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

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Innovation

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continue to market current products to current customers or take the same product to another market with similar customers.

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Without innovation firms would have two choices

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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.

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using innovations and value

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The longer a product exists in the marketplace, the more likely it is that the market will become _________.

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saturated

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can create helps the firm diversify its risk and therefore enhances firm value better than a single product can.

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innovation

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establish a completely new market or radically change both the rules of competition and consumer preferences in a market.

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Pioneers or breakthroughs

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Imitators capitalize on the weaknesses of ______- and subsequently gain advantage in the market

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pioneers

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Process by which innovation spreads throughout a market group

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Diffusion of Innovation

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Helps marketers understand the rate that consumers will adopt the product/service

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Diffusion of Innovation

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Also can identify potential markets for their new products or services and predict their potential sales

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Diffusion of Innovation

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Purchasers can be divided into five groups according to how soon they buy the product after it has been introduced.

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Innovators,Early Adopters ,Early Majority ,Late Majority ,Laggards

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buyers who want to be the first to have new services/products

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Innovators

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wait and purchase the product after careful review

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Early Adopters

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wait until the bugs are worked out of a particular product or service

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Early Majority

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last group of buyers to enter a new product market

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Late Majority

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like to avoid changes and rely on traditional products

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Laggards

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Enjoy taking risks, Well informed...... Crucial to the success of any new product of service, Help the product gain market acceptance.

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Innovators

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Enjoy novelty, opinion leaders..... Crucial for bringing the other three buyer categories to the market

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Early Adopters

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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.

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Early Majority

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Full market potential....... Sales tend to level off or may be in decline

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Late Majority

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Firms can predict which types of customers will buy their new products or service immediately after its intro

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Using the diffusion of innovation theory

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

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Relative advantages

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ritual in many cultures

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Compatibility

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easily seen and benefits or uses are easily communicated to others

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Observability

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products that are relatively less complex are also relatively easy to try.

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Complexity and Trialability

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Comes in play in the immediate and long term aftermath of a new product or service intro.

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Complexity and Trialability

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with the generation of new product ideas and culminates in the launch of a new product and the evaluation of its success.

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The new product development process begins

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To generate ideas for new products, a firm uses:

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Internal Research and Development

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Are considered continuous investments

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Internal Research and Development

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Explore new ideas or obtain solutions for developing new products.

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R&D Consortia (groups of other firms and institutions)

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medical study that tests the safety and effectiveness of a drug or treatment in people.

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Clinical trial

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Firms buy the rights to use the technology or ideas from other research-intensive firms through a

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licensing agreement.

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Groups works together to generate ideas

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brainstorming

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No idea can be immediately accepted or rejected

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brainstorming

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taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor's patents.

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Reverse engineering

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Listening to the customer is essential for successful idea generation

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Customer Input

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innovative product users who modify existing products according to their own ideas to suit their specific needs.

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Lead Users

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brief written descriptions of the product

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Concept

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refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions

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Concept testing

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Helps the firm avoid unnecessary product development by occurring before real product has been made.

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Concept testing

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process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features.

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Product development or product design

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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.

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Prototype

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firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended

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Alpha Testing

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Occurs in the firm's R&D department.

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Alpha Testing

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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.

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Beta Testing

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Product development or product, Prototype , Alpha Testing, Beta testing

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Product Development

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Premarket Tests , test marketing

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Market Testing

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conducted before a product or service is brought to market to determine how many customers will try and then continue to use it.

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Premarket Tests

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introduces the product to a limited geographical area prior to a national launch.

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Test Marketing

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Uses all elements of the marketing mix

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Test Marketing

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Is a strong predictor of product success

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Test Marketing

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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)

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BehaviorScan

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If market testing returns with positive results, the firm is ready to introduce the product to____

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the entire market

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Most critical step

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Product Launch

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Firms confirm target market and decides how the product will be positioned.

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product launch

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help the firm determine an appropriate integrated marketing communications strategy.

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Test results

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limited duration lower than normal prices designed to provide retailers with an incentive to try the products.

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Introductory Price

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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.

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place

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Setting_____is a supply chain wide decision

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prices

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When setting MSRP, manufacturers also consider the _______ at which the new products are sold to the retailers.

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price

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fee paid simply to get new products into stores or to gain more or better shelf space fro their products.

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Slotting allowance

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• 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.

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• Evaluation of Results

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Three interrelated factors that measure success are_______

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-Satisfaction of technical requirements -Customer acceptance -Satisfaction of the firm's financial requirements

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Products pass thru four stages

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The Products Life Cycle

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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

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The Products Life Cycle

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innovative products or services usually starts with a single firm, and innovators are the ones to try the new offering.

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Introduction stage

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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.

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Introduction stage

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Firms may start seeing profits toward the end of this stage

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introdution stage

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-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

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Growth Stage

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start rebuying the product, and early majority consumers enter.

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Innovators

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First attempts to reach new customers by studying their preferences and producing different product variations.

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Growth stage

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Firms may decide to exit referred to as _______- which usually occurs with firms that have not yet established a stronghold in the market.

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"industry shakeout"

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Sales = ?

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rising

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, Profits =?

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Rapidly rising

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Typical Consumers = ?

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early adopters and early majority

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Competitors = ?

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few but increasing

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industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them

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Maturity Stage

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Marketing costs increase

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maturty stage

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___ intense competition on price

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Face

question

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

answer

Decline Stage -

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_______is assumed to be bell shaped with regard to sales and profits.

answer

Product life cycle curve

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