Chapter 8 - Developing New Products

Question 1

Product

Answer 1

anything that is of value to a consumer and can be offered through a marketing exchange

Question 2

Why do firms create new products?

Answer 2

• innovation

Question 3

Reasons for innovation

Answer 3

• Changing customer needs
• market saturation
• managing risk through adversity
• fashion cycles
• improving business relationships

Question 4

Innovation

Answer 4

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

Question 5

Changing customer needs -

Answer 5

satisfying the changing needs of their current and new customers, prevent customers from getting bored identify problems customers are having

Question 6

Market saturation -

Answer 6

the longer a product exists in the marketplace, the more likely it is that the market will become saturated - without new products/ services the value of the firm will decline

Question 7

Managing risk through adversity -

Answer 7

through innovation firms can offer a broader portfolio of products, which can help them diversify their risk and enhance firm value better than a single product can

Question 8

Fashion cycles

Answer 8

in industries that rely on fashion trends and experience short product life cycles (apparel, books, art, software) most sales come from new products

Question 9

Improving business relationships

Answer 9

new products do not always target end consumers sometimes they function to improve relationships with suppliers

Question 10

Adoption of Innovation

Answer 10

• diffusion of innovation/ adoption of innovation
• pioneers
• disruptive innovation

Question 11

Diffusion of innovation/ adoption of innovation

Answer 11

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/ services and predict their potential sales, even before they introduce the innovations

Question 12

Pioneers

Answer 12

new product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market; also called a breakthrough

Question 13

Disruptive innovations -

Answer 13

new product introductions that are simpler, less sophisticated, and usually less expensive than existing products or services
Ex - netflix and blockbuster

Question 14

Consumer adoption cycle

Answer 14

• innovators
• early adopters
• early majority
• late majority
• laggards

Question 15

Innovators

Answer 15

are those buyers who want to be first on the block to have the new product or service - enjoy taking risk, are regarded as highly knowledgeable, and are not price sensitive

Question 16

Early adopters

Answer 16

the second subgroup that begins to use a product or service - do not like to take as much risk as innovators but instead wait and purchase the product after careful review

• Enjoy novelty and often are regarded as the opinion leaders for particular product categories

Question 17

Early majority

Answer 17

group of consumers in the diffusion of innovation model that represents approx 34% of the population, members do not take much risk and therefore tend to wait until all the bugs are worked out

Question 18

Late majority -

Answer 18

the last group of buyers to enter a new product market - the product has achieved its full market potential

Question 19

Laggards

Answer 19

16% of the market, like to avoid change and rely on traditional products until they are no longer available

Question 20

Factors Affecting Product Diffusion Speed

Answer 20

• Relative advantage
• compatibility
• observability
• complexity and trialability

Question 21

Relative advantage

Answer 21

if a product is perceived to be better than substitutes, the the diffusion will be relatively quick

Question 22

Compatibility

Answer 22

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

Question 23

Observability

Answer 23

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

Question 24

Complexity and trialability

Answer 24

products that are relatively less complex are also relatively easy to try - generally these products will diffuse more quickly than those that are not

Question 25

Product Development Process

Answer 25

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

Question 26

Idea generation

Answer 26

- to generate ideas for new products a firm can use its own - Internal R&D efforts, collaborate with other firms and institutions, - License technology from research intensive firms - Brainstorm - Research competitors products and services - conduct customer research

Question 27

Reverse engineering

Answer 27

involves taking apart a competitors product, analyzing it, and creating an improved product that does not infringe on the competitors patents

Question 28

Concept testing

Answer 28

- refers to the process in which a concept statement is presented to potential buyers representative of the target market or users to obtain their reactions

Question 29

Purpose of concept testing

Answer 29

estimate the sales value of the product or service concept, possibly make changes to enhance its sales value, and determine whether the ides is worth further development - respondents purchase intentions, would it satisfy needs

Question 30

Product development

Answer 30

or product design, entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features or a services features

Question 31

Prototype

Answer 31

- is the 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, sometimes even crafted individually

Question 32

Alpha testing

Answer 32

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

Question 33

Beta testing

Answer 33

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

Question 34

Market Testing

Answer 34

Must test the market for the new product with a trial batch of products - sometimes this step is skipped because of competitive timing, or cost pressures, tests can take two forms: premarket testing or test marketing

Question 35

Premarket tests -

Answer 35

firms conduct these before they actually bring a product or service to market to determine how many customers will try and then continue to use their product or service according to a small group of potential customers

Question 36

Test marketing

Answer 36

introduces the offering to a limited geographical area (usually a few cities) prior to a national launch - strong predictor of product success, uses all elements of the marketing mix

Question 37

Product Launch

Answer 37

If the market testing returns with positive results, the firm is ready to introduce the product to the entire market - This is the most critical step and requires a lot of financial resources and extensive coordination of all aspects of the marketing mix

Question 38

Evaluation of Results

Answer 38

Marketers must undertake a critical post launch review to determine whether the produce and its launch was a success or failure and what additional resources or changes to the marketing mix are needed

Question 39

How firms measure success

Answer 39

- Its satisfaction of technical requirements, such as performance - Customer acceptance - Its satisfaction of the firms financial requirements, such as sales and profits

Question 40

Product life cycle - stages

Answer 40

- introduction stage - growth stage - maturity stage - decline stage

Question 41

Product life cycle -

Answer 41

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

Question 42

Introduction stage

Answer 42

stage of the product life cycle where innovators start buying the product - Usually starts with a single firm, and innovators are the ones to try the new offering - Sales are low, profits are negative or low

Question 43

Growth stage

Answer 43

the product gains acceptance, demand and sales increase, and competitors emerge in the product category - The market becomes more segmented and consumer preferences more varied which increases the potential for new markets or new uses of the product or service - Sales/ profits rise, competition is few but increasing, consumers are early adopters/ early majority, prince is the same or drops slightly, new product variations, more outlets for places, increase in awareness in broader market

Question 44

Maturity stage

Answer 44

industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them - if efforts succeed, the product achieves new life - Price competition as the avg price falls, saturated markets - firms may enter new geographical markets, firms may find new market segments, new products with improved features, sales peak, profits decline, competition intensifies, consumers are late majority

Question 45

Decline stage

Answer 45

- product exists the market - Position themselves for a niche segment of die-hard consumers or those with special needs, or they completely exit the market - Consumers are laggards, competition is limited - Low competitors