: the point at which the customer and service provider interact Employees such as bank tellers, cashiers, and customer service representatives have a powerful impact on whether their customers decide to return. Poor service can cut into a firm's competitiveness. service quality: the perceived level of service a customer receives Service quality is determined by five variables: Tangibles: physical evidence Reliability: consistency of performance and dependability Responsiveness: readiness to serve Assurances: confidence communicated by the service provider Empathy: ability of the service provider to understand customers' needs and to be ready to fulfill them
product development
the introduction of new products into established markets
The Diffusion Process
the process by which new products are accepted into the marketplace Because of the diversity of consumer adoption of products, most new products take time to be accepted by the overall market. Some consumers are quick to buy new products. Others are slower at trying something unfamiliar. Members of the early majority are careful and pragmatic in their buying decisions. Members of the late majority generally only buy a new product when its diffusion in the marketplace is nearly complete. Laggards are afraid of change. The differences among consumer adoption categories become especially clear with regard to new technology.
The Product Lifecycle
the progression of a product through four basic stages: introduction, growth, maturity, and decline Applies to products or product categories within an industry, not to individual brands No set schedule or time frame for each stage
commercialization
when a new product idea is ready for full-scale manufacturing and marketing A new product is more likely to be successful if a firm follows these six steps:
