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Cluster107- Chapter 08
Create the Product
55
Marketing
Undergraduate 3
02/23/2012

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Term
Value Proposition
Definition
benefits the consumer will receive when buying the product.
Marketer must focus on: 1. Creating a product/service with better value than althernatives. 2. Crafting marketing communication messages in a manner that convinces customers that the product is better than the competition.
Term
Product(of value proposition)
Definition
Tangible good, service, or idea that satisfy needs, a bundle of attributes
Term
Good (of value proposition)
Definition
A tangible product, something we can see, touch, smell, hear, taste, or possess.
Term
Intangible products (of value proposition)
Definition
Services, ideas, people, and places
Term
3 Layers of the Product
Definition
Core Product, Actual Product, Augmented Product
Term
Core product
Definition
all the benefits that the product will provide
Term
Actual Product
Definition
physical good or delivered service that supplies the desired benefit.
Includes: appearance, styling, packaging, & the brand
Term
Augmented Product
Definition
Actual product plus supporting features such as warranty, credit, delivery, repair service, installation.
Term
Durable goods
Definition
Goods that provide benefits over a period of time. Ex. furniture, appliances, cars
Term
Nondurable goods
Definition
Goods that are consumed in the short term. Ex. newspapers, beverages, printer cartridges.
Term
Classification of Products
Definition
Consumer (convenience, shopping, specialty, unsought) and Business (Equipment, Mainenance/Repair/Operating, Raw Materials, Processed Materials/Special Services, Component Parts)
Some items can be sold to both consumers & businesses
Term
Convenience Product
Definition
Consumer products, Frequently purchased items. Nondurable products, purchased w/ minimal time & efforts. Typically low priced
Subtypes:
Staple Products-basic necessities (gas & milk)
Impulse products-bought spur of the moment(candy bars)
Emergency Products-purchased immediately b/c of a dire need (drain cleaner & diapers)
Term
Shopping Products
Definition
Consumer products that are purchased w/ considerable time & effort
Attribute based-we look for the best possible product
price-based-we visit numerous stores in an attempt to save money (water heater)
Term
Specialty Products
Definition
Consumer products that have unique characteristics important to buyers. Usually pretty knowledgeable about products, tent to be brand loyal, willing to go out of way to purchase preferred brand
Ex. Rolex Watch
Term
Unsought Products
Definition
Consumer products that are those in which consumers have little interest until a need arises. Higher priced, more important in long-term than emergency products. Personal selling is key to many of these.
Ex. Burial plots, insurance
Term
Equipment
Definition
B2B used in daily operations
Ex. machines
Term
Maintenance, Repair, and Operating Goods (MRO)
Definition
B2B goods that are consumed relatively quickly.
Ex. broom, nuts/bolts, oil
Term
Raw Materials
Definition
B2B goods used in the manufacture of finished goods.
Ex. Lumber
Term
Processed materials and Special Services
Definition
B2B are raw materials that have been transformed from their original state.
Ex. sheets of steel
Term
Component Parts
Definition
B2B goods are manufactured goods that organizations need to complete their own goods.
Ex. tie rods for ears
Term
Innovation
Definition
A product that customers perceive to be new and different
Term
What does Federal Trade Commission consider "new"?
Definition
Must be entirely new or significantly changed.
Also can only be considered this for 6 months
Term
Types of Innovation
Definition
Continuous- little change
Dynamically continuous-some change
Discontinuous- extreme change
Term
Continuous Innovation
Definition
A modification to an exisiting product.
The bulk of new products
Sets brands apart from competion, consumers don't need to learn anything new, change is minimal.
Knockoffs-copy (w/slight change) the design of an original copy
ex. new flavors, bigger/smaller
Term
Dynamically Continuous Innovation
Definition
A pronounced modification to an existing product-requires a modest amount of learning or behavior change
Audio Products: 8-track tapes, cassette tapes, CDs, MP3s
Term
Convergence
Definition
Refers to the coming together of 2 or more technologies to create a new system w greater benefit than its parts
Ex. merging of cell phones, camera, games, etc.
Term
Discontinuous Innovations
Definition
A totally new product
Creates major changes in the way we live, consumers must engage in a great deal of new learning
Ex. 1st computer, car
Term
How to measure innovation
Definition
Very complicated
Measure w/ respect to:
Firms strategy, firm culture, outcomes of innovation
Term
New Product Development (NPD)
Definition
a continuous process of looking for entirely new products or for ways to make an exisiting product better
Term
Reasons new products are becoming more difficult to introduce
Definition
-R&D costs are enormous
-products become obsolete faster
-slotting fees are high
Term
Key reasons for new product failure
Definition
-creating a product w. no discernable benefit over existing alternatives
-overestimating the size of the market
-poor positioning strategy
-poor implementation of the marketing mx
Term
Phases in new product development
Definition
1.Idea generation
2.Product Concept development & screening
3.Marketing Strategy Development
4.Business Analysis
5.Technical Development
6.Test Marketing
7.Commercialization
Term
Idea Generation
Definition
1st step in New Product Development.
Involves brainstorming product ideas that provide customer benefits which are compatible w the firms w the firms mission
Term
Product-concept development and screening
Definition
2nd step in New Product Development.
Product ideas are tested for technical & commercial success
Term
Marketing Strategy development
Definition
3rd step in New Product Development.
Develop a strategy to introduce the product to the marketplace
Identify target market, est. its size, etc.
Term
Business Analysis
Definition
4th step in New Product Development.
The products commerical viability is assessed
Term
Technical development
Definition
5th step in New Product Development.
Firm engineers define & perfect the new product.
-prototypes of test versions of the proposed product are developed (in R&D dept)
-the firm may need to apply for a patent
Term
Test Marketing
Definition
6th step in New Product Development.
The complete marketing plan is tested in a small geographic area similar to the larger market
Term
Commercialization
Definition
The new product is launched into the market
Full-scale production, distribution, advertising, and sales promotion are begun
Commercialization is no guarante
Term
Product Adoption
Definition
Process by which a consumer or business customer begins to buy and use a new good, service, or idea
Term
Diffusion
Definition
Process by which the use of a product spreads throughout a population
Term
Tipping Point
Definition
The point where a product’s sales spike from a slow climb to a new level is called the tipping point.
Marketers work hard to reach the tipping point as soon as possible, and undertake a variety of actions to reach and motivate consumers during each stage in the consumer adoption process.
Term
Stages in Consumer Adoption of a new product
Definition
1.Awareness: provide consumers with information
massive advertising is used
2.Interest: the consumer wants more information-teaser ad. is used
3.Evaluation: the consumer weighs the costs and benefits-impulse purchases made w/ little evaluation
4.Trial: consumer uses the product on a small scale-sales promos and product demos
5.Adoption: the consumer buys the product-expectations vs experience
6.Confirmation: the consumer determines whether or not they are satisfied
Term
Categories of Adopters
Definition
Innovators-2.5
Early Adopters-13.5
Early Majority-34
Late Majority-34
Laggards-16
Term
Innovators
Definition
The first to accept a new idea or product
Willing to take risks
Rely heavily on impersonal information sources
Term
Early Adopters
Definition
The second to adopt an innovation
Heavy media users
Tend to be concerned with social acceptance
Opinion leaders typically come from this group
Term
Early Majority
Definition
Adopt prior to the mean time of adoption
Deliberate and cautious
Spend more time on the decision process
Slightly above average in education and social status
Term
Late Majority
Definition
Follow the average time of adoption
Older, more conservative
Peers are their primary information source
Below average in education, income and social status
Wait to purchase until the product has become a necessity or there is pressure to adopt
Term
Laggards
Definition
Last to adopt an innovation
Lower in social class than other categories
Bound by tradition
Product may have already been replaced by another innovation
Term
Product Factors that affect the rate of adoption
Definition
Relative advantage
Compatibility
Complexity
Trialability
Observability
Term
Relative Advantage
Definition
-A product innovation is percieved as better than existing alternatives
-Positively correlated w an innovation's adoption rate
-Exists when a new product offers: better performance, increased comfort, saving in time & effore, or immediacy of reward
Term
Compatibility
Definition
An innovation is perceived to fit into a person’s way of doing things
The greater the compatibility, the more rapid a product’s rate of adoption
Overcome perception of incompatibility through heavy advertising
Term
Complexity
Definition
The more complex the product, the more slowly a product’s rate of adoption
Overcome perception of complexity with demonstrations, personal selling and emphasis on ease of use
Term
Trialability
Definition
An innovation can be used on a limited basis prior to making a full-blown commitment
The trial experience reduces the risk of the consumer being dissatisfied
Term
Observability
Definition
The user or other people can see the positive effects of new product usage
The higher the visibility, the more rapid the adoption rate
Supporting users have an ad free experience!