Marketing Chapter 8 & 9

New Product Development

The development of original products, product improvements, and product modification

Idea Generation

The systematic search for new product ideas

Crowd Sourcing

a company invites broad communities of people—customers, employees, independent scientists and researchers, and even the public at large—into the innovation process

Idea Screening

Evaluating new product ideas to spot the good ones and drop the bad ones

Product Concept Development

A detailed version of the new product idea stated in terms that are meaningful to the consumer.

Marketing Strategy Development

Designing an initial marketing strategy for a new product based on the product concept

Business Analysis

Involves a review of the sales, costs, and profit projections for a new product to ensure they satisfy the company’s objectives

Product development phase

Developing the product concept into a physical product or a detailed service blueprint to ensure that the product idea can be turned into a workable market offering.

Test marketing

the stage at which the product and its proposed marketing program are tested in realistic market settings

Commercialization

introducing a new product into the market

Customer-centered new product development

focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.

team-based new product development

multiple company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness.

Product life cycle (PLC)

the course that a product’s sales and profits take over its lifetime

Fashion

a currently accepted or popular style in a given field

Fads

are temporary periods of intense sales or interest driven by short-term consumer enthusiasm

Growth stage

products sales start increasing quickly

Maturity stage

The PLC stage in which a products sales growth slows or levels off

Decline stage 

The PLC stage in which a products sales fade away

Price

The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service

Customer value–based pricing

Setting price based on buyers’ perceptions of value rather than on the seller’s cost

Good-value pricing

Offering just the right combination of quality and good service at a fair price

Value-added pricing

Attaching value-added features and services to differentiate a company’s offers and charging higher prices

Cost-based pricing

Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Fixed costs (overhead)

Costs that do not vary with production or sales level

Variable costs

Costs that vary directly with the level of production

Total costs

The sum of the fixed and variable costs for any given level of production

Cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product

Break-even pricing (target return pricing)

Setting price to break even on the costs of making and marketing a product, or setting price to make a target return

Competition-based pricing

Setting prices based on competitor’s strategies, prices, costs, and market offerings

Target costing

Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is profitably met

Demand curve

A curve that shows the number of units the market will buy in a given time period at different prices that might be charged

Experience curve

The drop in the average per-unit production cost that comes with accumulated production experience

Price elasticity

A measure of the sensitivity of demand to changes in price

Market-skimming pricing (price skimming)

Setting a high price for a new product to skim maximum revenues layer by layer from customer segments in line with their willingness to pay

Market-penetration pricing

Setting a low price for a new product in order to quickly attract buyers and gain a large market share

Product line pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices

Optional-product pricing

The pricing of optional or accessory products along with a main product

Captive-product pricing

Setting a price for products that must be used along with a main product, such as toner cartridges for a printer and games for a video-game console

By-product pricing

Setting a price for by-products to help offset the costs of disposing of them and help make the main product’s price more competitive

Product bundle pricing

Combining several products and offering the bundle at a reduced price

Discount

A straight reduction in price on purchases during a stated period of time or of larger quantities

Allowance

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way

Segmented pricing

Selling a product or service at two or more prices, where the differences in prices is not based on differences in costs

Psychological pricing

Pricing that considers the psychology behind how consumer evaluate price and value, not just the economics

Reference prices

Prices that buyers carry in their minds and refer to when they look at a given product

Promotional pricing

temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

Geographical pricing

Setting prices for customers located in different parts of the country or world

Dynamic pricing

Adjusting prices continually to meet changing conditions and situations in the marketplace

Personalized pricing

Adjusting prices in real time to fit individual customer needs, situations, locations, and buying behaviors