Chapter 08 - Developing New Products Chapter 08 Developing New Products Multiple Choice Questions The process by which ideas are transformed into new products and services that help firms grow is known as: A prototyping B innovation C diffusion D adoption E brainstorming Innovation helps firms transform ideas into new products and services Without innovation and its resulting new products and services, firms would have only two choices: continue to market current products to current customers or take the same product to another market with similar customers 8-1 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-01 Why Do Firms Create New Products? Which of the following is NOT true about new products? A Companies can successfully offer a new product that customers never knew they needed B Without new products, value of a company will decline C Companies should always avoid saturated markets for their new products D Loyal customers appreciate and expect changes in a product E The longer a product exists in the marketplace, the more likely it is that the market will become saturated Saturated markets can offer opportunities for a company that is willing to adopt a new process or mentality Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-02 Changing Customer Needs Topic: 08-03 Market Saturation Companies try to create a broader portfolio of products Which one is NOT true about this strategy? A It will result in risk diversity B It enhances firm value C It requires innovation D It helps companies to manage external shocks E It works better industries that rely on fashion trends Companies can manage risk through diversity, it requires innovation and enhance firm value Companies in fashion industries need to come up with new product more often, but it has nothing to with diversification 8-2 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Difficult Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-04 Managing Risk Through Diversity Which of the following is an example of a product in a fashion industry? A Coke B The Kellogg's Special K cereal C Beatrice milk D Sea of Thieves video game E Haagen-Dazs ice cream Video games are fashionable because consumers demand new versions! Once they beat the game, they want to challenge with a new experience Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-05 Fashion Cycles Which of the following is an advantage for product pioneers in new product introductions? A They make high profits as soon as they enter a market B They become readily recognizable to consumers C They have to share a market with very few competitors that have monopoly power D They always succeed in a marketplace because of lack of competition E They need not focus on creating demand for a product category Product pioneers have the advantage of being first movers; as the first to create a market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead 8-3 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation The term "diffusion of innovation" refers to the: A process of vertical integration between a manufacturer and its suppliers B process by which a statement that describes a product or a service is presented to potential buyers or users to obtain their reactions C process by which the use of a new product or a service spreads throughout a market group over time and over various categories of adopters D process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product E process of taking apart a competitor's product, analyzing it, and creating an improved product that does not infringe on the competitor's patents 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, is referred to as diffusion of innovation or adoption of innovation The theory surrounding diffusion or adoption of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation A new product might be failed for all the following reasons EXCEPT: A Inappropriate product testing B Targeting the wrong segment C Poor positioning D Being disruptive innovation E Bad timing Disruptive innovation is generally simpler and less sophisticated It has nothing to with new product failure 8-4 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation Which of the following terms can be best defined as buyers who want to be the first to have a new product or service? A Lead users B Laggards C Early adopters D First movers E Innovators Innovators are those buyers who want to be the first on the block to have a new product or service These buyers enjoy taking risks, are regarded as highly knowledgeable, and are not price sensitive Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators Which of the following groups of the consumer adoption cycle is characterized by buyers who enjoy taking risks, are regarded as knowledgeable, and are not price sensitive? A Laggards B Innovators C Early adopters D Early majority E Late majority Innovators are those buyers who want to be the first on the block to have a new product or service These buyers enjoy taking risks, are regarded as highly knowledgeable, and are not price sensitive 8-5 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 10 Firms that invest in the latest technology, either to use in their new products or services or to make the firm more efficient, are considered: A first movers B innovators C lead users D laggards E early adopters Firms that invest in the latest technology, either to use in their products or services or to make the firm more efficient, also are considered innovators Typically, innovators keep themselves very well informed about a product category by subscribing to trade and specialty magazines, talking to other experts, searching the Internet, and attending product-related forums, seminars, and special events Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 11 Innovators are crucial to the success of any new product or service because: A they prefer products from established market leaders B they are easily influenced by advertising C they help the product or service gain market acceptance D they are considered opinion leaders and influence other majority groups E they form a major group of consumers in the market of a new product or service Innovators are crucial to the success of any new product or service because they help the product gain market acceptance Through talking and spreading positive word-of-mouth about the new product, they prove instrumental in bringing in the next adopter category, known as early adopters 8-6 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 12 Greg wants to upgrade his personal computer He consults his friend Vernon because Vernon is highly knowledgeable in this field and always uses the latest technology According to the diffusion of innovation model, to which of the following groups does Vernon belong? A Innovators B Laggards C Late majority D Early majority E Early adopters According to the diffusion of innovation model, Vernon belongs to the group called innovators Innovators are those buyers who want to be the first on the block to have a new product or service These buyers enjoy taking risks, are regarded as highly knowledgeable, and are not price sensitive Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 13 Eric is enthusiastic about online video games He has extensive knowledge of technical aspects of developing games and usually purchases licensed versions of most games as soon as they are launched According to the diffusion of innovation model, to which of the following groups of buyers does Eric belong? A Early adopters B Early majority C Lead users D Innovators E Late majority According to the diffusion of innovation model, Eric belongs to the group called innovators Innovators are those buyers who want to be the first on the block to have a new product or service These buyers enjoy taking risks, are regarded as highly knowledgeable, and are not price sensitive 8-7 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 14 The category of buyers that waits and purchases a product after careful review is called: A innovators B laggards C early adopters D late majority E lead users Early adopters generally not like to take as much risk as innovators but instead wait and purchase a product after careful review Early adopters tend to enjoy novelty and often are regarded as opinion leaders for particular product categories Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters 15 The category of buyers that tends to enjoy novelty and is regarded as opinion leaders for particular product categories and spreads the word are called: A early adopters B early majority C late majority D innovators E laggards Early adopters tend to enjoy novelty and often are regarded as opinion leaders for particular product categories This group, which represents about 13.5 percent of all buyers in a market, acts as opinion leaders and spreads the word 8-8 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters 16 Jeremy is interested in buying a phone that has a music player and provides access to the Internet After doing a detailed analysis of all the phones in the market that offer these features, he decides to buy a recently released model Which of the following groups of buyers best represents Jeremy's buying behaviour? A Innovators B Early adopters C Laggards D Early majority E Late majority The group of buyers called early adopters best represents Jeremy's buying behaviour Early adopters generally not like to take as much risk as innovators but instead wait and purchase a product after careful review Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters 17 The group of buyers that acts as opinion leaders and is responsible for bringing the early majority, late majority, and laggard groups into a market is the: A innovators B lead users C pioneers D laggards E early adopters Early adopters are crucial for bringing the other three buyers—early majority, late majority, and laggards—to a market If the early adopter group is relatively small, the number of people who ultimately adopt an innovation likely will also be small 8-9 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters 18 Early adopters differ from innovators in that early adopters: A help a product gain market acceptance by spreading positive word-of-mouth B enjoy taking risks and are not price sensitive C want to be the first on the block to have a new product or service D decide whether a product is worth the cost only after careful review E are regarded as highly knowledgeable as they keep themselves well informed about different product categories Early adopters decide whether a product is worth the cost only after reading the innovators' complaints and praises They generally not like to take as much risk as innovators but instead wait and purchase a product after careful review Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters 19 According to the diffusion of innovation theory, buyers belonging to the early majority group are considered crucial because: A they act as opinion leaders and spread the word to the next groups entering a market B they are regarded as highly knowledgeable and are not price sensitive C they affect the profitability of new products and services D they avoid change and rely on traditional products until they are no longer available E they enter a new product market when the product has achieved its full market potential The early majority, which represents approximately 34 percent of the population, is crucial because few new products and services can be profitable until this large group buys them If the group never becomes large enough, a product or service typically fails 8-10 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 105 Compatibility is important for rapid diffusion of new products because products that are consistent with consumers' past behaviour will be more readily accepted TRUE When consumers are familiar with the way products work, it makes them more likely to adopt them since the products are compatible (or consistent) with their past behaviour and ways of doing things Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-12 Using the Adoption Cycle 106 Lead users are those buyers who want to be the first to have a new product or service FALSE Lead users are those who modify existing products according to their own ideas to suit their specific needs, whereas innovators are those buyers who want to be the first to have a new product or service Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-14 Idea Generation 107 Lead users customize a firm's products; studying lead users helps the firm understand general market trends TRUE Lead users customize a firm's products; other customers might wish to so as well Studying lead users helps the firm understand general market trends that might be just on the horizon 8-56 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-14 Idea Generation 108 When Glenn asked a few of his regular customers to test his prototype surfboard, he was engaging in alpha testing FALSE Alpha testing takes place in R&D units In alpha testing, the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended In contrast, beta testing uses potential consumers, who examine the product prototype in a "real use" setting to determine its functionality, performance, potential problems, and other issues specific to its use Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-16 Product Development 109 A product such as a refrigerator is likely to remain in the maturity period of its product life cycle until a superior product comes along to replace it TRUE Many products, such as home appliances, stay in the maturity period for a very long time A refrigerator seems unlikely to enter the decline stage unless some innovative, superior solution comes along to replace it 8-57 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Easy Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-23 Maturity Stage 110 The growth stage of the product life cycle is characterized by intense competition for market share among firms FALSE The maturity stage of the product life cycle is characterized by the adoption of a product by the late majority and intense competition for market share among firms Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-22 Growth Stage 111 The decline stage of the product life cycle is characterized by the adoption of the product by laggards TRUE Firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs, or they completely exit the market The few laggards who have not yet tried the product or service enter the market at this stage Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-24 Decline Stage 112 In reality, the product life cycle curve of most products is bell-shaped FALSE In theory, the product life cycle curve is assumed to be bell-shaped with regard to sales and profits In reality, however, each product or service has its own individual shape; some move more rapidly through their product life cycles than others, depending on how different a product or service is from products currently in the market and how valuable it is to consumers 8-58 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-25 The Shape of the Product Life Cycle Curve 113 The most challenging part of applying the product life cycle concept is that managers not know exactly how long each stage of the cycle will last TRUE The most challenging part of applying the product life cycle concept is that managers not know exactly what shape each product's life cycle will take, so there is no way to know precisely what stage a product is in Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-26 Strategies Based on Product Life Cycle: Some Caveats Short Answer Questions 114 What is a product? A product is the first P in the marketing mix As a key element of a firm's marketing mix (four Ps) strategies, product strategies are central to the creation of value for consumers A product is anything that is of value to a consumer and can be offered through a marketing exchange In addition to goods or services, products might also be ideas, places, organizations, people, or communities that create value for consumers in their respective competitive marketing arenas 8-59 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-01 Why Do Firms Create New Products? 115 Why are new-to-the-world products called "disruptive"? New-to-the-world products are called pioneers, breakthroughs or "disruptive" because they establish a completely new market or radically change both the rules of competition and consumer preferences in a market They require a higher level of learning from consumers and offer many more benefits than predecessor products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation 116 What advantages pioneers have in a market? Pioneers have the advantage of being first movers As they are first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation 117 What is diffusion of innovation? 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 is referred to as diffusion of innovation or adoption of innovation The theory surrounding diffusion or adoption of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service It also gives them a means to identify potential markets for their new products or services and predict their potential sales, even before they introduce the innovations 8-60 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation 118 Why are innovators considered crucial to the success of a new product or service? Innovators are crucial to the success of any new product or service because they help the product gain market acceptance Through talking and spreading positive word-of-mouth about the new product, they prove instrumental in bringing in the next adopter category, known as early adopters Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators 119 Explain how the use of the adoption cycle benefit firms? Provide one example By using the adoption cycle, firms can predict which types of customers will buy their new product or service immediately after its introduction as well as later as the product gets more and more accepted by the market With this knowledge, a firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group 8-61 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-12 Using the Adoption Cycle 120 What is relative advantage? Give an example of how relative advantage can influence the speed of diffusion Relative advantage is a product characteristic that makes consumers perceive that a product is better than its substitutes If a product has a relative advantage over its substitutes, then the speed of diffusion will be relatively quick Example: Student answers will vary Instead of offering just an e-reader, Apple developed a multipurpose "tablet" device (the iPad) When launched, the iPad had several relative advantages, including a touch screen, a vibrant and large colour screen, access to various games and apps, and the facility to watch videos and listen to music Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-12 Using the Adoption Cycle 121 Select a company and discuss the six steps of the product development process that it should go through for a new product development Make sure to support your answer by specific examples The six steps are: Idea generation, Concept testing, product development, market testing, product launch and evaluation of results Students should select a company of their choice and discuss each of the steps For example, they may select Apple company and discuss how the company develop a new product (a new tablet or smart phone) 8-62 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-13 How Firms Develop New Products 122 Why many biotechnology firms license their new products to pharmaceutical companies? Most biotechnology firms are smaller, tend to be very research focused, and lack the resources and expertise to market their own innovations For these reasons, they license their products to pharmaceutical companies and are content with the royalties they obtain from the sales of their product Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-14 Idea Generation 123 How does market testing help in the promotion of products? The test results help a firm determine an appropriate integrated marketing communications strategy For products that are somewhat complex or conceptually new, marketers may need to provide for more consumer education about a product's benefits than they would for simpler and more familiar products For technical products, technical support staff must be trained to answer any customer questions that may arise immediately after the launch 8-63 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-17 Market Testing 124 How firms market a product in the growth stage of the product life cycle? Provide one example During the growth stage, firms attempt to reach new consumers by studying their preferences and producing different product variations—varied colours, styles, or features—which enables them to segment the market more precisely The goal of this segmentation is to ride the rising sales trend and firmly establish a firm's brand, so as not to be outdone by competitors Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-22 Growth Stage 125 List three reasons firms innovate Support your answer by providing one example for each Student answers will vary Firms innovate for a number of reasons:  Changing customer needs: When they add new products to their offerings, firms 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 the current product or service offering  Market saturation: The longer a product exists in a marketplace, the more likely it is that the market will become saturated Without new products or services, the value of a firm will ultimately decline  Managing risk through diversity: Through innovation, firms often create a broader portfolio of products, which helps them diversify their risk and enhance firm value better than a single product can If some products in a portfolio are doing poorly, others may be doing well Firms with multiple products are better able to withstand external shocks, including changes in consumer preferences or intensive competitive activity 8-64 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-01 Identify the reasons firms create new products Topic: 08-01 Why Do Firms Create New Products? Topic: 08-02 Changing Customer Needs Topic: 08-03 Market Saturation 126 Explain with examples how a successful new product launched by a company can overcome the various factors that affect its diffusion rate in the context of the diffusion of innovation theory Student answers will vary  Relative advantage: Instead of offering just an e-reader, Apple developed a multipurpose "tablet" device (the iPad) When launched, the iPad had several relative advantages, including a touch screen, a vibrant and large colour screen, access to various games and apps, and the facility to watch videos and listen to music  Compatibility: The ritual of "having a coffee" is well ingrained in many cultures, including Canadian culture "Having a coffee" is consistent with people's past behaviour, their needs, and their values Since people are accustomed to drinking coffee, it has been relatively easy for Starbucks to acquire customers in Canada The diffusion has been much slower in countries such as China and Japan, where tea has been the traditional drink  Observability: Consumers seeing their friends using the iPad, seeing the devices on television or on YouTube, or reading about them in the deluge of media coverage surrounding each iPad release may be convinced to purchase one as well In contrast, since people may not want to talk about their Botox treatments to reduce wrinkles, the use of this product is less easily observed by others and therefore diffused more slowly  Complexity and trialability: Due to the lack of Amazon stores, consumers may not be aware that they can get a Kindle at The Source or Staples But even the consumers who go to one of these stores often run into an availability problem—whereas Apple stores may have dozens of iPads for customers to try, electronics stores typically have just a few floor models 8-65 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-12 Using the Adoption Cycle 127 Paul is a research manager at an automobile firm, which needs to launch a new model to sustain its position in the market Briefly explain any three idea-generation methods that Paul can use to develop a new product idea Student answers will vary Paul can use any of these sources for idea generation:  internal research and development  licensing  brainstorming  competitors' product  customer input Licensing: For many new scientific and technological products, firms buy the rights to use the technology or ideas from other research-intensive firms through a licensing agreement This approach saves the high costs of in-house research and development, but it means that the firm is banking on a solution that already exists but has not been marketed Brainstorming: Firms often engage in brainstorming sessions during which a group works together to generate ideas The moderator of the session may channel participants' attention to specific product features and attributes, performance expectations, or packaging Competitors' product: This involves taking apart a competitor's product, analyzing it, and creating an improved product that does not infringe on the competitor's patents, if any exist 8-66 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-14 Idea Generation 128 Explain the concept testing stage in the development of a new product Ideas with potential are developed further into concepts, which refers to brief written descriptions of the product; its technology, working principles, and forms; and what customer needs it would satisfy A concept might also include visual images of what a product would look like Concept testing refers to the process in which a concept statement is presented to potential buyers representative of the target market or users to obtain their reactions These reactions enable a developer to estimate the sales value of a product or service concept, possibly make changes to enhance its sales value, and determine whether the idea is worth further development If the concept fails to meet customers' expectations, it is doubtful it would succeed if it were to be produced and marketed Because concept testing occurs very early in the new product introduction process, even before a real product has been made, it helps a firm avoid the costs of unnecessary product development Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08-03 List the stages involved in developing new products and services Topic: 08-15 Concept Testing 129 Explain the stages of the product life cycle and provide one example for each stage The four stages are as follow: 1) Introduction stage: when the product is launched to the marketInnovators buy the product at this stage 2) Growth stage: the product gains acceptance, demand and sales increase 3) Maturity: Industry sales reach their peak Companies try to reposition the product and use other techniques to give the product a new life 4) Decline stage: Stage of the PLC when sales decline and the product eventually exits the market 8-67 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-20 The Product Life Cycle 130 Explain four strategies for extending the product life cycle Provide at least one example for each strategy 1) Develop new uses for products 2) Modify the product (change quality, boost performance, alter appearance) 3) Increase number of users 4) Find new users 5) Reposition product 6) Tweak marketing strategy 8-68 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Difficult Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-23 Maturity Stage 131 Kevin is the marketing manager at a mobile company While conducting an analysis of a recent sales report of one of the successful products of his company, Kevin realizes that the product is in the maturity stage and he must alter marketing strategies immediately to sustain its market share Explain three strategies that Kevin can employ Student answers will vary The maturity stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms Marketing costs (e.g., promotion, distribution) increase as these firms vigorously defend their market share against competitors At the same time, they face intense competition on price as the average price of the product falls substantially compared with the shifts during the previous two stages of the life cycle Lower prices and increased marketing costs begin to erode the profit margins for many firms In the later phases of the maturity stage, the market has become quite saturated, and practically all potential customers for the product have already adopted the product Such saturated markets are prevalent in developed countries Firms may pursue several strategies during this stage to increase their customer base and/or defend their market share, such as entering into new markets and market segments and developing new products or promotions Kevin can use the following additional strategies for extending the maturity stage of the product life cycle:  develop new uses for the product  modify the product by changing quality, boosting performance, and altering appearance  increase frequency of use  increase the number of users  find new users  reposition the product  tweak marketing strategy 8-69 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-23 Maturity Stage 132 Which stage of the product life cycle is Coca Cola in? What strategies Coca Cola should use at this stage? Coca Cola is in the maturity stage The market is saturated and industry is really competitive There is an intense competition on price In order for Coca Cola to extend the product life cycle, it should use one of the strategies indicated in Exhibit 8.7 For example: Coca Cola can introduces healthier options, more flavours, different can/bottle sizes for different segments, find new use of the product (use as a cooking sauce), sell to new customers (new restaurants) etc Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 08-04 Describe the product life cycle and summarize how it is used to make product line decisions Topic: 08-23 Maturity Stage 8-70 ... new ideas 8-22 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08- 03 List the stages involved in developing new products. .. 8-21 Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 08- 03 List the stages involved in developing new products. . .Chapter 08 - Developing New Products Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08- 01 Identify the reasons firms create new products Topic: 08- 01