Exam 3 Review Flashcards
2 ways to obtain new products
Acquisition and new product developement
new product developement
refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development
New product development process
- Idea generation
- idea screening
- concept development
- strategy development
- business analysis
- product development
- test marketing
- commercialization
Idea Generation
- the systematic search for new-product ideas
- Marketers use a variety of sources to come up with ideas that provide strong customer benefits and that are compatible with the company mission. These ideas can come from customers, salespeople, service providers, etc. Research is often conducted to come up with new product ideas.
Internal idea sources
here the company finds new ideas through formal research and development. Or it can pick the brains of employees—from executives to scientists, engineers, and manufacturing staff to salespeople.
external idea sources
good new-product ideas can also emerge from sources such as distributors, suppliers or even competitors.
Perhaps the most important source of new-product ideas is customers themselves.
Idea screening
- helps spot good ideas and drop poor ones as soon as possible.
- ideas are expanded into more complete product concepts. When screening, marketers and researchers examine the chances that the product concept might achieve technical and commercial success.
concept development
several descriptions of the product are generated to find out how attractive each concept is to customers. From these concepts, the best one is chosen.
crowdsourcing
inviting broad communities of people at large- into the new-product innovation process
Marketing strategy development
designing an initial marketing strategy for introducing a product to the market.
The marketing strategy statement consists of three parts.
- A description of the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years.
- Outline of the product’s planned price, distribution, and marketing budget for the first year.
- Description of the planned long-run sales, profit goals, and marketing mix strategy.
Product development
R&D or engineering develops the product concept into a physical product.
The product development step calls for a large jump in investment.
Standardized Test Markets
occur when the company finds a small number of representative test cities, conducts a full marketing campaign in these cities, and uses store audits, consumer and distributor surveys, and other measures to gauge product performance. Drawbacks include costs, time and risk of competitor scooping up the idea.
Controlled Test Markets
track individual consumer behavior for new products from television set to the checkout counter.
composed of stores that have agreed to carry new products for a fee.
provide in-depth purchasing data not possible with retail point-of-sale data alone.
allows companies to evaluate their specific marketing efforts.
Simulated Test Markets
are basically simulated shopping environments
The company shows ads and promotions for a variety of products, including the one being tested, to a sample of consumers.
gives consumers a small amount of money and invites them to a store where they may keep the money or use it to buy items.
Commercialization
introducing the new product into the market.
Decisions must be made concerning: timing, where to launch the new product, and how to implement the market rollout.
Development Life Cycle Strategy
begins when the company finds and develops a new-product idea
Introduction of life cycle strategy
a period of slow sales growth as the product is introduced in the market.
Profits are nonexistent in this stage because of the heavy expenses of product introduction.
goal is to get first-time buyers to try the product.
Sales usually increase at a steady but slow pace.
An introduction stage can be quite long. N
ot all products make it past the introduction stage. Nearly 40 percent of all new products fail.
Marketing during this stage often focuses on informing consumers about the product, how to use it, and its promised benefits.
Growth of life cycle strategy
a period of rapid market acceptance and increasing profits.
Marketing’s goal is to encourage brand loyalty by convincing the market that this brand is superior to others.
In this stage, marketing strategies may include the introduction of product variations to attract market segments and price cuts.
Maturity of life cycle strategy
a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers.
Profits peak then level off or decline because of increased marketing outlays to defend the product against competition.
usually the longest.
Competition grows intense when remaining competitors fight for their share of a shrinking pie.
Price reductions and reminder advertising may be used to maintain market share.
firms will try to sell their product through as many outlets as possible because availability is crucial in a competitive market.
Decline of life cycle strategy
the period when sales fall off and profits drop.
A firm’s major product decision in the decline stage is whether or not to keep the product. If the firm decides to keep the product, advertising and other marketing communications may be decreased to cut costs, and prices may be reduced if the product can remain profitable.
If the firm decides to drop the product, it can either phase it out by cutting production in stages and letting existing stocks run out or simply drop the product immediately.
style
a basic and distinctive mode of expression.
fashion
a currently accepted or popular style in a given field.
Fads
temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.
Customer value-based pricing
uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing.
means that the marketer cannot design a product and marketing program and then set the price.
value based pricing
customer driven
Cost-based pricing
involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
Cost-based pricing adds a standard markup to the cost of the product.
product driven
Break-even pricing
the price at which total costs are equal to total revenue and there is no profit.
cost plus pricing
adding a standard markup to the cost of the product
Target profit pricing
the price at which the firm will break even or make the profit it’s seeking.
Everyday low pricing (EDLP)
involves charging a constant, everyday low price with few or no temporary price discounts. (Wal-Mart)
