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, to use a product or service innovation represent about 13.5 percent of the population. They generally don’t like to take as much risk as innovators but instead wait and purchase the product after careful review.

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 and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them.

Late Majority (diffusion of innovation): The last group of buyers to enter a new product market, representing approximately 34 percent of the population; when they do, the product has achieved its full market potential.

Laggards (diffusion of innovation): Consumers, representing approximately 16 percent of the population, who like to avoid change and rely on traditional products until they are no longer available. Sometimes laggards never adopt a product or service.

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, possibly including government and educational institutions, that explore new ideas or obtain solutions for developing new products.

Concept testing: The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions.

Product development: Entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product’s form and features or a service’s features. 

Prototype: The first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes, sometimes even the crafted individually

Alpha testing: An attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended; occurs in the firm’s research and development (R&D) department.

Beta testing: Having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use.

Premarket testing: Conducted before a product or service is brought to market to determine how many customers will try and then continue to use it. 

test marketing: A method of determining the success potential of a new product; it introduces the offering to a limited geographical area prior to a national launch.

Product Life Cycle: Defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning. 

Introduction stage (product life cycle): Stage of the product life cycle when innovators start buying the product.

Growth stage (product life cycle): Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category.

Maturity stage (product life cycle): Stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them.

Decline stage (product life cycle): Stage of the product life cycle when sales decline and the product eventually exits the market.

Shape of PLC: Bell curved in theory.