The firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which is was intended.

Occur in the firm's R&D department.

A group works together to generate ideas, where no idea can be immediately accepted or rejected.

Members vote on the best ideas or combinations of ideas at the end of the session.

The spoken component of branding, it can describe the product or service/product characteristics and/or be composed of words invented or derived from colloquial or contemorary language.

Can be an exercise in creativity and can indicate a strong brand image.

1. National- Manufacturers brands

2. Resellers- Private label brands

3. Generic brands

4. Licensed brands

1. De-regulation

2. Franchising

3. Budget crunchies

4. Technology

5. New supply/demand conditions

6. Changing standards

The process in which a concept statement is presented to potential buyers or users to obtain their reactions.

The reactions enable the developer to estimate the sales value of the product or service concept, possibly make changes to enhance its sales value, and determine whether the idea is worth further development.

Occurs very early in the new product introduction process, even before a real product is made, which helps the firm avoid the costs of unnecessary product development.

Brief written descriptions of the product; its technology, working principles, and forms; and what customer needs it would satisfy.

May also include visual images of what the product would look like.

Ideas with potential are developed further into concepts.

Listening to the customer is essential for successful idea generation, especially the lead users.

As many as 85% of all new B2B product ideas come from customers.

Joint effort between the selling firm and the customer that significantly increases the probability that the customer eventually will buy the new product.

Can also help a company innovate in different areas.

"Old Age" Characteristics

Profit/Sales- Further decline

Ripe old age

Cut backs

Bite the bullet

Firms in this stage either have a niche segment of loyal consumers or those with special needs, or they exit the market.

Laggards who have yet to try the product enter the market at this stage.

Services are...

1. Intangible

2. Inseparable

3. Variable

4. Perishable

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.

Helps marketers understand the rate at which consumers are likely to adopt a new product or service, identify potential markets for their new products or services, and predict their potential sales before they introduce the innovations.

Knowing this, the firm can develop effective promotion, pricing, and other marketing strategies to  push acceptance among each customer group.

Generally follows a bell-shaped curve.

Comes into play in the immediate and long-term aftermath of a new product or service introduction.

The purchasers can be divided into 5 groups according to how soon they buy the product after its introduction:

1. Innovators

2. Early adopters

3. Early majority

4. Late majority

5. Laggards

Marketers must understand what the diffusion curve for the new product looks like, and the characteristics of the target customers in each stage of the diffusion since different products diffuse at different rates.

The speed a product diffuses depends on several product characteristics:

-Relative advantage- diffusion will be relatively quick if a product is perceived to be better than substitutes.

-Compatibility, consistent with people's past behavior, needs, and values.

-Observability, the products benefits or uses are easily communicated to others, thus enhancing the diffusion process.

-Complexity and Trialability, products that are less complex and easier to try generally diffuse more quickly.

A customer's perception of the benefits he/she received compared with the costs (inconvenience or loss).

The key is listening carefully to the customer.

Second subgroup that begins to use a product or service innovation.

Generally don't like to take as much risk as innovators, instead wait and purchase the product after careful review.

Tend to enjoy novelty and often are regarded as the opinion leaders in product categories who spread the word.

Represents about 13.5% of all buyers in market, and crucial for bringing the other 3 buyer categories to the market.

-If this group is small, the number of people who ultimately adopt the innovation likely will also be small.

When entering the market, the number of competitors in the marketplace usually also has reached its peak, giving them many price and quality choices.

Represents about 34% of the population.

Few new products and services can be profitable until this large group buys them.

Don't like to take as much risk as innovators or the early adopters, instead, wait until "the bugs" are worked out.

Allowing employees to make decisions about how service gets provided to customers.

When frontline employees are authorized to make decisions to help their customers, service quality generally improves.

Becomes more important when the service is more individualized.

Managers need to support the service provider in several ways:

1. Emotional support

2. Instrumental support

3. Consistent and coherent support throughout the organization

4. Provide rewards to employees for excellent service

Postlaunch review to determine if the product and its launch were a success or not and what additional resources or changes to the marketing mix are needed, if any.

Firms measure success of a new product by 3 interrelated factors:

1. Its satisfaction of technical requirements, such as performance

2. Customer acceptance

3. Its satisfaction of the firm's financial requirements, such as sales and profits.

-The first to create the market or product category

-Become readily recognizable to consumers and thus establish a commanding and early market share lead

-Can command a greater market share over a longer time period than later entrants can.

-The advantage of Pioneers

-Imitators capitalize on the weaknesses of pioneers and subsequently gain advantage in the market. Spend less marketing effort creating demand for the product category and focus directly on creating demand for their specific brand

-Majority of new products fail: 95% of all new consumer goods fail, and products across all markets and industries suffer failure rates of 50-80%

Youth and Young Adulthood Characteristics

Profit- Way up

Sales- Way up

Build loyalty

Retain, expand

Promotion- Persuade

Lines, competition increasing

Marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available prodcut versions.

Market becomes more segmented and consumer preferences more varied, which increases potential for new markets or new uses of the product or service.

Innovators start rebuying the product, and early majority consumers enter.

Firms attempt to reach new consumers by studying their preferences and producing different product variations enabling them to segment the market more precisely.

The goal this segmenting is riding the rising sales trend and firmly establishing the firm's brand, where profits rise because of the economies of scale associated with manufacturing and marketing costs, esp. promotion and advertising.

A firm can use:

-its own internal research and development (R&D) efforts

-collaborate with other firms and institutions

-license technology from research-intensive firms

-brainstorm

-research competitors' products and services

-and/or conduct consumer research

The process by which ideas are transformed into new products and services that will help firms grow.

Firms sustain growth by getting customers excited by the new looks and features before a products functional life is over.

1. Adds new products to firms' offerings, so they can create and deliver value more effectively by satisfying the changing needs of their current and new customers or simply by keeping customers from getting bored with current product or service offerings.

2. The longer a product exists in the marketplace, the more likely it is that the market will become saturated.

3. The portfolio of prodcuts that innovation can create helps the firm diversify its risk and therefore enhances firm value better than a single product can.

4. In some industries (arts, books, software) most of the sales come from new products.

Without innovation, firms would only have two choices:

1. Continue to market current products to current customers,

2. Take the same product to another marker with similar customers, making the value of the firm decline.

Buyers who want to be the first to have the new product or service, and keep themselves well informed about the product category.

Firms that invest in the latest technology, either to use in their new products or services or to make the firm more efficient.

Enjoy taking risks and are regarded as highly knowledgeable.

Help the product gain market acceptance and in bringing in the next adopter category, the early adopters.

Represent only about 2.5% of total market for any new product or service.

Services are produced and consumed at the same time.

Purchase risk of services are relatively high.

A difference between services and products.

The systems and equipment to deliver the service properly

Required by service providers.

The most fundamental difference between and product and a service.

Services that cannott be touched, tasted, or seen like a pure product can, which makes it difficult to convey the benefits of services.

Cannot be shown directly to potential customers making it difficult to promote.

Product development costs are quite high for these firms, and the resulting new product or service has a good chance of being a technological or market breakthrough.

R&D investments are considered continuous investments, since in the long run the few extremely successful new products, or blockbusters, generate enough revenues and profits to cover the losses from the less successful introductions

Childhood Characteristics

Profit- Negative

Sales- Low

"Get it off ground"

Secure trial

Promotion- Inform

Limited lines, competition

Usually starts with a single firm, and innovators are the ones to try the new offering.

Characterized by initial losses to the firm due to its high start up costs and low levels of sales revenue as the product begins to take off.

If the product is successful, the firm may start seeing profits towards the end of this stage.

Like to avoid change and rely on traditional products until they are no longer available.

May never even adopt a certain product or service.

Roughly 16% of the market.

Last group to enter a new product market, and usually do when the product has achieved its full market potential.

By the time they enter the market, sales tend to level off or may be in decline.

Represents about 34% of the market.

Innovative product users who modify existing products according to their own ideas to suit their specific needs.

Helps firms understand general market trends that might just be on the horizon.

Analysis of this group is a successful customer input approach.

Firms buy the rights to use the technology or ideas from other research-intensive firms through a licensing agreement in many new scientific and technological products.

Saves the high costs of in-house R&D, but means the firm is relying on a solution that already exists but has not been marketed.

Testing the market for the new product with a trial batch of products, after testing the prototypes.

Can take two forms: Premarket testing, Test marketing

"Adulthood" Characteristics

Profit/Sales- Both beginning to decline

Combat competition

Forms

Promotion- Market share

Maximum levels

Characterized by the adoption of the product by the late majority and intense competition for market share among firms, and so marketing costs increase.

Average price of the product falls substantially compared with the shifts during the previous 2 stages of the life cycle.

In the US, most consumer packaged goods found in grocery and discount stores are already in the maturity stage.

Firms may pursue strategies such as entry into new markets and market segments and developing new products, to increase their customer base and/or defend their market share.

In the later stages, the market is quite saturated.

Services cannot be stored for use in the future.

Provides both challenges and opportunities to marketers in terms of the critical task of matching demand and supply; but their perfect match rarely occurs.

Truely new product introductions, truely new-to-the-world products that create new markets that add tremendous value to firms.

Establish a completely new market or radically change both the rules of competition and consumer preferences in a market.

Have the advantage of being first movers.

The degree to which a new product or service adds value to the firm and for customers depends on how new it really is.

Completely new-to-the-market products represent <10% of all new product introductions each year.

The degree of newness of a product ranges from truely "new-to-the-world" to "slightly repositioned".

New-to-the-world products diffuse or spread through a population by diffusion of innovation.

Conducted by firms before they 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.

1. BASES II, exposes potential customers to the marketing mix variables, surveys them and gives them a sample to try. A second survery is given after a period of time, which indicates an estimate of repeat purchases. This data helps the firm generate a sales estimate and enables them to decide whether to introduce the product, abandon it, redesign it, or revise the marketing plan saving marketers money.

2. Firms simulate a product or service introduction where potential customers view the ads of various currently available products along with ads for the new product. They are given money to purchase the product and then respond to a survey. This helps determine the effectiveness of a firm's ads as well as the expected trial rates for the new product.

Setting prices is a supply chain-wide decision.

Manufacturers often encourage retailers to sell at a specified price know as the manufacturer's suggested retail price (MSRP).

The perceived fairness of the process used to resolve complaints.

Customers want come influence on the outcomes of complaints.

Anything that is of value to a consumer and can be offered through a voluntary marketing exchange.

Benefits are in the eyes of the beholder.

Create value for consumers in their respective competitive marketing arenas.

Add value to firms' product and service offerings through innovation.

The complete set of all products offered by a firm.

Consists of various product lines.

Can be described in terms of their breadth and depth, or variety.

An assortment of items that the customer sees as reasonable substitutes for one another or are used under similar circumstances.

Consists of similar or different brands, and a number of individual SKUs.

Optimizing the combination of function, value, and aestetics.

Process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features.

Engineering team develops a prototype based on research findings from the concept testing.

The prototypes are usually tested through alpha and beta testing

Companies can demonstrate the likely success or failure of a product without actually having to produce it for a market and, possibly expose any secrets to competitors.

(lecture)

1. Generate ideas

2. Evaluate ideas

3. Conduct business analysis

4. Develop product and marketing mix

5. Test marketing

6. Commercialization

(book)

1. Idea generation

2. Concept testing

3. Product development

4. Market testing

5. Product launch

6. Evaluation of results

Provide information the consumer needs for his/her purchase decision and consumption of the product.

Identify the product or brand, and can be used for promotion.

Information required on them must comply with general and industry-specific laws and regulations, inclusing the ingredients in the product, where the product was made, directions for use, and/or safety precautions.

A product label is a communication tool.

Help sell the product and facilitate its use.

Most critial step in the new product introduction.

Requires a lot of financial resources and extensive coordination of all aspects of the marketing mix.

1. On the basis of the research on consumer perceptions, conducted tests, and competitive considerations, the firm confirms its target market(s) and decides how the product will be positioned.

2. Then the firm finalizes the first year marketing budget and remaining marketing mix variables: Promotion, Place, Price, Timing.

The stage that new products move through as they etner, get established in, and ultimately leave the marketplace.

In their life cycle, products pass through 4 stages:

1. Introduction

2. Growth

3. Maturity

4. Decline

Offers marketers a starting point for their strategy plan.

Growth slows, and customers become more knowledgeable.

Helps marketers manage their products' marketing mix during and after its introduction.

Useful tool for managers to analyze the types of strategies that may be required over the life of their products.

The strategic emphasis of a firm and its marketing mix (4 P's) strategies can be adapted from insights about the characteristics of each stage of the cycle.

Assumed to be bell shaped, but in reality, each product or service has its own shape, but managers don't know exactly what shape each will take.

Some move more rapidly through their product life cycles than others, depending on how different the product is from current products and how valuable it is to the consumer.

New products and services that consumers accept very quickly have higher consumer adoption rates very early in their product life cycles and move faster across the various stages.

Required at each link in the supply chain for new products.

Test results help determine an appropriate integrated marketing communications strategy.

Promotions to retailers to get them to purchase the new products are often a combination of introductory price promotions, special events, and personal selling.

Used by manufacturers to generate demand for new products with consumers, which are often coupled with short-term price reductions, coupons, or rebates.

Manufactures sometimes promote new products in advance of the product launch to create excitement.

May just be an effort to add value to a relatively well-known product.

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

Usually tested through alpha and beta testing.

Developed by an engineering team.

In recent years, more and more firms have been joining consortia, or groups of other firms and institutions, possibly including govt. and educational institutions, to explore new ideas or obtain solutions for developing new products.

Example: A clinical trial

The R&D investments come from the group as a whole, and they share the results.

Tiny computer chips that automatically transmit to a special scanner all the info about a container's contents or products.

Personalize and enhance the customer experience.

Used to understand the competitor's product and then bring an improved version to market, creating a market opportunity for the firm.

Involves taking apart a product, analyzing it, and creating an improved product that does not infringe on any competitor patents.

Widespread "copycat" approach practiced by even the most research-intensive firms.

The wrapper or exterior carton that contains the primary package information and provides the UPC label used by retail scanners.

Location of additional product information that may not be available on the primary package.

May be packed into larger cartons, pallets, or containers to facilitate shipment and storage from the manufacturer to the retailer.

Since packages are critical to the firm's brand positioning and shelf appeal, many innovations in design and materials have occured in the past few decades.

Any intangible offering that involves a deed, performance, or effort that cannot be physically possessed.

A method to maintain a sustainable competitive advantage.

Service industries account for 42% of the US GDP and almost 100% of US job growth.

Proportion of service production to goods production in the US has steadily increased over time.

Because of their intangibility, the images marketers use reinforce the benefit or value that a service provides; Professional providers, such as doctors lawyers, accountants, and consultants, depend heavily on consumers' perceptions of their integrity and trustworthiness.

When the delivery of a service fails to meet a customers certain expectations.

There are 4 service gaps:

1. The knowledge gap

2. The standards gap

3. The delivery gap

4. The communication gap

1. Intangibility- Communication

2. Variability- Quality control

3. Perishability- Scheduling

4. Inseparability- Delivery

5. Low productivity- Cost

Customers' perceptions of how well a service meets or exceeds their expectations.

Often difficult to evalutate because of its intangibility.

Customers generally have 5 distinct service dimensions to determine overall service quality:

1. Reliability

2. Responsiveness

3. Assurance

4. Empathy

5. Tangibles

1. Listening to the customer

2. Providing a fair solution

3. Resolving the problem quickly

Effective service recovery efforts can significantly increase customer satisfaction, purchase intentions, and positive word of mouth, though customers' postrecovery satisfaction levels usually fall lower than their satisfaction level prior to the service failure.

Size, Color, Package, Physical Characteristics, Features, "Quality", Absence of Defects, Capabilities, Performance Level.

From the customer's point of view.

A method of determining the success potential of a new product.

Introduces the offering to a limited geographical area prior to a national launch and uses all the elements of the marketing mix.

The results can help the firm estimate demand for the entire market, and then can determine how aggressively the product should be introduced nationally.

Costs more and takes longer than premarket tests

Strong predictor of product success because the firm can study actual purchase behavior.

1. Customer

2. Convenience

3. Communication

4. Costs

From the customers' point of view

Can help resolve many service failures when carefully and sincerely implemented.

-C: "Calm the customer"

-R: "Repeat the problem"

-E: Use "empathy statements"

-S: "Solve the problem"

-T: Make a "timely response"

The difference between the actual service provided to customers and the service that the firm's promotion program promises.

Firms can generally close this gap by being more realistic about the services they can provide and at the same time manage customer expectations created through promotions, ads, or personal selling.

Customer expectations can be managed when the service is delivered.

Always results in a service failure.

The difference between the firm's service standards and the actual service it provides to customers.

Where "the rubber meets the road", or where the customer directly interacts with the service provider.

This gap can be closed by getting employees to meet or exceed service standards, and with the use of technology.

Reflects the difference between customers' expectations and the firm's perception of those expectations.

Firms can close this gap by matching customer expectations with actual service through research and increased interaction and communication between managers and employees.

Customers' expectations are based on their knowledge and experiences, and vary according to the type of service and the situtation.

The difference between the firm's perceptions of customers' expectations and the service standards its set.

By setting appropriate standards and measuring service performance, firms and attempt to close this gap.

3 levels:

1. Core (Benefits)

2. Tangible

3. Augmented

1. Convenience Products

2. Shopping Products

  a. Homogeneous- Price based

  b. Heterogeneous- Attribute based

3. Speciality Products

4. Unsought Products

The quality of a service may vary because it is provided by humans.

Marketers can use the variable nature of services to their advantage in the way of a micromarketing segmentation strategy to customize a service to meet customers' needs exactly.

Some service providers are replacing people with machines to reduce variablity.

The internet has reduced in-store service variability and has many online benefits.

The area between customers' expectations regarding their desired service and the minimum level of acceptable service.

An important marketing metric to evaluate how well firms perform on the 5 service quality dimensions.

1. Traditional department stores

2. Chain store organizations

3. Food supermarkets

4. Planned shopping centers

Specialize in buying, selling contracts.

Do NOT take title.

1. Reduces the cycle time, information flows quicker, so inventory turnover is higher.

2. Improves overall quality of communications through better recordkeeping; Fewer errors in inputting and receiving an order; less human error in the interpretation of data.

3. Data transmitting by EDI are in a computer-readable format that can be easily analyzed and used for a variety of tasks ranging from evaluating vendor delivery performance to automating reorder processes.

Discount Stores that offer a narrow but deep assortment of merchandise.

Most use a self-service approach, but do offer assistance.

-Staples

2 or more stores with the same owner, format.

Completely dominate most retail categories.

Steady growth in market share.

Cookie cutter approach.

Tend to have higher turnover and lower mark-ups.

8 differnt channels.

M-W-R-C is the most common for consumer goods.

Tend to be shorter for organizational (B2B) markets.

The manufacturer owns the merchandise until it is sold by the retailer, at which time the retailer pays for the merchandise.

By sharing POS transaction data, allows manufacturers to sell merchandise on consignment.

Provides an incentive for manufacturer to pick SKUs and inventory levels that will minimize inventory and generate sales.

Independent firms at different levels of the supply chain join together through contracts to obtain economies of scale and coordination and to reduce conflict.

Franchising is the most common type of Contractual Vertical Marketing System.

Provide a limited variety and assortment of merchandise at a convenient locationwith speedy checkout.

Customers make quick purchases.

Self-service food store offering groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise.

Perishables account for 50% of supermarket sales and typically have higher margins than packaged goods.

Carry about 30,000 SKU's.

Time between the decision to place an order and the receipt of merchandise.

Reduced by EDI use.

Retailers that carry a broad variety and deep assortment, offer customer services, and organize their stores into distinct departments for displaying merchandise.

Categorized into 3 tiers:

1. Upscale, high-fashion chains

2. Upscale traditional department stores

3. Value-oriented, price-conscious

To better compete, department stores are:

1. Attempting to increase the amount of exclusive and private-label merchandise they sell

2. Strengthening their customer loyalty programs

3. Expanding their online presence

-JCPenny

Products are costly, bulky, complex, perishable.

Buyers are few in number, large, geographically concentrated.

Suppliers are large, offer full lines, want control.

Coordinates inbound transportation; receiving, checking, storing, and cross-docking; getting merchandise "floor ready"; coordinating outbound transportation.

Facility for the receipt, storage, and redistribution of goods to company stores or customers, may be operated by retailers, manufacturers, or distribution specialists.

Number of channel members to use at each level of the marketing channel.

Commonly divided into 3 levels: Intensive, Exclusive, Selective.

Specialty Stores that concentrate on pharmaceuticals and health and personal grooming merchandise.

Sustained sales growth because of the aging population.

-CVS

Computer-to-computer exchange of business documents from a retailer to a vendor and back.

Transmits sales data, purchase orders, invoices, and data about returned merchandise.

Enables vendors to transmit information about on-hand inventory status, vendor promotions, and cost changes to the retailer, as well as info about purchase orders, order status, retail prices, and transportation routings.

Transmitted over the internet through either intranets or entranets.

Exclusive Distribution

Policy by granting exclusive geographic territories to one or very few retail customers so no other customers in the territory can sell a particular brand.

Can benefit manufacturers by assuring them that the most appropriate retailers represent their products.

Collaborative network that uses internet technology to link businesses with their suppliers, customers, or other businesses.

Transmit EDI.

Typically private and secure.

Suppliers can describe and show pictures of their products, and buyers can issue requests for proposals.

Small, full-line discount stores that offer a limited merchandise assortment at very low prices.

Reduce costs and maintain low prices by buying opportunistically from manufacuturers that have excess merchandise, offering a limited assortment, and operating in low-rent locations.