Ch 8

Question 1

Adoption of innovation

Answer 1

the process by which the use of an innovation whether a product or service, spreads throughout a market group, over time & over various categories of adopters.

helps marketers to understand the rate at which consumers are likely to adopt a new product or service

Question 2

Innovation

Answer 2

process by which ideas are transformed into new products and services that will help firms grow

Firms MUST innovate in order to stay in business & current

Question 3

Firms innovate for a number of reasons

Answer 3

Changing customer needs
Market saturation
Managing risk through diversity
Fashion cycles
Improve business relationships

Question 4

Diffusion/adoption of innovation

Answer 4

process by which innovation spreads throughout a market group, over time and over various categories of adopters

Question 5

pioneers/breakthroughs

Answer 5

establishes a completely new market or radically changing both the rules of competition and consumer preferences in a market

Question 6

Disruptive innovations

Answer 6

new but are generally simpler, less sophisticated, and may be less expensive than existing products

Question 7

Consumer adoption cycle

Answer 7

2.5% - innovators
13.5% - early adopters
34% - early majority
34% late majority
16% - laggards

Question 8

Innovators

Answer 8

buyers who want to be the first to have the new product - Crucial to success of new products because they help the product gain market acceptance through positive word of mouth

Enjoy taking risks, are highly knowledgeable, not price sensitive, keep themselves well informed

Question 9

Early adopters

Answer 9

second subgroup to use the product/service

Don’t take as many risks as innovators, wait and purchase product after careful review

Question 10

Early majority

Answer 10

few products can be profitable until this group buys them

Has different price and quality choices because by the time these customers enter the market, the number of competitors has reached its peak

Question 11

Late majority

Answer 11

last group of buyers to enter new product market

Entered when the product has achieved full potential, by the time they enter, sales tend to level off or decline

Question 12

Laggards

Answer 12

like to avoid change and rely on traditional products until they are no longer available

Also may never adopt the product

Question 13

Factors Affecting Product Diffusion

Answer 13

Firms can predict which types of customers will buy their product and when using the diffusion of innovation theory to develop effective promotion and pricing strategies but there are 4 factors that affect the diffusion speed

relative advantage
compatibility
observability
complexity and triability

Question 14

Relative advantage

Answer 14

if product is perceived to be better than substitutes then diffusion will be relatively quick

Question 15

Compatibility

Answer 15

depends on various consumer features like international cultural differences

Question 16

Observability

Answer 16

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

Question 17

Complexity and trialability

Answer 17

products that are relatively less complex are also relatively easy to try and will diffuse more quickly

Question 18

How firms develop new products

Answer 18

Idea generation -> concept testing -> product development -> market testing -> product launch -> evaluation of results

Question 19

idea generation

Answer 19

The development of viable new production ideas

How?
- Internal research and development
- Licensing
- Brainstorming
- Outsourcing
- Customer input
- competitors products

Question 20

Concept Testing

Answer 20

testing the new product idea among a set of potential customers

Reactions enable developer to estimate the sales value of the product and make changes to enhance its sales value and determine if it is worth developing further

Question 21

Product Development

Answer 21

Development of prototypes and the product

Alpha testing; firm attempts to determine whether the product will perform according to its design and if it satisfies the need for which it was intended ; test on a small scale

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 those users;

Question 22

Market Testing

Answer 22

Testing the actual products in a few test markets

Two forms: premarket testing or test marketing

Question 23

Premarket Tests

Answer 23

Premarket tests are used before actually bringing a product or service to market
- Potential customers are exposed to the marketing mix variables, such as advertising, and then surveyed and given a sample of the product to try

Question 24

Test Marketing

Answer 24

A method of determining the success potential of a new product

Test marketing introduces the offering to a limited geographical area (usually a few cities) prior to national launch
-> uses all the elements of the marketing mix

Question 25

Product Launch

Answer 25

full scale commercialization of the product

What a product launch involves:
- The firm confirms its target market and decides how the product will be positioned
- Done using research it has gathered on consumer perceptions and tests it has conducted and competitive considerations
- The firm finalizes the marketing mix variables for the new product

Question 26

Evaluation of Results

Answer 26

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

Firms measure the success of a new product by three interrelated factors
1. Its satisfaction of technical requirements, such as performance
2. Customer acceptance
3. Satisfaction of the firm’s financial requirements, such as sales and profits

Question 27

Product Life Cycle

Answer 27

The product life cycle (PLC) defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace

Four stages: introduction, growth, maturity, and decline

Question 28

Introduction Stage Characteristics

Answer 28

Sales: low

Profit: negative or low

Typical Customers: innovators

Competitors: one of few

Question 29

Growth Stage Characteristics

Answer 29

Sales: rising

Profit: rapidly rising

Typical Customers: early adopters and early majority

Competitors: few but increasing

Question 30

Maturity Stage Characteristics

Answer 30

Sales: peak

Profit: peak to declining

Typical Customers: late majority

Competitors: high number of competitors and competitive products

Question 31

Decline stage characteristics

Answer 31

Sales: declining

Profit: declining

Typical Customers: laggards

Competitors: low number of competitors and products