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Chapter 8

Marketing Chapter 8 Notes.docx

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Department
Marketing
Course
MKT 100
Professor
Laila Rohani
Semester
Winter

Description
Marketing: MKT100 Chapter 8 Notes Ch. 8: Developing New Products Why Do Firms Create New Products? • New market offerings provide value to both firms and consumers • Innovation is the process by which ideas are transformed into new products and services that will help firms grow Changing Customer Needs • Adding new products and services, firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers by simply keeping the customers from getting bored with the current product or service • Sometimes, companies identify problems and develop products and services that the customer never knew they needed Market Saturation • The longer a product is in the market, the more likely it is that the market will become saturated • Without new products or services, the value of the firm will ultimately decline Managing Risk Through Diversity • Through innovation, firms often create broader portfolios of their products, which helps diversify their risk and enhance firm value better than a single product can • Firms with multiple products are better able to withstand external shocks, such as changes in consumer preferences and intensive competitive activity Fashion Cycles • Industries that rely on fashion trends and experience short product cycles, most sales come from new products Innovation and Value • New product introductions add tremendous value and 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 market • Disruptive products generally require a higher level of learning from consumers and offer much more benefits than predecessor products. • Pioneers have the advantage of being first movers; as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead. • A threat of competitors capitalizing on weaknesses of pioneers is sometimes the case because so much is spent by the pioneer on establishing demand for the product that competitors easily steal market share Adoption of Innovation • Diffusion of innovation is the process by which the use of innovation, whether a product or service, spreads throughout a market group over time and over various categories of adopters • This helps marketers understand the rate at which consumers are likely to adopt a new product or service Innovators • Innovators are those buyers who want to be the first to have the new product or service, enjoy taking risks, are regarded as highly knowledgeable and are not price sensitive • These people keep themselves well informed about a product Early Adopters • Early adopters are the second group of the diffusion model that generally doesn’t take as much risk as innovators but instead wait and purchase the product after careful review • They tend to enjoy novelty and are regarded as the opinion leaders of particular products Early Majority • The early majority group is crucial to a product’s success because the product cannot be profitable if this group doesn’t buy it • The members of this group do not take much risk and wait until bugs are worked out Late Majority • This group buys when the product has reached its full market potential Laggards • These consumers like to avoid change and rely on traditional products until they are no longer available • In some cases, laggards may never adopt a certain product or service Using the Adoption Cycle • Using the adoption cycle, firms can predict which types of consumers will buy their products at which point in the product life cycle • They use this to develop effective pricing, promotion and other marketing strategies Relative Advantage • If a product is perceived to be better than substitutes, then the diffusion will be relatively quick. Compatibility • Most business professionals have to make decisions in a timely fashion and be able to communicate their decision in a timely manner, and they need real-time information to do this Observability • When products are easily observed, their benefits or uses are easily communicated to others, thus enhancing the diffusion process Complexity and Trailability • Products that are relatively less complex are also relatively easy to try • The diffusion of innovation theory comes into play in the immediate and long term aftermath of a new product or service introduction How Firms Develop New Products • Begins with development of new ideas • Marketing, design, engineering, manufacturing, procurement, and finance. Idea Generation • Firm can develop using its own internal R&D efforts, collaborate with other firms, license technology from firms, brainstorm, research competitors’ products, or conduct consumer research • New products can come for employees, customers, suppliers, and partners by attending trade shows and conferences. Internal Research and Development • Many firms have their own R&D departments where scientists work to solve complex problems to
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