Chap 9 Flashcards
Product life cycle:
Describes the stages a really new product idea goes through from beginning to end. The product life cycle is divided into four major stages: Market introduction, Market growth, Market maturity, Market decline. NOTE! All phases are not necessarily of the same length.
Market introduction:
In this stage sales are low as a new idea is first introduced to a market. Customers aren’t looking for the product. Informative promotion is needed to tell potential customers about the advantages and uses of the new product concept.
Market growth:
In this stage the industry sales grow fast, and industry profits rise and the start falling. The innovator begins to make big profits as more and more customer buy, but competitors see the opportunity and enter the market.
Market maturity:
The stage occurs when industry sales level off and competition gets tougher. Industry profits go down throughout this stage because promotion costs rice and some competitors cur prices to attract business.
Market decline:
During this stage new products replace the old. Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they have successfully differentiated their products.
Some product moves faster:
A new product idea will move faster through the early stages of the life cycle when it has certain characteristics. The greater the comparative advantage of a new product over those already on the market the more rapidly its sales will grow. Sales growth is also faster when it is easy to use and if its advantages are easy to communicate. If the product can be tried on a limited basis without a lot of risk it can usually be introduced more quickly.
Product life cycles are getting shorter:
This Is partly due to rapidly changing technology. One new invention may make possible many new products that replace old ones.
Fashion:
The currently accepted or popular style.
Fad:
An idea that is fashionable only to certain groups who are enthusiastic about it.
New product:
Is one that is new in any way for the company concerned. A firm can call its products new for only six months according to the Federal Trade Commission. Experts estimate that consumer packaged-goods companies spend more than 20M (Warren: 40-45M) to introduce a new brand and 80 to 95 percent of those new brands flop.
New-product development process:
New-products move through the following five-steps process: Idea generation, Screening, Idea evaluation, Development (of product and marketing mix), Commercialization
Idea generation:
Finding new-product ideas can be hard, therefore firms need a formal procedure to generate a continuous flow of ideas.
Screening:
Involves evaluating the new idea with the S.W.O.T analysis and the product-market screening criteria.
Idea evaluation:
When an idea moves past the screening step it’s evaluated more carefully. This stage involves getting more reactions from customers, even though the actual product has not yet been developed.
Development:
Product ideas that survive screening and idea evaluation steps must now be analyzed further. This involves research and development and engineering to design and develop the physical part of the product.
