Lecture 5

Question 1

What are the two ways in which a firm can obtain a new product?

Answer 1

Through acquisition or innovation

Question 2

Why do so many new products fail?

Answer 2

They can fail for several reasons:
Although the idea may be good, the market size may have been overestimated
The actual product may not have been designed as well as it should have been
The product was incorrectly positioned in the market, price too high, or advertised poorly

Question 3

What does a new-product strategy do?

Answer 3

It sharpens the focus of the company and provides general guidelines for generating, screening, and evaluating new-product ideas

Question 4

What is idea generation?

Answer 4

It is the process of searching for new-product ideas. A company typically has to generate many ideas in order to find a few good ones

Question 5

Where could new product ideas come from?

Answer 5

Internal sources
Watching and listening to customers
Watch competitors’ ads and other communications

Question 6

What is idea screeing?

Answer 6

It is the process of identifying good ideas and dropping poor ones as soon as possible

Question 7

What are some questions that are asked when idea screening?

Answer 7

Is the product truly useful to the consumer?
Does it mix well with the company’s objectives and strategies
Do we have the people, skills and resources to make it succeed?
Does it deliver more value to customers than competing products?
What is the likely demand for the product?
How might competitors respond?
What is the risk of failure? Is the company willing to take the risk?

Question 8

What is concept development?

Answer 8

It is the process of expanding the new-product idea into various alternatives forms based on questions such as
Who will use the product
What primary benefit should the product provide?
When and where will the product be used?

Question 9

What is concept testing?

Answer 9

It is the process of testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal

Question 10

What is product development?

Answer 10

This is when R&D or engineering develops the product concept into a physical product

Question 11

What is test marketing?

Answer 11

It is when the product and the marketing program are introduced into more realistic market setting.

Question 12

What does test marketing provide to the marketer?

Answer 12

It gives the marketer experience with marketing the product before going to the expense of full introduction/market

Question 13

What is a standard test market?

Answer 13

It is when the company finds a small number of representative test cities and conducts a full marketing campaign in these cities and then measures product performance

Question 14

What are product-use tests?

Answer 14

It is when companies select a small group of potential customers who agree to use the new product for a limited time

Question 15

What is a trade show?

Answer 15

It is when new industrial products are displayed to consumers so that manufacturers can see how buyers react to various product features and terms, and can asses buyer interest and purchase intentions

Question 16

What is commercialization?

Answer 16

It is when test marketing gives management the information needed to make a final decision about whether to launch the new product
If the company goes ahead with commercialization - introducing the new product into the market

Question 17

What is the product life-cycle?

Answer 17

It is a concept that provides a way to trace the stages of a product’s acceptance from its introduction to its decline

Question 18

What is the introduction stage?

Answer 18

It is the stage of the product life-cycle where the new product is first launched

Question 19

What are some of the characteristics of the introduction stage?

Answer 19

Marketing costs are high
Incentives are needed to get consumers to try the new product
Advertising expenses are high because of the need to educate consumers about the new product’s benefits
Promotion strategy focuses on developing product awareness

Question 20

What determines the length of the introduction stage?

Answer 20

It is determined by product characteristics, such as the product’s advantages over substitute products. the educational effort required to make the products known

Question 21

What is the growth stage?

Answer 21

It is the stage where, if the product satisfies the market, sales will begin to climb quickly and profits will increase

Question 22

Who are the main consumers of the growth stage?

Answer 22

They are the early “adopters” and late buyers will start following their lead, especially if they hear favourable word of mouth

Question 23

What are some of the characteristics of the growth stage?

Answer 23

New competitors will enter the market
Improvements to product quality and additions of new features
Market shares are formed

Question 24

What is the maturity stage?

Answer 24

It is the period of slowdown in sales growth because the product has achieved acceptance by most potential buyersW

Question 25

What are some of the characteristics of the maturity stage?

Answer 25

Weaker competitors will begin to drop out
The industry will eventually contain only well-established competitors

Question 26

What must firms consider when in the maturity stage?

Answer 26

Modifying the market: The company tries to increase the consumption of the current product
Modifying the product: Changing product characteristics such as quality, features, or style to attract new users
Modify the marketing mix: Marketers can try to improve sales by changing one or more marketing-mix elements

Question 27

What are the characteristics of the maturity stage?

Answer 27

Heavy consumer promotion by the manufacturer is required to maintain market share
Emergence of “niche marketers” that narrow, well-defined, undeserved segments of the market

Question 28

What is the decline stage?

Answer 28

It is the stage when sales decline for many reasons, including technological advances, shifts in consumer tastes, substitute products and increased competition

Question 29

What is diffusion innovation?

Answer 29

It is the process by which the adoption of an innovation spreades

Question 30

What are innovators?

Answer 30

They are people that are eager to try new ideas and products

Question 31

What are early adopters?

Answer 31

They are consumers who adopt early in the product’s life-cycle

Question 32

What is the early majority?

Answer 32

They are consumers who adopt the product after weighing its pros and cons
They collect more information and evaluate more brands than early adopters

Question 33

What are the late majority?

Answer 33

They are consumers who adopt a new product because most of their friends have adopted it

Question 34

What are laggards?

Answer 34

Laggards are consumers who adopt an innovation after is has probably been outmoded and replaced by something else