Marketing, Chapter 12

In their life cycles, products pass through four stages:

-Introduction -Growth -Maturity -Decline

Introduction

Begins when the product category first launches and innovators start buying the product

One popular proprietary premarket test version is called ______ BASES.

Nielsen

Brainstorming

a group works together to generate ideas

Complexity and Trialability

-Products that are relatively less complex are also relatively easy to try diffuse more quickly and lead to greater and faster adoption than will those that are not so easy to try.

Product Development Process

-idea generation -concept testing -product development -market testing -product launch -evaluation of results

At ____% of the market, the ______ is the next group of buyers to enter a new product market. When they do, the product has achieved its ______. By the time the late majority enters the market, sales tend to level off or may be in _____.

34; late majority; full market potential; decline

Compatibility

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

test marketing

A method of determining the success potential of a new product by introducing the offering to a limited geographic area (usually a few cities) prior to a national launch.

__________ When they add products, services, and processes to their offerings, firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or by keeping customers from getting bored with the current product or service offering. Sometimes companies can identify problems and develop products or services that customers never knew they needed. In other cases, customers enter new stages in their lives that intensify their demand for such innovations.

Changing Customer Needs

Decline Stage of Life Cycle: Sales: Profits: Typical consumers: Competitors (#):

Declining; declining; laggards; few and decreasing

________ -In industries that rely on fashion trends and experience short product life cycles-including apparel, arts, books, and software markets-most sales come from new products. -If the same selection of books were always for sale, with no new titles, there would be no reason to buy more.

Fashion Cycles

Premarket Tests

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.

Relative Advantage

If a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick.

Decline

If these efforts succeed, the product achieves new life. If not, it goes into the decline stage and eventually exits the market.

________ make up roughly ____% of the market. These consumers like to avoid change and rely on _______ until the products are no longer available. In some cases, laggards may never adopt a certain product or service.

Laggards; 16; traditional products

Introduction Stage of Life Cycle Sales: Profits: Typical consumers: Competitors (#):

Low; negative or low; innovators; one or few

______ Through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can. If some products in a portfolio perform poorly, others may do well. Firms with multiple products can better withstand external shocks like changes in consumer preferences or intensive competitive activity.

Managing Risk through Diversity

Maturity Stage of Life Cycle: Sales: Profits: Typical consumers: Competitors (#):

Peak; peak to declining; late majority; many

Internal Research and Development Many firms have their own ____ departments in which scientists and engineers work to solve complex problems and develop new ideas. The product development costs for these firms are quite ____, but the resulting new product or service is expected to have a good chance of being a technological or market breakthrough.

R&D; high

Growth Stage of Life Cycle Sales: Profits: Typical consumers: Competitors (#):

Rising; rapidly rising; early adopters and early majority; few but increasing

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

Growth

The product gains acceptance, demand and sales increase, and more competitors emerge in the product category

Innovators help the product gain market _____. Through talking about and spreading positive word of mouth about the new product, either directly to family and friends or through social media, online forums, or reviews, they prove instrumental in bringing in the next adopter category, known as early adopters.

acceptance

Product prototypes are usually tested through ____ and ____testing.

alpha; beta

Licensing Although this approach saves the high costs of in-house R&D, it means that the firm is banking on a solution that ______ but has not been marketed.

already exists

Early adopter don't like to take as much risk and therefore tend to wait until the _____ are worked out of a particular product or service. When early majority customers enter the market, the number of _____ in the marketplace usually also has reached its peak, so these buyers have many price and quality choices.

bugs; competitors

Licensing

buy the rights to use a technology or ideas from other firms through a licensing agreement.

product launch

completing all the final preparations for making the fully tested product available to the market

An idea with potential is developed further into a _____, which in this context refers to a brief written description of the product; its technology, working principles, and forms; and what customer needs it would satisfy.

concept

R&D investments generally are considered ______, so firms may lose money on a few new products. In the long run, though, these firms are betting that a few extremely successful new products, often known as blockbusters, can generate enough revenues and profits to cover the losses from other introductions that might not fare so well. Some global firms also are taking an approach called _____, as we discussed in Chapter 8. They turn to subsidiaries in less developed markets for new product ideas.

continuous investments; reverse innovation

The product life cycle

defines the stages that products move through as they enter, get established in, and ultimately leave the marketplace.

On the basis of the results of the test marketing, the firm can estimate _____ for the entire market. Test marketing is widely used by ______. 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. Test marketing costs _____ and takes longer than premarket tests do.

demand; fast-food chains; more

The second subgroup that begins to use a product or service innovation is _______.

early adopters

The ____, which represents approximately ___% of the population, is crucial because few new products and services can be _____ until this large group buys them. If the group never becomes large enough, the product or service typically fails.

early majority; 34; profitable

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.

Competitors' Products 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 ______ version to market.

improved

Diffusion of innovation curve

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

Sources of Ideas

internal R&D, R&D consortia, licensing, brainstorming, outsourcing, competitors' products, customer input

Evaluation of Results Was it a success or failure and what additional resources or changes to the ________ are needed? For those products that do move on, firms can measure the success of a new product by three interrelated factors: (1) its satisfaction of technical requirements, such as performance (2) customer acceptance (3) its satisfaction of the firm's financial requirements, such as sales and profits.

marketing mix

Many products, such as home appliances, stay in the _____ stage for a very long time. The product life cycle offers a useful tool for managers to analyze the types of strategies that may be required over the life of their products.

maturity

Development of New Products Despite market saturation, firms continually introduce _____ with improved features or find _____ for existing products because they need constant innovation and product proliferation to defend market share from intense competition.

new products; new uses

An engineering team develops a product _____ that is based on research findings from the previous concept testing step as well as their own knowledge about materials and technology.

prototype

The most important question pertains to the respondent's _____ if the product or service were made available. Marketers also should ask whether the product would satisfy a need that other products currently are not meeting.

purchase intentions

prototype

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.

reverse innovation

when companies initially develop products for niche or underdeveloped markets, and then expand them into their original or home markets

alpha testing

-the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended. -Rather than use potential consumers, alpha tests occur in the firm's R&D department.

Outsourcing

firms hire an outside firm to help generate ideas and develop new products and services.

Another particularly successful customer input approach is to analyze ______, those innovative product users who modify existing products according to their own ideas to suit their specific needs. If lead users customize a firm's products, other customers might wish to do so as well. Thus, studying lead users helps the firm understand general market trends that might be just on the horizon. Manufacturers and retailers of fashion products often spot new trends by noticing how innovative trendsetters have altered their clothing and shoes.

lead users

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

less; higher

It is more useful to think of the degree of newness or innovativeness on a continuum from truly _______ to _______.

new-to-the-world; slightly repositioned

The theory surrounding the diffusion of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service. It also gives them a means to identify potential markets for their new products or services and predict their potential sales, even before they introduce the innovations.' Truly new product introductions, that is, new-to-the-world products that create new markets-can add tremendous value to firms. These new products, also called _____ or _____, establish completely new markets or radically change the rules of competition as well as consumer preferences in a market.

pioneers; breakthroughs

Test marketing is a strong predictor of _______because the firm can study actual purchase behavior, which is more reliable than a simulated test.

product success

Innovation

refers to the process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow.

To generate ideas for new products, a firm can use its own internal _______ (R&D) efforts, collaborate with other firms and institutions (R&D consortia), license technology, brainstorm, outsource, research competitors' products and services, and/or conduct consumer research. Firms that want to be pioneers rely more extensively on ____ efforts, whereas those that tend to adopt a follower strategy are more likely to scan the market for ideas.

research and development; R&D

Innovators

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.

Concept testing helps the firm avoid the costs of ______.

unnecessary product development.

beta testing

uses potential consumers who examine the product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use.

Early adopters generally don't like to take as much risk as innovators do but instead _______. Represent about ___ percent 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.

wait and purchase the product after careful review; 13.5 percent

R&D consortia Here, the R&D investments come from the ____ as a whole, and the participating firms and institutions share the results. In many cases, the consortia involve pharmaceutical or high-tech members, whose research costs can run into the millions-too much for a single company to bear.

group

_________ -New products do not always target end consumers; sometimes they function to improve relationships with suppliers. -With data from suppliers, Walmart can work quickly with suppliers to get these products on its shelves. Furthermore, Walmart can use data to work with suppliers to develop new products that they do not already manufacture.

Improving Business Relationships

Maturity

Industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them

This most critical step in the new product introduction requires tremendous financial resources and extensive coordination of all aspects of the marketing mix. So what does a product launch involve?

The firm confirms its target market (or markets) and decides how the product will be positioned. Then the firm finalizes the remaining marketing mix variables for the new product, including the marketing budget for the first year.

Observability

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

The new product development process, when followed rationally and sequentially, helps avoid _____.

failures

industry shakeout

firms that have not yet established a stronghold in the market, even in narrow segments, may decide to exit

Pioneers have the advantage of being _______; as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early _______ lead. Studies also have found that market pioneers can command a greater market share over a longer time period than later entrants can. Yet not all pioneers succeed. They pave the way for followers, who can spend less marketing effort creating demand for the product line and focus directly on creating demand for their specific brand.

first movers; market share

Entry into New Markets or Market Segments Because a market is saturated, firms may attempt to enter new _____, including international markets, that may be less saturated. ______ is well known for releasing new versions of its iPhone and iPad yearly.

geographic markets; Apple

R&D Consortia

groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products.

Reverse engineering

involves taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor's patents, if any exist.

~ Maturity Stage -The maturity stage of the product life cycle is characterized by the adoption of the product by the _____ and intense ______ for market share among firms. Marketing costs (e.g., promotion, distribution) ______ 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. -Firms pursue various strategies during this stage to increase their customer base and/or defend their market share.

late majority; competition; increase

~ Growth Stage -The growth stage of the product life cycle is marked by a growing number of product adopters, rapid growth in industry _____, and increases in both the number of _____ and the number of available product _____. -The market becomes more _____ 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 _____-varied colors, styles, or features-which enable them to segment the market more precisely. -At the same time, firms that have not yet established a stronghold in the market, even in narrow segments, may decide to exit, in what is referred to as an industry shakeout.

sales; competitors; versions; segmented; variations

Market Saturation The longer a product exists in the marketplace, the more likely it is that the market will become ______. Without new products or services, the value of the firm will ultimately decline.

saturated

~ Introduction Stage The introduction stage for a new, innovative product or service usually starts with a _____, and _____ are the ones to try the new offering. The introduction stage is characterized by initial _____ 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.

single firm; innovators; losses

Firms that invest in the latest ______, either to use in their products or services or to make the firm more efficient, also are considered innovators. Typically, innovators keep themselves very well informed about the product category by subscribing to trade and specialty magazines, talking to other experts, visiting product-specific blogs and forums that describe the coolest new products, and attending product-related forums, seminars, and special events. Yet innovators represent only about ____ percent of the total market for any new product or service.

technology; 2.5