CH 11 marketing

Innovation
is the process by which ideas are transformed into new products and services that will help firms grow.
Without innovation firms would have two choices
continue to market current products to current customers or take the same product to another market with similar customers.
using innovations and value
Firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or simply by keeping customers from getting bored with the current product or service offering.
saturated
The longer a product exists in the marketplace, the more likely it is that the market will become _________.
innovation
can create helps the firm diversify its risk and therefore enhances firm value better than a single product can.
Pioneers or breakthroughs
establish a completely new market or radically change both the rules of competition and consumer preferences in a market.
pioneers
Imitators capitalize on the weaknesses of ______- and subsequently gain advantage in the market
Diffusion of Innovation
Process by which innovation spreads throughout a market group
Diffusion of Innovation
Helps marketers understand the rate that consumers will adopt the product/service
Diffusion of Innovation
Also can identify potential markets for their new products or services and predict their potential sales
Innovators,Early Adopters ,Early Majority ,Late Majority ,Laggards
Purchasers can be divided into five groups according to how soon they buy the product after it has been introduced.
Innovators
buyers who want to be the first to have new services/products
Early Adopters
wait and purchase the product after careful review
Early Majority
wait until the bugs are worked out of a particular product or service
Late Majority
last group of buyers to enter a new product market
Laggards
like to avoid changes and rely on traditional products
Innovators
Enjoy taking risks, Well informed……
Crucial to the success of any new product of service, Help the product gain market acceptance.
Early Adopters
Enjoy novelty, opinion leaders…..
Crucial for bringing the other three buyer categories to the market
Early Majority
Crucial b/c few new products and services can be profitable until this large group buys them……
Competitors usually has reached its peak, so many different prices and quality choices.
Late Majority
Full market potential…….
Sales tend to level off or may be in decline
Using the diffusion of innovation theory
Firms can predict which types of customers will buy their new products or service immediately after its intro
Relative advantages
product is perceived to be better than substitutes then will be relatively quick
Compatibility
ritual in many cultures
Observability
easily seen and benefits or uses are easily communicated to others
Complexity and Trialability
products that are relatively less complex are also relatively easy to try.
Complexity and Trialability
Comes in play in the immediate and long term aftermath of a new product or service intro.
The new product development process begins
with the generation of new product ideas and culminates in the launch of a new product and the evaluation of its success.
Internal Research and Development
To generate ideas for new products, a firm uses:
Internal Research and Development
Are considered continuous investments
R&D Consortia (groups of other firms and institutions)
Explore new ideas or obtain solutions for developing new products.
Clinical trial
medical study that tests the safety and effectiveness of a drug or treatment in people.
licensing agreement.
Firms buy the rights to use the technology or ideas from other research-intensive firms through a
brainstorming
Groups works together to generate ideas
brainstorming
No idea can be immediately accepted or rejected
Reverse engineering
taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor’s patents.
Customer Input
Listening to the customer is essential for successful idea generation
Lead Users
innovative product users who modify existing products according to their own ideas to suit their specific needs.
Concept
brief written descriptions of the product
Concept testing
refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions
Concept testing
Helps the firm avoid unnecessary product development by occurring before real product has been made.
Product development or product design
process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product’s form and features or a service’s features.
Prototype
first physical form or service description of a new product, still in rough or tentative form that has the same properties as a new product but is produced through different manufacturing processes.
Alpha Testing
firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended
Alpha Testing
Occurs in the firm’s R&D department.
Beta Testing
uses potential consumers, who examine the ,in a real use setting to determine its functionality, performance, potential problems, and other issues specific to its use.
Product Development
Product development or product, Prototype , Alpha Testing, Beta testing
Market Testing
Premarket Tests , test marketing
Premarket Tests
conducted before a product or service is brought to market to determine how many customers will try and then continue to use it.
Test Marketing
introduces the product to a limited geographical area prior to a national launch.
Test Marketing
Uses all elements of the marketing mix
Test Marketing
Is a strong predictor of product success
BehaviorScan
utilizes consumer panel data collected passively at the point of sale in stores and through home scanning to measure individual household first time trial and repeat purchases. (used to improve probability of success)
the entire market
If market testing returns with positive results, the firm is ready to introduce the product to____
Product Launch
Most critical step
product launch
Firms confirm target market and decides how the product will be positioned.
Test results
help the firm determine an appropriate integrated marketing communications strategy.
Introductory Price
limited duration lower than normal prices designed to provide retailers with an incentive to try the products.
place
Manufacturer coordinates the delivery and storage of the new products with its retailers to assure that it is available for sale when consumers want it, need it, and can obtain it.
prices
Setting_____is a supply chain wide decision
price
When setting MSRP, manufacturers also consider the _______ at which the new products are sold to the retailers.
Slotting allowance
fee paid simply to get new products into stores or to gain more or better shelf space fro their products.
• Evaluation of Results
• Must undertake a postlaunch review to determine whether the product and its launch were a success or failure and what additional resources or changes to the marketing mix are needed.
-Satisfaction of technical requirements
-Customer acceptance
-Satisfaction of the firm’s financial requirements
Three interrelated factors that measure success are_______
The Products Life Cycle
Products pass thru four stages
The Products Life Cycle
defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning
Introduction stage
innovative products or services usually starts with a single firm, and innovators are the ones to try the new offering.
Introduction stage
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.
introdution stage
Firms may start seeing profits toward the end of this stage
Growth Stage
-marked by a growing # of product adopters, rapid growth in industry sales, and increase in both the # of competitors and the # of available product versions
Innovators
start rebuying the product, and early majority consumers enter.
Growth stage
First attempts to reach new customers by studying their preferences and producing different product variations.
“industry shakeout”
Firms may decide to exit referred to as _______- which usually occurs with firms that have not yet established a stronghold in the market.
rising
Sales = ?
Rapidly rising
, Profits =?
early adopters and early majority
Typical Consumers = ?
few but increasing
Competitors = ?
Maturity Stage
industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them
maturty stage
Marketing costs increase
Face
___ intense competition on price
Decline Stage –
firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market
Product life cycle curve
_______is assumed to be bell shaped with regard to sales and profits.