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Marketing Exam 3 NotesChapter 11 Notes:- Bing promoting itself as a “decision engine” rather than a search engine. Despite Microsoft’s problems developing search engines it intends to stay in the aggressive in this market (Foursquare)- Microsoft big in gaming with Xbox and Game Cube (Project Natal)- New- adding something new to an existing product, introducing a flavor never offered before, orrelying on different packaging that provides added value. Most exhilarating type is a product never seen before.- new-to-the-market products represent fewer than 10% of all new product introductions each year- more useful to think of the degree of newness or innovativeness on a continuum from truly “new-to-the-world” (Wi-Fi a few years ago) to “slightly repositioned” (Kraft’s Capri Sun brand of ready-to-drink beverages repackaged in a bigger pouch to appeal more to teens)- Innovation- refers to the process by which ideas get transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow (regardless of where on the continuum firms need to innovate)- Without innovation and its resulting new products firms would only have two options: continue to market current products to current customers or take the same product to another market with similar customers- Although innovation strategies may not always work in the short-run (some estimates indicate that only about 3% of new products actually succeed), various overriding and long-term reasons compel firms to continue introducing new products and services…1. Changing Customer Needs: when they add products, services, and processes 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- Sometimes companies can identify problems and develop products that customers never knew they needed (car wash, polish, and undercarriage)- Firms take a well-known offering and innovate to make it more interesting (James Dyson caught sight of a local sawmill that used a cyclone to collect sawdust from the air, then decided to apply the concept to a vacuum cleaner so he could establish his company’s now familiar promise: a vacuum that won’t lose suction) (Now present innovation process, which relies heavily on secrecy, protection of ideas, and risk taking)- Beef industry making beef seem like less of a luxury, in-store and online education programsthat teach customers how to cook and prepare beef, $60 million in coupons- 6 times more than last year)2. Market Saturation- the longer a product exists in the marketplace, the more likely it is that the market will become saturated. Without new products or services, the value of the firm will ultimately decline (firms sustain their growth by getting consumers excited by the new looks and features, prompting many new car buyers to exchange their old vehicle years before its functional life is over)- Saturated markets can also offer opportunities for a company that is willing to adopt a new process or mentality (Betty Crocker innovating its products and process to offer versions of its well-known cake, brownie, and cookie mixes without any gluten at all—only 1% of the U.S. population suffers from celiac disease, which is a condition that damages the digestive system when sufferers ingest gluten—approximately 12% of U.S. consumers say they want to reduce or eliminate gluten, a wheat protein, from their diet)3. Managing Risk though Diversity- through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can. - Firms with multiple products can better withstand external shocks, including changes in consumer preferences or intensive competitive activity (3M demand that a specific percentage of their sales each year must come from new products introduced within the previous few years) (Special K offers many variations which allows it to enjoy more consistent performance than it would with just one kind of Special K)4. Fashion Cycles- in industries that rely on fashion trends and experience short product life cycles—including apparel, arts, books, and software markets—most sales come fromnew products (a motion picture generates most of its theatre, DVD, and cable TV revenues within a year of its release, once consumers have “beat the game” they want to be challenged by another or experience most recent version (Madden NFL), fashion designers produce entirely new product selections a few times per year)5. Improving Business Relationships- new products do not always target end consumers; sometimes they function to improve relationships with suppliers (Kraft’s Capri Sun lemonade flavor was doing poorly, but by changing and innovating its pallet, Kraft offered chimney stacks for each flavor, enabling the retail stockers to reach whichever flavor they needed easily and lemonade sales rose 162%)- Diffusion of Innovation- the process by which the use of an innovation—whether a product, a service, or a process—spreads throughout a market group, over time and across various categories of adopters (bell-shaped curve)- Helps marketers understand the rate at which consumers are likely to adopt a new product or service and gives them a means to identify potential markets for their new products or services and predict their potential sales, even before they introduce new innovations- Pioneers or breakthroughs: establish a completely new market or radically change both the rules of competition and consumer preferences in a market—new-to-the-world products that create new markets and can add tremendous value to the firms (Apple IPod not only changed the way people listen to music, but also created an entirely new industry devoted to accessories, such as cases, ear buds, docking stations, and speakers)- First movers : (Pioneer advantage) as the first to create the market or product category, theybecome readily recognizable to consumers and thus establish a commanding and early market share lead. Pioneers can command a greater market share over a longer time periodthan later entrants can- A majority of new products fail: as many as 95% of all new consumer goods fail, and products across all markets and industries suffer failure rates of 50 to 80% (Orajel

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OSU COMM 3620 - Chapter 11

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