MARK chapter 12 notes
MARK chapter 12 notes MARK 3001
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This 11 page Class Notes was uploaded by Kyla Brinkley on Monday September 28, 2015. The Class Notes belongs to MARK 3001 at University of Georgia taught by Kimberly Grantham in Summer 2015. Since its upload, it has received 88 views. For similar materials see Principles of Marketing in Marketing at University of Georgia.
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Date Created: 09/28/15
Kyla Brinkley MARK 3001 Notes Fall 2015 l Chapter 12 Developing New Products a Exhilarating something never seen before b Why Do Firms Create New Products I ii iii iv VI vii viii X Provide value to firms and customers Usually not TOTALLY new just improvedrepositioned Better than before Innovation the process by which ideas are transformed into new products amp services that will help firms grow 1 Without innovation firms have 2 choices continue to market current products to current customers or take same product to another market with similar customers 3 of new products actually succeed Firms use innovation because of long term benefits Changing Customer Needs 1 Createdeliver value more effectively 2 Customers not bored 3 Identify problemsdevelop products to help research Market Saturation 1 The longer a product exists in the marketplace the more likely it is that the market will become saturated 2 Without new products value of firm declines 3 Niche markets a General mills gluten free products Managing Risk Through Diversity 1 Through innovation firms create a broader portfolio of products a Diversify risk b Enhance firm value 2 Firms with multiple products better withstand external shocks a Changes in consumer preferences b Intensive competitive activity c Keebler varied cookies Fashion Cycles xi 1 Apparel books software a Rely on trends b Short product life cycles c Beat the video game clothes out of style no reason to buy more books if no new titles Improving Business Relationships 1 Sometimes new products improve relationships w suppliers 2 Stock products better c Diffusion of Innovation the process by which the use of an innovation whether a product or a service spreads throughout a market group over time and over various categories of adopters vi helps marketers understand rate at which consumers are likely to adopt a new product or service identify potential marketspredict potential sales pioneers breakthroughs new product introductions that establish a completely new market or radically change both the rules of competition amp consumer preferences in a market 1 iPod first movers product pioneers that are the first to create a market or product category making them readily recognizable to consumers amp thus establishing a commanding amp early market share lead 1 can command a greater market share over a longer time period than later entrants can 2 establish market alone pave way for followers 3 pioneer product is usually less sophisticatedpriced higher most new products are failures 1 failure to assess the market properly with product testing 2 targeting wrong segment 3 poor positioning 4 overextend abilities of the brand Innovators those buyers who want to be the first to have the new product or service 1 Enjoy taking risks 2 Knowledgeable vii viii 3 The person who camped out in front of the store for a new product 4 Talking to experts well informed 5 Represent 25 of the market for new products 6 Crucial to new product success help product gain market acceptance 7 Positive word of mouth Early Adopters the second group of consumers in the diffusion of innovation model after innovators to use a product or service innovation generally don t like to take as much risk as innovators but instead wait and purchase the product after careful review 1 Probably went to see a new movie a week or two after it opened Enjoy novelty Opinion leaders 135 of buyers in market Spreads word If this group is small number of people who adopt product will be small Early Majority a group of consumers that represents approx 34 of the population members don t like to take much risk amp therefore tend to wait until bugs are worked out of a particular product or service few new products amp services can be profitable until this large group buys them 1 If this group isn t big enough the product will probably fail 2 Rents the new movie when it comes out on DVD a Little risk reviews are in and costs are lower 3 By the time they enter the market the amount of competitors has reached peak many options available to them Late Majority last group of buyers to enter a new product market when they do the product has achieved its full market potential 1 Wait until they can rent the movie or watch it on Netflix 2 Sales have leveled off or are in decline 3 34 of the market eweww x Laggards consumers who like to avoid change amp reply on traditional products until they re no longer available 1 16 of the market 2 May never adopt a new product 3 Will probably watch that new movie when it s not new and it s on regular TV 2 years later xi Using the Diffusion of Innovation Theory 1 Firms can predict which types of customers will buy their new product or service immediately after its introduction and later as it s more accepted by the market Different products diffuse at different rates Marketers must understand diffusion curve for each new product 4 Relative Advantage a If a product is perceived to be better than substitutes the diffusion will be fast 5 Compatibility a Diffusion process may be faster or slower depending on various consumer features b International cultural differences 6 Observability a When products easily observed benefits or uses are easily communicated to others b Enhances diffusion process 7 Complexity amp trialability a Products that are less complex are easy to try b Diffuse faster amp lead to greaterfaster adoption than those that aren t as easy to try d How Firms Develop New Products i ldea Generation 1 To generate ideas for new products firm can use internal research and development RampD efforts collaborate with other firms license technology brainstorm research competitors and conduct consumer research 2 Firms that want to be pioneers rely on RampD 3 Internal Research amp Development a Many firms have own RampD departments pow b Want products to be profitable enough to make costs of RampD worthwhile c Firms hope that the few successful products they have will cover losses from other new products RampD Consortia a Consortia groups of other firmsinstitutions to explore new ideasobtain solutions for developing new products b In many cases consortia includes pharmaceuticalhigh tech members Licensing a Firms buy the rights to use the technology or ideas from other researchintensive firms through a licensing agreement b Saves high costs of inhouse RampD Brainstorming a Firms often engage in brainstorming sessions where group works together to generate ideas b No idea can be immediately accepted or rejected c Moderator may channel participants attention to specific product featuresattributes performance expectations or packaging d Vote on best ideas at end of meeting Outsourcing a Firm turns to an outside firm to help generate new products Competitor s Products a Reverse engineering involves taking apart a competitor s product analyzing it and creating an improved product that does not infringe on the competitor s patents if any exist i copycat products ii widespread Consumer lnput a Listening to the customer in BZB amp BZC markets is essential for successful idea generation b BZB products i Few customers i Firms can follow product use closely iii Focus groupsinterviewssurveys iv Joint effort increase probability that customer will buy product c BZC products i Observing customer behavior to determine need for new product ii Monitor feedback in online communities 1 Twitter 2 Yelp iii Lead users innovative product users who modify existing products according to their own ideas to suit their specific needs 1 Studying lead users helps the firm understand general market trends that might be just on the horizon ii Concept Testing 1 Concepts brief written descriptions of a product or service its technology working principles and forms and what customer needs it would satisfy 2 Concept testing the process in which a concept statement that describes a product or service is presented to potential buyers or users to obtain their reactions a Reactions allow developers to estimate sales value make changes to enhance sales value determine if idea is worth more development b Helps firm avoid costs of unnecessary development c Uses research techniques 3 Ask respondent s purchase intentions if product were made available a Does it satisfy a need other products aren t meeting b Frequency of purchase c Why they would buy it d When they would buy it iii Product Development 1 Product development product design entails a process of balancing various engineering manufacturing marketing amp economic considerations to develop a product s form amp features or a service s features 2 Engineering team develops prototype 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 3 Alpha testing an attempt by the firm to determine whether a product will perform according to its design amp whether it satisfies the need for which it was intended occurs in the firm s RampD department a Many people are concerned when alpha testing involves tests on animals esp pharmaceuticalscosmetics 4 Beta testing having potential consumers examine a product prototype in a realuse setting to determine its functionality performance potential problems amp other issues specific to its use iv Market Testing 1 Premarket test conducted before a product or service is brought to market to determine how many customers will try and then continue to use it a According to small group of potential customers b Ex Nielsen BASES test c determine effectiveness of advertising 2 Test marketing introduces a new product or service to a limited geographical area usually a few cities prior to a national launch a Strong predictor of product success because firm can study actual purchase behavior i More reliable than simulated test b Includes all elements of marketing mix c Costs more and takes longer than premarket tests d i Advantage to competitors who can launch a similar or better product without test marketing Can estimate demand for entire market v Product Launch lf testing returns with positive results launch product to entire market Expensive Coordinate marketing mix Failed product launches can make it hard for product and even firm to recover Confirms target marketdecides positioning Promotion a Trade promotions advertising to wholesalers 1 99 039quot 8 b C d 7 Place a 0993 Pric a b or retailers to get them to purchase new products often through special pricing incen ves i Combine introductory price promotions special events amp personal selling Introductory price promotions shortterm price discounts designed to encourage trial Trade show major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry i Fashion weeks Promoting in advance Manufacturer coordinates delivery amp storage of new products with retailers Where it should be stored How much should be stored How it should be packaged How to place price stickers Merch maintenance Setting prices is a supply chainwide decision Manufacturer s suggested retail price MSRP the price that manufacturers suggest retailers use to sell their merchandise c Better to start with high MSRP then lower it over time d Slotting allowance fees firms pay to retailers to get new products into stores or to gain more or better shelf space for their products 9 Timing a Timing of launch is important depending on product b GPG rated movies are released in summer when kids out of school vi Evaluation of Results Post launch review Determine if it was a success or failure Determine changes needed Panel data Estimate market demand to adjust marketing mix Some products never make it past introduction phase Measure of success a Satisfaction of technical requirements b Customer acceptance c Satisfaction of financial requirements e The Product Life Cycle 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 i Stages of life cycle reflect market trends 1 Ex healthy lifestyle ii Introduction stage stage of the product life cycle when innovators start buying the product 1 Usually starts with single firm 2 Innovators try it 3 Initial losses to firm due to high startup costs 4 Low levels of revenue as product takes off 5 If product is successful may start to see profit at end of this stage iii Growth stage stage of the product life cycle when the product gains acceptance demand and sales increase and competitors emerge in the product category 1 Growing of product adopters WPP JNT N 2 Growth in industry sales 3 Increase in competitorsproduct versions 4 Firm attempts to reach new consumers by studying preferences 5 Firms that haven t established stronghold in the market may decide to exit industry shakeout iv Maturity stage state of the product life cycle when industry sales reach their peak so firms try to rejuvenate their products by adding new features or repositioning them 1 Some products ex home appliances stay in this stage for a long time Adoption by late majority Intense competition Marketing costs increase Price competition price lowering Towards end almost all potential customers have already adopted product Entry into New Markets or Market Segments a Market is saturated b Firms attempt to enter new geographical markets i International markets 8 Development of New Products a Firms continually introduce new products with improved features b Find new users for existing products c Able to maintaingrow market shares v Decline state of the product life cycle when sales decline and the product eventually exits the market 1 Firms position themselves for niche segment of diehard consumers or those with special needs 2 Or exit the market 3 Laggards finally try product 4 Ex vinyl LP records vi The Shape of the Product Life Cycle Curve 1 Bell shaped with regard to sales amp profits IN THEORY 2 IN REALITY each productservice category has own shape eweww N 3 Products that are adopted early in the product life cycle move faster across the stages vii Strategies Based on Product Life Cycle Some Caveats 1 Product life cycle concept provides starting point for managers to think about the strategy they want to implement during each stage 2 Must be used with care 3 Don t know exactly what stage product is in 4 New research important FOR REVIEW Diffusion of Innovation Model 1 Innovators 2 Early adopters 3 early majority 4 late majority 5 laggards The Product Develooment Process 1 idea generation a development of viable new product amp ideas 2 concept testing a testing the new product idea among a set of potential customers 3 product development a development of prototypes andor the product 4 market testing a testing the actual products in a few test markets 5 product launch a fullscale commercialization of the product 6 evaluation of results a analysis of the performance of the new product and making appropriate modifications Product Life Cvcle Stages 1 introduction 2 growth 3 maturity 4 decline
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