Marketing Chapter 9

New Product

One that is new in any way for the company concerned. (ex: a fresh idea can be turned into a new product and start a new product life cycle.)

Product Life Cycle

Describes the stages a really new product idea goes through from the beginning to end. Divided into four major stages: 1)Market Introduction 2)Market Growth 3)Market Maturity 4)Sales Decline

Two keys to improving service quality

1)Training 2)Empowerment

Ways to improve a product in maturity phase to extend its life cycle

-It's important for a firm to have competitive advantage -Top managers must realize/understand that industry profits are declining in this phase -Develop an innovative new product for same market -Develop a new strategy targeted at a new market where life cycle is not so far along.

What distinguishes a product modification from a new product with a new life-cycle?

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Continuous Improvement

A commitment to constantly make things better one step at a time. Firms that adopt TQM always look for ways to improve implementation by using this concept.

Can a product enter in any phase of life cycle?

A firm may introduce or drop a specific product during any stage of the life cycle.

Consumer Product Safety Act (of 1972)

Act that set up the Consumer Product Safety Commission to encourage safety in product design and better quality control.

Fashion

Currently accepted or popular style. Fashion related products tend to have short life cycles.

Federal Trade Commission (FTC)

Federal government agency that polices antimonopoly laws. For a product to be new the FTC says a product must be entirely changed or new in a "functionally significant or substantial respect"

Market Introduction

First stage of product life cycle. Sales are low as a new idea is first introduced to market. Customers aren't looking for the product. Informative promotion is needed to tell potential customers about the advantages and uses of new product.

Sales Decline-a time of replacement

Fourth stage of product life cycle. New products replace the old. Price competition from dying products becomes more vigorous-but firms with strong brands may make profits until the end b/c they are successfully differentiated.

Concept Testing

Getting reactions from customers about how well a new-product idea fits their needs.

Empowerment

Giving employees the authority to correct a problem without first checking with management.

Fad

Idea that is fashionable only to certain groups who are enthusiastic about it. Even more short-lived than a regular fashion.

New-Product Development Process is Critical

Identifying new product ideas and effective strategies to go with them. 1) Idea Generation 2)Screening 3)Idea Evaluation 4) Development (of product and marketing mix) 5) Commercialization

Product Managers/Brand Managers

People that manage specific products, often taking over the jobs formerly handled by an advertising manger. -often times their major responsibility is promotion

Total Quality Management (TQM)

Philosophy that everyone in the organization is concerned about quality, throughout all of the firm's activities, to better serve customer needs.

Market Growth

Second stage in product life cycle. Industry sale grow fast, but industry profits rise and then start falling. Competitor sees opportunity and enters market. Time of biggest profits for the industry. Time of rapid sales for companies with effective strategies. Toward the end of this stage, profits start to decline as competition and consumer price sensitivity increase.

Product Liability

The legal obligation of sellers to pay damages to individuals who are injured by defective or unsafe products. Taken very seriously in US.

Do all product categories follow the same pattern?

The sales and profits of an individual brand may not, and often do not, follow the life-cylce pattern. Also, a product idea may be in a different life-cycle stage in different markets. A cycle may vary from 90 days (toys)-100 years (gas-powered cars)

Market Maturity

Third stage of product life cycle. Occurs when industry sales level off and competition get tougher. Aggressive competitors have entered the race for profits-except in oligopoly situations. Industry profit goes down b/c promotion costs rise and some competitors cut prices to attract business. Less efficient firms drop out of market. There is a long-run downward pressure on prices