Marketing Chapter 12

Step 4: Market Testing (also called Test Marketing)

(mini product launch) -The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

***Simultaneous Product Development*** (ON TEST!!)

**A new team-oriented approach to new-product development where all relevant functional areas and outside suppliers participate in the development process.**

The Maturity stage of the PLC

**Sales increase, at a decrease rate** Saturated market (a lot of different players on the site) Annual models appear Lengthing of product lines Ex) Special K's cereal and protein bars Marginal competitor's drop out

**Idea Screening**

**a filter in the product development process, which eliminates ideas that are inconsistent with the organization's new product strategy or are inappropriate for some other reason**

Go Pro

-10 year overnight success story -Invented as a wrist camera for surfers -Releasing peripherals and cameras quickly -Gives customers the opportunity to innovate -Investment perspective not enough diversification/ focused in too small segment- challenges in competing with phones

Step 2: Concept Testing

-Concept is a brief written description of the product -Customers reactions determine whether or not it goes forward -Triggers the marketing research process

Why New Productions Fail

-No discernible benefits -Poor match between features and customers desires -Overestimation of market size -Incorrect positioning -Price too high or too low -Inadequate distribution -Poor promotion -Inferior product

Step 6: Evaluation of Results

-Satisfaction of technical requirements -Customer acceptance -Satisfaction of the firm's financial requirements

Step 1: Idea Generation

1. Internal R & D (Research and Development) (inside the company) -High product development costs -Often the source of technological products -Often the source of breakthrough products 2. R & D Consortia -Lower costs and risks; firms join together -Form research consortiums -Benefits spread to all firms -Example) pharmaceutical industry research 3. Licensing -Firms purchase the rights to technology or ideas from other research- intensive firms. -University research centers also often provide such licenses ***4. Brainstorming*** -Groups work together to generate ideas -No idea can be immediately dismissed ***It is not evaluating ideas, just generating ideas.*** 5. Competitor's Products -Reverse engineering -"Me Too" or copycat products 6. Customer Input -As much as 85% of new business to business products come from customers -Lead users modify existing products according to their own specific needs 7. Outsourcing -Is the idea that you will pay someone to do work you don't have the ability to/don't want to do

Evaluation of Results

Analysis of the performance of the new product and making appropriate modifications.

Observability

Can see the benefits easily (Can easily see the benefits of the product) Ex) Lipstick Cars that have new features

In cleaning products range, it is far easier to pick up a new spray cleaner at the grocery store to try at home than it is to access and test a new vacuum. This is an example of what?

Complexity

Laggards

Consumers who like to avoid change and rely on traditional products until they are no longer available. (Sometimes Laggards never adopt a product or service.)

Product Development

Development of prototypes and/or the product.

Idea Generation

Development of viable new product ideas

Step 5: Product Launch

Evokes (to call forth) to 4 P's (Product, Price, Place, Promotion)

Compatibility

Ex) Software/ Technology Update your software

***Using the Diffusion of Innovation Theory***

Factors affecting product diffusion: - relative advantage, -compatibility, -observability, -complexity -trialability

Product Launch

Full scale commercialization of the product.

***How Firms Develop New Products***

Idea Generation Concept Testing Product Development Market Testing Product Launch Evaluation of Results

The Growth Stage of the PLC

Increasing rate of sales Entrance of competitor's Healthy **Profits** Aggressive advertising Wider Distribution Ex) Electric cars, Instant Pot, 3-D Television

The person who stood in line overnight to be sure to get a ticket for the very first showing of the latest superhero movie. This is an example of what type of diffusion of innovation?

Innovators

Product Life Cycle (PLC)

Introductory stage Growth stage Maturity stage Decline stage

When the sequel to Star Wars: The Force Awakens eventually shows up on their regular television networks, they might watch it. This is an example of what diffusion of innovation?

Laggards

Perhaps these movie watchers wait until the newest movie is available on Netflix. This is an example of what diffusion of innovation?

Late majority

The Decline stage of the PLC

Long-run drop in sales Large inventories of unsold items Elimination of all non essential Organized abandonment Ex) Diesel cars, AMF radio, Crisco, Comet, CDs

Stages in the Product Life Cycle

Look at chart from book (Pg. 265)

Many restaurants roll out new ideas first in Orlando, Florida, a location that attracts a vast range of diverse tourists and thus might offer insights into what various consumers will like. This is an example of what?

Market Testing (also referred to as Test Marketing)

Early majority

Members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them.

The Maturity stage of PLC is where......

Most products are

Relative advantage

Perceived to be better than substitutes Ex) Cassete to CDs to songs in Iphone Ex) Dot matrix printer to Laser jet printer

Market Testing

Premarket tests -customers exposed -customers surveyed -firm makes decision Test marketing -mini product launch -more expensive than premarket tests -market demand is estimated

New automobile models traditionally are released for sale during September, and fashion products are launched just before the season of the year for which they are intended. These are examples of what?

Product Launch

Hollywood studios typically release movies targeted toward general audiences (G- or PG-rated movies) during the summer when children are out of school. This is an example of what?

Product launch

Step 3: Product Development

Prototype: A fake version of the product you will test Alpha testing: Is testing the product (prototype) **INSIDE** the company Beta testing: Is allowing a small group of customers to test your products Ex) Google does this Car companies will put some of their newest engines in race cars.

The Introduction Stage of PLC

Something brand new to the market Profits are negative Very few competitor's (if any) Ex) Alexa, Google Home, brand new (test) car

Market testing

Testing the actual products in a few test markets.

Concept Testing

Testing the new product idea among a set of potential customers.

Trialability

The ease of sampling a new product and its benefits

Late majority

The last group of buyers to enter a new product market; When they do, the product has achieved its full potential.

Complexity

The more complex (difficult) a product is the slower it is to diffuse (The more complex a product is the more difficult it is to use)

Innovation

The process by which ideas are transformed into new products and services that will help firms grow. Ex) FitBits are new to the world

Early adapters

They generally don't like to take as much risk as innovators but instead wait and purchase the product after careful review.

Innovators

Those buyers who want to be the first to have the new product or service.

Innovation and Value

Why do firms create new products? - Changing customer needs - Market Saturation - Managing risk through diversity - Fashion cycles - Improving business relationships

These type of people tend to not wait in line for the new Samsung 65 curve tv but only after reading reviews before they purchase the product. These people are _________________.

early adapters

Diffusion of Innovation

innovators, early adopters, early majority, late majority, laggards

For example, in the well-established hair care products market, consumer goods companies constantly search for innovators to set themselves apart and extend the time in which they maintain their position in the ___________________ stage.

maturity

New Product Introductions Pioneers: ________________________________________

radically change competition and consumer preferences. (changes the way we view the world) Ex) MP3 player, Ipod, Iphone