Marketing Chapter 12: Developing New Products – Flashcards

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innovation
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refers to the process by which ideas get transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow
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Why do firms create new products? (5)
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changing customer needs market saturation (no new demand,,,w/o new products, value of firm declines. ex- car company, ppl want new cars) manage risk through diversity (protect against external shock) fashion cycles improving business relationships
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diffusion of innovation
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process by which the use of an innovation spreads throughout a market group, over time and across categories of adopters
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pioneers or breakthroughs
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new products (establish a completely new market or radically change rules of comp and consumer prefs) that can add tremendous value to firms, establish a completely new market
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first movers
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first to create the market or product category easily recognized establishes commanding and early market share lead
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innovators
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buyers who want to be the first on the block to have the new product or service, 2.5%
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Early adopters
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generally don't take as much risk as innovators do but wait and purchase the product after a careful review, 13.5%
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Early majority
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*few new products can be profitable until this large group buys them, don't like to take much risk and tend to wait until the bugs are worked out, 34%
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Late majority
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last group of buyers to enter the new product market, product has achieved full market potential already 34%
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Laggards
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consumers like to avoid change and rely on traditional products until they are no longer available, 16%
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5 different types of innovation and percentages
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Innovators 2.5% Early adopters 13.5% Early majority 34% Late majority 34% Laggards 16%
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4 factors enhancing the diffusion of a good or service
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Relative advantage (better) compatibility observability complexity and trial-ability (apple- stores to try out) ACOC
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Product development process (6 steps)
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Idea generation -> Concept Testing -> Product Development -> Market Testing -> Product Launch -> Evaluation of Results
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R&D R&D consortia
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research and development R&D by a group who shares info to whole community
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Licensing
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firms buy rights to use technology or ideas from other firms through a licensing agreement
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Brainstorming
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groups work together to generate ideas, no idea can be immediately accepted or rejected
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Outsourcing
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enlisting help of outside firms like IDEO, helps clients generate new product and services ideas in certain industries
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competitors' products: Reverse engineering
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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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how firms develop new products (6)
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internal R&D, R&D consortia, licensing, brainstorming, outsourcing, competitors' products, consumer input
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consumer input
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focus groups, interviews, surveys, looking at consumer behavior, social media
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Lead users
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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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Concepts
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brief written descriptions of the product, its technology, working principles, other forms, and what customer needs it would satisfy
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Concept testing
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process in which a concept statement is presented to potential buyers or users to obtain their reactions
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Product development or design
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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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Prototype
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first physical form or service description of a new product
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Alpha testing
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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 (inside R&D Department)
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Beta testing
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uses potential customers, examine the product prototype in a real use setting to determine its functionality, performance, and potential problems (real world test)
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Premarket tests
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conducted by firms to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers
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Test marketing
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introduces the offering to a limited geographical area prior to a national launch, strong predictor for product success because they can study actual purchase behavior
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product launch
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4 ps and timing
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Trade promotions
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Promotions to wholesalers or retailers to get them to purchase the new products, often combine introductory price promotions, special events
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Introductory price promotions
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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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Trade show
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temporary concentration of manufacturers that provide retailers the opportunity to view what is available and new in the marketplace
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manufacturer's suggested retail price
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encouraged price for retailers to sell at
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slotting allowance
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fee paid simply to get new products into stores or gain more and better shelf space for their products
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3 factors of evaluation of results
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1) satisfaction with performance 2) customer acceptance 3) satisfaction with firm's sales and profits
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Product life cycle
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defines the stages that products move through as they enter, get established in, and ultimately leave the marketplace
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Introduction stage
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product category first launches (innovators start buying product)
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Growth stage
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product gains acceptance, demand and sales increase, more competitors emerge
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Maturity stage
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Industry sales reach their peak, firms try to rejuvenate their products by adding new features or repositioning them
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Decline
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when the product eventually exits the market
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shape of product life cycle curve
shape of product life cycle curve
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bell shaped
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The diffusion of innovation theory is useful to marketers in helping them
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predict which types of customers will buy their product immediately and later
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The __________ diffusion of innovation group is crucial because few new products can be profitable until this large group buys them.
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The early majority is the first large group to adopt the product. Without this group, profits are unlikely to materialize. early majority
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When testing new products, most firms consider the question of whether testing products on animals
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Some firms do not believe in conducting any animal testing at all, and a few consider animal testing appropriate in any situation. Many firms, though, find a middle ground, considering the benefit to humans of the research. The correct answer is: should be done when the new product does not contribute to the health and well-being of human users.
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Computer game companies constantly monitor computer game-related blogs keeping track of the latest hot products, because they know that their customers crave the latest and greatest games. They use this information to create new products that primarily provide the benefit of
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Since customers crave the latest and greatest, this indicates that most sales come from new products, requiring game manufacturers to keep up with that trend. The correct answer is: keeping up in a market where sales come mostly from new products.
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How is consumer panel data collected during the test marketing phase of a new product introduction?
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The consumer panel data is collected by panelists scanning in their receipts using a home scanning device. The correct answer is: Panelists scan their receipts on a home scanning device.
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For new product marketers, early adopters are important because they tend to be
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Early adopters, who are not the very first buyers of a new product (those are the innovators) but who still buy very early in the product's life, are important to the diffusion of the products because they are often opinion leaders. The correct answer is: opinion leaders.
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If the __________ diffusion of innovation group is relatively small, the number of people who ultimately adopt the innovation likely will also be small.
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Early adopters, who are not the very first buyers of a new product (those are the innovators) but who still buy very early in the product's life, are important to the diffusion of the products because they are often opinion leaders. If there are relatively few early adopters to serve as opinion leaders, the market for the product is likely to be small. The correct answer is: early adopter
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