Principles of Marketing Test 2/ch. 11

New Product
A product new to the world, the market, the producer, the seller, or some combination of these.
Generally come in 6 categories:
New-to-the-World Products,
New Product Lines,
Additions to Existing Product Lines,
Improvements/Revisions of Existing Products,
Re-positioned Products,
and Lower-Priced Products.
1.New-to-the-World (discontinuous) Products
These products create an entirely new market.
Ex: Computers create the Computer Market.
2.New Product Lines
These products, which the firm has not previously offered, allow it to enter an established market.
Ex: Kindle Tablets.
3.Additions to Existing Product Lines
New products that supplement a firm’s established line.
Ex: Doritos Locos Tacos.
4.Improvements or Revisions of Existing Products
A product that already exists but has undergone either significant or minor changes.
Ex: New Tide Laundry Detergent scents.
5.Re-positioned Products
Existing products targeted at new markets or market segments, or ones re-positioned to change the current market’s perception of the product or company.
Ex: Ford streamlining the Mustang to appeal to a different demographic.
6.Lower Priced Product
Products that provide performance similar to competing brands at a lower price.
Ex: HP LaserJet 4-in-1 printer provides the capabilities of a printer, scanners, and fax machine for a lower price than all 4 combined.
New-Product Development Process
The process a product goes through before it becomes an New Product.
It includes 7-steps:
New-Product Strategy,
Idea Generation,
Idea Screening,
Business Analysis,
Development,
Test Marketing,
Commercialization/New Product.
1.New Product Strategy
The first step in New-Product Development. New Product Strategy is a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.
2.Idea Generation
The second step in the New-Product Development. Idea Generation is the formulation of an idea for a product. This idea can come from customers, employees, distributors, competitors, and research and development.
3.Idea Screening
The third step in the New-Product Development. Idea screening is the first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are obviously inappropriate for some other reason. Concept test are often used during this stage to evaluate a new-product idea, usually before a prototype is made.
4.Business Analysis
The fourth step in the New Product Development. Business Analysis is the second filter in the product development process. During this stage preliminary figures for demand, cost, sales, and profitability are calculated.
5.Development
The fifth step in the New Product Development. Development is the stage in the product development process in which a prototype is developed and a marketing strategy is outlined.
6.Test Marketing
The sixth step in the New Product Development. Test Marketing is the limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Test Marketing allows management to evaluate alternative strategies and to assess how well the various aspects of the marketing mix fit together.
7.Commercialization/New Product
The seventh and final stage in the New Product Development. Commercialization is the decision to market a product fully. This decision sets in motion the processes of ordering production materials and equipment, starting production, building inventories, shipping the product, training the sales force, announcing the new product, and advertising to potential customers.
Innovation
A product perceived as new by a potential adopter.
Diffusion
The process by which the adoption of an innovation spreads. Generally separated into 5 categories:
Innovators,
Early Adopter,
Early Majority,
Late Majority,
and Laggards.
1.Innovators
The first 2.5% of all those who adopt the product. Innovators are eager to try new ideas and products. They usually have higher incomes and are more active outsider their community than non-innovators. They are also well educated and more self-confident
2.Early Adopters
Early adopters are the next 13.5% to adopt the innovation. Compared to innovators they rely more on group norms and values. They are more likely than innovators to be opinion leaders because of their closer affiliation with groups. Early adopters are a new product’s best friend.
3.Early Majority
Early Majority are the next 34% to adopt the innovation. Early Majority weigh the pros and cons before adopting a new product. They are more likely to gather more information and evaluate other brands than early adopters.
4.Late Majority
Late Majority are the next 34% to adopt the innovation. The Late Majority adopt an innovation because most of their friends have already adopted it. This group tends to be older and below average in income and education. The dominant characteristic of the late majority is skepticism.
5.Laggards
Laggards are the final 16% to adopt an innovation. Laggards do not rely on group norms, instead their independence is rooted in their ties to tradition. Laggards can adopt an innovation even after it has been outmoded and replaced by something else.
Product Characteristics and the Rate of Adoption
Five product characteristics can be used to predict and explain the rate of acceptance and diffusion of a new product:
Complexity,
Compatibility,
Relative Advantage,
Observability,
and Trialability.
1.Complexity
The degree of difficulty involved in understanding and using a new product. The more complex the slower adoption will be.
2.Compatibility
The degree to which the new product is consistent with existing values and product knowledge, past experiences, and current needs. Incompatible products diffuse more slowly than compatible products.
3.Relative Advantage
The degree to which a product is perceived as superior to existing substitutes.
4.Observability
The degree to which the benefits or other results of using the product can be observed by others and communicated to target customers. The more visible or observable a product the quicker the diffusion.
5.Trailability
The degree to which a product can be tried on a limited basis. For example, it is much easier to try a new toothpaste or breakfast cereal than a new laptop.
Product Life Cycle (PLC)
A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Consists of 4 stages:
Introductory Stage,
Growth Stage,
Maturity Stage,
and Decline Stage.
1.Introductory Stage
The full-scale launch of a new product into the marketplace. Promotion strategy during the Introductory stage focuses on developing product awareness and informing consumers about the product category’s potential benefits. Costs are usually high during this stage, while sales increase slowly. During this stage Innovators and Early Adopters adopt the Product.
2.Growth Stage
The second stage of the product life cycle when sales typically grow at an increasing rate, many competitors enter the market, large companies may start to acquire small pioneering firms, and profits area healthy. Promotional Emphasis switches from primary demand promotion to aggressive brand advertising and the communication of the differences between brands. Distribution becomes a major key to success during the Growth Stage. During this stage the Early Majority adopt this product.
3.Maturity Stage
The third stage of the product life cycle during which sales increase at a decreasing rate. Heavy Consumer promotion by the manufacturer is required to maintain market share. Heavy competition during this stage can lead to price wars. During this stage niche markets may also begin to appear. During this stage the Late Majority adopt this product.
4.Decline Stage
The fourth and final stage of the product life cycle during which there is a long-run drop in sales. Marketers eliminate all nonessential marketing expenses and let sales decline as more and more customers discontinue purchasing the products. During this stage the remaining Laggards may adopt this product, while others began to seek alternatives.
Why New Products Succeed/Fail
Products fail for numerous reasons. A common reason products fail is because the product does not offer any discernible benefit compare to existing products. Another common factor is a poor match between product features and customer desires. Other reasons include overestimation of market size, incorrect targeting or positioning, poor promotion, or simply an inferior product. Successful new products deliver a meaningful and perceivable benefit to a sizable number of people or organizations and are different in some meaningful way from their intended substitutes.