Marketing Chapter 8: Developing New Products

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Questions and Answers

What role does innovation play in the context of firms creating new products?

It is essential for firms to stay in business and relevant. (correct)

It increases the costs associated with production.

It helps firms maintain their current product lines.

It primarily focuses on improving customer service.

Which of the following best describes what constitutes a product?

Only tangible items that can be purchased.

Anything of value to a consumer that can be offered through a marketing exchange. (correct)

Services exclusively that enhance customer experiences.

Innovative ideas that have not yet been marketed.

What is the significance of the prototype development in the case of Bartesian?

It was critical to the product's success, requiring multiple iterations. (correct)

It was unnecessary as the idea was easily marketable.

It primarily focused on increasing market segmentation.

It enhanced the product line without any revisions.

How can managers utilize the diffusion of innovation theory?

To make informed decisions regarding product line development. Signup and view all the answers

What is a key component of the product life cycle?

Understanding the life span of products from introduction to decline. Signup and view all the answers

How can firms add value to well-known products?

By redesigning the product to enhance its functionality Signup and view all the answers

What happens to a firm's value if it doesn't introduce new products in a saturated market?

The firm's value likely declines Signup and view all the answers

Why is having a portfolio of products beneficial for firms?

It diversifies risk across multiple products Signup and view all the answers

What characterizes the fashion industry in relation to product life cycles?

Sales are driven by constantly evolving trends Signup and view all the answers

What do consumers generally expect regarding trendy products, such as video games?

They demand new versions or experiences regularly Signup and view all the answers

What is the primary purpose of new products that do not target end consumers?

To enhance relationships with suppliers Signup and view all the answers

What distinguishes product pioneers in the market?

Their establishment of new markets or significant changes in consumer preferences Signup and view all the answers

What factor can result in the quick diffusion of a product within the market?

Perceived relative advantage over substitutes Signup and view all the answers

What is a characteristic of first movers in a market?

They are the first to market a new category or product Signup and view all the answers

How can compatibility enhance product acceptance in different cultures?

By offering products in various sizes to meet diverse needs Signup and view all the answers

What is one of the key benefits of observability in product development?

It enhances the diffusion process. Signup and view all the answers

Which method of idea generation often leads to breakthrough products?

Internal R&D Signup and view all the answers

What is a common challenge that encourages firms to utilize outsourcing?

Difficulty in progressing through development steps. Signup and view all the answers

What role do university research centers typically play in product development?

They provide licensing for technology or ideas. Signup and view all the answers

How does General Motors utilize data from its OnStar system in product development?

To support the development of new cars. Signup and view all the answers

Study Notes

Chapter 8: Developing New Products

This chapter focuses on developing new products and services.
Learning Objectives (LOs) outlined include identifying reasons firms create new products, describing diffusion of innovation, listing stages in developing products/services, and describing the product life cycle.

Developing New Products

Firms create new products to offer value to both existing and new customers.
Innovation is crucial for staying competitive in the market.
Firms may create innovative products to satisfy evolving customer needs or through internal research and development, licensing, brainstorming, outsourcing, or observing competitors' products.

Product Life Cycle

The product life cycle is a model that describes the stages a product goes through from introduction to decline.
Typical stages: Introduction, Growth, Maturity, and Decline.
During the Introduction stage, sales and profits are low due to initial market acceptance.
In the Growth stage, sales and profits rise rapidly as the product gains acceptance.
The Maturity stage is characterized by peaking sales but declining profits, often because of competitors entering the market.
The decline stage shows declining sales and profits as consumers adopt other alternatives.

Managing Risk Through Diversity

Innovation creates a broader portfolio of products.
Diversification of risk with various products is better than relying on a single product for business stability.
Variety in products decreases the risk of a company losing profit if one specific product declines in the market.

Fashion Cycles

The fashion industry often experiences quick product life cycles due to trends.
Most industry sales come from new products, as trends shift rapidly.
Products face a shorter life cycle as opposed to a high-learning product.

Improving Business Relationships

New products can target end consumers, or improve relationships with suppliers.
Walmart is one example of a company focused on improving supply relationships through its focus on new products and sourcing solutions.

Adoption of Innovation

Diffusion of innovation is the process of an innovation spreading throughout a market, involving various categories of adopters.
Categories of adopters: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards.
Pioneers introduce products that create a new market or drastically change competition and consumer preferences.
First Movers introduce products that make them readily recognizable by consumers for market share.

Stages of the Adoption Cycle

Factors affecting product diffusion include relative advantage, compatibility, complexity and trialability, and observability.
Understanding different methods of idea generation, internal research and development, licensing, brainstorming, outsourcing, competitors' products, and customer input are necessary for developing products.

How Firms Develop New Products

The following steps describe a new product's development process: Idea Generation, Concept Testing, Product Development, Market Testing, Product Launch, and Evaluation of Results.
Idea Generation includes Internal R&D, Customer Input, Competitors' Products, Licensing, and Brainstorming.
Product Development includes Prototyping, Alpha Testing, and Beta Testing to determine the product's viability.
Market Testing has two phases: Premarket tests and test marketing.
Product Launch includes the promotion, timing, placement, and pricing of a product.
Evaluation of Results occurs after market launch, analyzing the product's performance, customer acceptance, and financial satisfaction.

Strategies to Extend the Product Life Cycle

Companies can use strategies such as developing new uses, modifying the product to increase its frequency of use, increasing the number of users, finding new users, repositioning the product, and tweaking marketing strategies.

Different Variations on the Product Life Cycle Curve

Different product life cycles present varying growth curves, such as high-learning products, low-learning products, fashion products, and fad products.

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Description

This quiz explores Chapter 8, focusing on the development of new products and services. It covers key concepts such as the reasons for creating new products, the diffusion of innovation, the product life cycle, and the stages of product development. Test your understanding of these vital marketing principles.