Marketing Textbook Notes Chapters 8-15.docx

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2320A/B
Professor
All Professors
Semester
Spring

Description
Chapter 8 Developing New ProductsProduct anything of value to a consumer and can be offered through a marketing exchange They could be places ideas organizations people or communities that create value for consumers in their respective competitive marketing arenasLO1New markets provide value to both firms and customersCompletely newtothemarket products represent fewer than 10 of all new product introductions each yearInnovation the process by which ideas are transformed into new products and services that will help them growWithout innovation and its resulting new products and services firms would only have two choices continue to market current products to current customers or take the same product to another market with similar customersChanging Customer NeedsWhen they add new products to their offerings 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 boredCompanies can identify problems and develop products that customers never knew they needed Firms take a wellknown offering and innovate it to make it more interestingMarket SaturationThe longer a product exists in the marketplace the more likely it is that the market will become saturatedWithout productsservices the value of the firm will ultimately declineConsumers tend to get tired of products before they wear out or break and seek varietyExample Reebok introducing several lines a year they sustain their growthManaging Risk Through DiversityThrough innovation firms often create a broader portfolio of products which helps them to diversify risk and enhance firm value better than a single product canIf some products in a portfolio are doing poorly other may be doing wellFirms with multiple products are better able to withstand external shocks including changes in consumer preferences or intensive competitive activityExample Kelloggs offering many variations of Special K including cereal bars and protein shakesFashion CyclesIn industries that rely on fashion trends and experience short product life cyclesapparel books softwaremost sales come from new productsExample a motion picture generates most of its sales in theatre DVD and cable TV revenues within a year of releaseInnovation and ValueNew product introductions especially newtotheworld products that create new markets can add tremendous value to firmsThese new products services or processes are called pioneers breakthroughs or disruptive because they establish a completely new market or radically change both the rules of competition and consumer preferences in a marketGenerally they require a higher level of learning from consumers and offer much more benefits than predecessor productsExample eBay Blackberry or Canons desktop photocopiersPioneers have advantage of being first movers as the first to create the market or product category they become recognizable to consumers and thus establish a commanding and early market share leadNot all pioneers succeedIn many cases imitators capitalize on weaknesses of pioneers and subsequently gain advantage in the marketPioneers often have a less sophisticated design and may be priced relatively higher leaving room for better and lower priced competitive productsAs many as 95 of all consumer goods fail and products across all market and industries suffer failure rates of 5080WHYThey offer consumers too few benefits compared with existing productsThey are too complex or require substantial learning and effort before consumers can use themBad timing consumers arent ready for such psNewtotheworld products are not adopted by everyone at the same time LO2Diffusion of innovation the process by which the use of an innovation whether a product or service spreads throughout a market group over time and over various categories of adoptersHelps marketers understand the rate at which consumers are likely to adopt a new product or serviceIt also gives them a means to identify potential markets for their products or services and predict their potential sales even before they introduce the innovationsInnovators 25 of the total marketThose buyers who want to be first on the block to have the new product or serviceEnjoy taking risks are regarded as highly knowledgeable and are NOT price sensitiveTypically they keep themselves very well informed about the product category by subscribing to magazines talking to other experts searching the internet attending productrelated forums seminars and special eventsThey are crucial to the success of any new product or service because they help the product gain market acceptanceEarly Adopters 135 of the total marketSecond subgroup that begins to use a product or service innovationGenerally dont like to take as much risk as innovators but instead wait and purchase a product after careful reviewTend to enjoy novelty and are often regarded as the opinion leaders for specific product categoriesCrucial for bringing the other three buyer categories to the marketEarly Majority 34 of total marketCrucial because few new products and services can be profitable until this large group buys themIf the group never becomes large enough the product typically failsDiffer in many waysdont like to take as much risk and therefore tend to wait until the bugs are worked outWhen they are in the market the number of competitors in the marketplace usually also has reached its peak so they have many different price and quality choicesLate Majority 34 of the total marketLast group of buyers to enter a new product market when they do the product has achieved its full market potentialBy this time sales tend to level off or may be in declineLaggards 16 of the total marketThese consumers like to avoid change and rely on traditional products until they are no longer availableThey may never adopt a product or serviceVery few companies actively pursue these customersUsing the diffusion of innovation theory or adoption cycle firms can predict which types of customers will buy their new product or service immediately after its introduction as well as later as the product or service gets more and more accepted by the market
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