Marketing 111 - Chapter 8: Developing New Products and Product Life-Cycle Strategies

Vocabulary practice flashcards covering Chapter 8 (Parts A and B): the eight stages of the new product development process, demand forecasting, concept testing methodologies, and product life-cycle stages and marketing strategies.

New Product Development

The development of original products, product improvements, product modifications, and new brands created through the firm's own research and development efforts.

Product Idea

An idea for a possible product that the company can see itself offering to the market.

Product Concept

A detailed version of a product idea stated in meaningful consumer terms.

Product Image

The specific way consumers actually perceive an existing or potential product.

Crowdsourcing

An idea generation approach that invites broad communities of people—such as customers, employees, independent scientists, and the public—into the new product innovation process (exemplified by platforms such as LEGO Ideas).

Idea Screening

The second stage in the new product development process that involves evaluating new ideas via write-up memos (covering value proposition, target market, competitive landscape, costs, and rate of return) to spot good ideas and drop poor ones as early as possible.

R-W-W Framework

A screening framework assessing whether an idea is: 1) Real (is there a real need, desire, and demand?), 2) Win (can a sustainable competitive advantage be achieved?), and 3) Worth doing (does it fit company growth strategy and offer profit potential?).

Concept Testing

Testing new product concepts with groups of target consumers to evaluate their reactions, consisting of qualification questions, visual and verbal product descriptions, purchase intent scales, and detailed reaction analyses.

Purchase Intent

A metric measured during concept testing on a 5-point Likert scale (ranging from 'definitely would not purchase' to 'definitely would purchase') where marketers focus on consumer commitment via the 'top box' and 'second box' responses.

Marketing Strategy Statement

A three-part document that details: 1) the target market, planned value proposition, and sales, market share, and profit goals for the first few years; 2) the planned price, distribution, and marketing budget for year one; and 3) long-run sales, profit goals, and marketing mix strategy.

Total Market Demand Formula

The forecasting equation $Q = n \times q \times p$, where $Q$ is the total market demand, $n$ is the number of prospective buyers in the market, $q$ is the quantity purchased by an average buyer per year, and $p$ is the price of an average unit.

Business Analysis

formal review of the sales, costs, and profit projections for a new product to determine whether they satisfy the company's objectives.

Product Development Stage

product concept is engineered and developed into a physical prototype to ensure it can be turned into a workable market offering.

Test Marketing

the product and its proposed marketing program are introduced into realistic market settings to evaluate consumer and retailer response.

Controlled Test Market

A test marketing approach conducted with a pre-selected panel of shoppers and cooperating retail stores to track sales performance under controlled conditions.

Simulated Test Market

A test marketing technique that evaluates consumer reactions and forecasts sales by placing participants into laboratory or simulated shopping environments (such as the Copernicus Discovery model).

Microcosm Cities

U.S. metropolitan areas evaluated across key demographic and socio-economic metrics (such as age, gender, household makeup, and income) whose populations reflect the national average, making them ideal for localized product testing (e.g., Indianapolis, Cincinnati, Oklahoma City).

Product Life Cycle (PLC)

The course of a product's sales and profits over its lifetime, which can describe a product class (e.g., savory snacks), a product form (e.g., braided pretzel twists), or a specific brand (e.g., Rold Gold).

Style

A basic and distinctive mode of expression that appears in a given field and displays cycles of renewed interest showing multiple peaks over time.

Fashion

A currently accepted or popular style in a given field that tends to grow slowly, remain popular for a period, and then decline slowly over time.

Fad

A temporary period of unusually high sales driven by rapid consumer enthusiasm and immediate product popularity, followed by a swift and steep decline (e.g., Pet Rock, Tamagotchi, fidget spinners).

Introduction Stage

The PLC phase characterized by low sales, negative or low profits, high cost per customer, few competitors, and an objective to create product awareness and trial among innovators using a basic product, cost-plus pricing, and selective distribution.

Growth Stage

The PLC phase characterized by rapidly rising sales, rising profits, average cost per customer, a peak in the number of competing firms, and an objective to maximize market share among early adopters using product extensions, market-penetration pricing, and intensive distribution.

Maturity Stage

The PLC phase marked by peak sales, high profits that eventually level off or decline, low cost per customer, a stable competitor pool beginning to decline, and an objective to defend market share by diversifying models, matching or beating competitor prices, and modifying the market, product, or marketing mix.

Decline Stage

The PLC phase marked by declining sales, falling profits, low cost per customer, a declining number of competitors, laggard customers, and an objective to reduce expenditures and milk the brand by phasing out weak items and cutting prices.

Harvesting

A strategic option in the decline stage of the PLC where a company reduces various operating and marketing costs (such as R&D, advertising, sales promotion, and maintenance) in the hope that sales hold up to maximize short-term cash flow.

Standardization vs. Localization

A critical global product strategy decision balancing the cost efficiencies and uniform brand image of standardizing offerings across countries against tailoring features, packaging, and marketing programs to accommodate distinct local consumer needs and regulations.