Marketing Chapter 12

Innovation

The process by which ideas are transformed into new products and services that will help firms grow.

Pioneers

New product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market.

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.

Innovators (diffusion of innovation)

Those buyers, representing approximately 2.5 percent of the population, who want to be the first to have the new product or service.

Early adopters (diffusion of innovation)

The second group of consumers in the diffusion of innovation model, after innovators, who represent about 13.5 percent of the population.

Early majority (diffusion of innovation)

A group of consumers in the diffusion of innovation model that represents approximately 34 percent of the population; members don’t like to take much risk.

Late Majority (diffusion of innovation)

The last group of buyers to enter a new product market, representing approximately 34 percent of the population.

Laggards (diffusion of innovation)

Consumers, representing approximately 16 percent of the population, who like to avoid change and rely on traditional products.

The Product Development Process

Idea generation, concept testing, product development, market testing, product launch, evaluation of results.

Sources of new product ideas

Internal R&D, R&D consortia, licensing, brainstorming, outsourcing, competitors products, customer input.

R&D consortia

A group of firms and institutions that explore new ideas or obtain solutions for developing new products.

Concept testing

The process in which a concept statement describing a product or service is presented to potential buyers to obtain their reactions.

Product development

The process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product’s form and features.

Prototype

The first physical form or service description of a new product that is still in a tentative form.

Alpha testing

An attempt by the firm to determine whether a product will perform according to its design and meets its intended need.

Beta testing

Having potential consumers examine a product prototype in a real-use setting to determine its functionality and performance.

Premarket testing

Conducted before a product is brought to market to determine how many customers will try and continue to use it.

Test marketing

A method of determining the success potential of a new product by introducing it to a limited geographical area.

Product Life Cycle

Defines the stages that new products go through as they enter, get established in, and eventually leave the marketplace.

Introduction stage (product life cycle)

Stage of the product life cycle when innovators start buying the product.

Growth stage (product life cycle)

Stage when the product gains acceptance, demand, and sales increase, and competitors emerge.

Maturity stage (product life cycle)

Stage when industry sales reach their peak; firms try to rejuvenate their products.

Decline stage (product life cycle)

Stage when sales decline and the product eventually exits the market.

Shape of PLC

Bell curved in theory.