Chp. 12 Flashcards
Innovation
the process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow
Why do firms add products, services, and processes to their offerings?
it creates and delivers value more effectively by satisfying customers changing needs and keeps them from getting bored with the current product or service
True or false: without new products or services the value of the firm will ultimately decline
true
How does innovation affect risk?
diversification creates a broader portfolio of products which helps diversify the risk and enhance firm value better than a single product can
What industries experience short product life cycles?
apparel, arts, books, and software
Diffusion of Innovation
the process by which the use of innovation spreads throughout a market group over time and across various categories of adopters
Pioneers (break throughs)
establish a completely new market or radically change both the rules of competition and consumer preferences in the market
First Movers
the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead
Innovators
those buyers who want to be the first on the block to have the new product or service. risk takers and highly knowledgeable. stands in line overnight. 2.5%
Early adopters
second subgroup that begins to use a product. not as risky as innovators, purchase product after careful review, wait for the first reviews to be released do not stand in line to be first to get product. 13.5%
Early Majority
34%. few new products can be profitable if this group doesn’t adopt them. wait for bugs to be out of the product. enter the market when the # of competitors has reached its peak so they have price choice
Late Majority
34% last group. product has reached its full market potential when they buy. sales have leveled off or declined
Laggards
16%. rely on traditional products until they are no longer available may never adopt a new product or service
How can firms use the diffusion of innovation theory?
to predict which types of customers will buy their new product or service immediately after its intro as well as later as the product is more and more accepted by the market
Relative advantage
product or service is perceived to be better than subs then the diffusion will be quick
Compatibility
diffusion process may be faster or slower depending on various customer features including international culture differences
Observability
products are easily observed their benefits or uses are easily communicated to others which enhances the diffusion process
Complexity and trialability
products that are less complex and are easy to try will diffuse more quickly and lead to faster adoption than those that are not as easy to try (apple stores always have tons of products to try)
What are some ways of idea generation?
internal research and development, license tech. from research intensive firms, brainstorm, research competitors products, conduct consumer research
R&D Consortia
firms joining groups of other firms and institutions to explore new ideas or obtain solutions for developing new products
Reverse engineering
taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitors patents
Lead users
those innovative product users who modify existing products according to their own
Concept testing
the process in which a concept statement is presented to potential buyers or users to obtain their reactions
Product development/design
entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features
Prototype
the first physical form or service description of a new product still in rough form
<p>Beta Testing
</p>
<p>uses potential customers, examine the prototype in a real use setting to determine its functionality performance potential problems and other issues specific to its use</p>
Premarket Tests
tests conducted before they actually bring a product or service to market to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers
Test Marketing
introduces the offering to limited geographical area
Trade Promotions
promotions to wholesalers or retailers to get them to purchase the new products
Introductory Price Promotions
limited-duration, lower-than-normal prices designed to provide retailers with incentive to try the product
Trade Show
a temporary concentration of manufacturers that provides retailers the opportunity to view what is available and new in the marketplace
Manufacturers Suggested Retail Price (MSRP)
manufacturers encourage retailers to sell at this price
Slotting Allowance
a fee paid simply to get new products into stores or to gain more or better shelf space for their products
Evaluation of results
takes place after the product has been launched determines whether the product was a success or a failure
Three interrelated factors to access success of a new product.
(1) satisfaction of technical requirements, performance (2) customer acceptance (3) satisfaction of the firms financial requirements
Product life cycle
the stages that products move through as they enter get est. in and ultimately leave the marketplace
Intro stage
first launch of the product
growth Stage
product gains acceptance, demand and sales increase competitors emerge
maturity Stage
industry sales reach their peak
decline
if the product doesn’t achieve success it will decline and eventually leave the market
alpha testing
firm attempts to determine whether the product will perform according to its design and whether it satisfies the needs for which it was intended
