Chapter Eight: Developing New Products TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy Chapter Case Study • Video Activities Learning Objectives 1. Identify the reasons firms create new products 2. Describe the diffusion of innovation theory and how managers can use it to make product line decisions 3. List the stages involved in developing new products and services 4. Describe the product life cycle and summarize how it is used to make product line decisions Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Chapter 8 will focus on developing new products. These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides. Opening Vignette: Lego LEGO has become one of the top toy manufacturers in the world, introducing new sets and variations on its basic theme. LEGO had come to violate one of its basic principles, in that its toys appealed widely to boys but not specifically to girls. Ask students how many of them played with Lego when they were younger. Ask how many of them still enjoy and/or collect Lego. How has the company kept their interest in the toys? Ask students how will the popularity of video and automated games affect LEGO? LO1: Why Do Firms Create New Products? Changing Customer Needs • As they add new products, firms can satisfy the changing needs of current and new customers. • Customers get bored with products • Companies find opportunities to extend a brand into new categories Market Saturation • The longer a product exists in the marketplace, the more likely the market becomes saturated. Without new products, the value of the firm ultimately declines. Managing Risk though Diversity • An innovative product portfolio helps firms diversify risk and therefore enhances firm value better than a single product plan. Fashion Cycles • Clothing, books, and computer games all have short life cycles and so businesses must constantly innovate. Improving Business Relationships • Some new products are introduced to satisfy vendors. Innovation and Value • Some products are considered new to the world or pioneers. Others are seen as first movers. Product is the first ‘P’ of the marketing mix. A new product can be anything from a slight redesign to new-to-the-world offerings. Ask students: what is an example of a slightly redesigned product? What about a new-to-the-world product? Ask students: Think of a new product that interested you as a consumer. Did this new product alter your opinion of the firm that offered it? After revolutionizing the home computer industry, Microsoft set out to be a leader in the information technology home entertainment field. But one area in which Microsoft has been less successful is the search engine market. Ask students how do they choose which search engine to use? For example, P&G changed its formula for Tide to make it more concentrated in order to satisfy Walmart’s desire to have it take up less shelf space. Innovation and Value • Pioneer or breakthrough products establish a completely new market or radically change the rules of competition and consumer preferences. • First movers are the first to create the market or product category. Despite first-mover advantages, pioneers often lose out to superior competitors. For example, walkmans were taken over by iPods. First movers must staunchly defend their territory. After establishing the market, they generally must switch to a defender mode to fend off newcomers. Answer A; see page 247 LO2: Adoption/Diffusion of Innovation Innovations diffuse throughout a market, over time, across categories and across adopters. • Innovators want to be the first to have the new product or service. • Early adopters wait to purchase until after a careful review. • The early majority, approximately 34% of the population, usually determines the success of new products. • The late majority, approximately 34% of the market, enters a new product market last, after the product has achieved its full market potential. • Laggards, roughly 16% of the market, avoid change and rely on traditional products until they are no longer available. Group activity: Have groups pick one product. Ask them; what group of innovative consumers are they in? Why? Example answer: Tivo has been around for over 10 years, it is probably in the early or late majority stages. Cable television, on the other hand, is now appealing to laggards; whereas some new cell phones are appealing to innovators and early adopters. Disruptive products/services such as the Internet required a higher level of learning from consumers and offered much more benefits than predecessor products. Sony’s Walkman and Apple’s iPod are examples of pioneers or first movers. Answer B; see page 248 Using Diffusion of Innovation Theory • Relative advantage: If a product is perceived as better than substitutes, its diffusion will be relatively quick. • Compatibility: If a product is similar to something currently on the market, it will diffuse more rapidly. • Observability: Easily observed products communicate their benefits or uses efficiently. • Complexity and trialability: Less complex products are relatively easier to try. This chart can be used to introduce the topic. More detailed slides follow. Different products diffuse at different rates. Various factors increase the speed of diffusion of a new product. Group activity: Continue with the previous group activity. Assess why some of the products chosen by the groups diffused more quickly than others by applying the four criteria in the boxes. The phone replaced the telegraph because it offered a clear benefit; it did not rely on just dots and dashes but could transmit voices. Visual demonstrations often clearly communicate product benefits and clarify complex products for which consumers require significant information before they will purchase and use them. New cell phones have become sufficiently complex so that some potential consumers, particularly older consumers, may be put off. Complicated contracts also make trialability difficult. Purse ‘n Boots (shown in the slide) is new product that lets women store their credit cards, keys and cell phones in their boots instead of having to carry a purse. However, because the valuables are hidden away, the benefits are not very observable. Furthermore, trialability is currently low as retailers have not yet started to carry them and so the boots are sold only online. LO3: How Firms Develop New Products This slide is designed to introduce the new product development process and the steps to follow. Group activity: Have each student group think of a new product. It need not be a “new-to-the-world” product. Then have them follow the steps in the New Product Development Process and describe what they would do at each step. This exercise might take an hour or so, so it may be used as an out of class assignment. Have students present their process to the rest of the group. Answer D; see page 253 1. Idea Generation • Can come from internal research and development. Sometimes R&D consortia help firms explore new ides or obtain new product solutions. • With licensing, firms buy the rights to technology or ideas from research-intensive firms. • Brainstorming involves group efforts to generate ideas, during which no idea can be immediately accepted or rejected. • Reverse engineering takes apart a product, analyzes it, and recreates an improved product that does not infringe on competitors’ patents. • Customer input, especially from lead users, suggests product modifications that better suit consumers’ needs. Firms must constantly scan the environment looking for new product ideas. Depending on the company strategy, they use different sources. This slide introduces the idea generation step. The slides that follow provide further detail. Larger firms often maintain their own R&D department and rely on it to generate new products that will lead the market. Firms license the use of new products, technology and processes. Small biotech firms frequently license their inventions to larger pharmaceutical firms. Many firms, such as 3M, foster a culture of creativity and give employees both the time and the freedom to develop new products and new ideas. The web link brings you to IDEO.com. Products with patents or other proprietary protections cannot be copied, so reverse engineered products must be substantively different from their source product. Fashion-based product lines often identify trend leaders and watch them to gather new ideas. Ask students: Have you ever modified a product, e.g., apparel, a car? Why did you do it? Answer: C; see page 254 Entrepreneurial Marketing 8.1 Rise and Shine Ask students to watch CBC’s Dragons’ Den video. Ask them to evaluate this new product idea for innovation. Would they pay $70 for a Rise and Shine bag? 2. Concept Testing Presents a Concept to Potential Buyers to Obtain their Reactions. Concepts are presented to potential buyers or users to gauge their reactions. Marketing research techniques discussed in chapter 7 are used to test these concepts. 3. Product Development Requires a Balance of Various Considerations. • During alpha testing, the firm attempts to determine whether the product will perform according to its design and satisfy the need for which it was intended. • Beta testing uses potential consumers, who examine the product prototype in “real use” settings to rate its functionality and performance, as well as potential problems. A prototype allows consumers to interact physically with the product. Some prototypes, such as the concept cars revealed at auto shows, never actually go into production. Before it released Vista, Microsoft began beta testing two years earlier to gather feedback from computer aficionados. 4. Market Testing Must Come Next. • Premarket tests determine how many customers will try and continue to use the product, according to small groups of potential consumers. • Test marketing introduces the offering to a limited geographical area, which means it may provide an advantage to competitors. Premarket test are conducted by research firms, such as ACNielsen (BASES). Because test marketing reveals a new product to competitors, it might be inappropriate to expose some new products this way. Ask students: Think of some products that you think should not be subjected to test marketing. Why not? Answer: incremental improvements on existing products (such as a new flavour of soda), small niche products because they only appeal to small market, products that could easily be copied by competition, etc. Answer B; see page 258 5. Product Launch Is the Most Crucial step of the new product development process because it requires a large financial investment and all aspects of the marketing mix must be coordinated. Launching a new product is part art and part science. Each of these products offered unique benefits. Ask the students if they feel the products in Exhibit 8.6 will continue to be successful? From past Product of the Year Awards: iogo Greek yogurt was introduced in 2013 and has been extremely successful. In 2014 iogo made the list again for its iogo 0% with stevia extract. Product Launch Marketing Mix • Promotion: Determine an appropriate integrated marketing communication strategy. • Place: Ensure an adequate quantity of the product is available. • Price: Get the price right. • Timing: Find the right moment for the launch. The right product must hit the market at the right time and for the right price. It matters little how good a product is if the launch lacks sufficient resources. Group activity: Continue with the same products the students have been working with. Design the marketing mix required to launch it. How will you communicate its benefits? What types of distribution will you use? How will you determine the price? When will you launch? 6. Evaluate the Results. Companies must conduct a postlaunch review to determine if the product is doing well or what, if any, changes are needed to the marketing mix. • Does it satisfy technical requirements, such as performance? • Do customers accept it? • Does it satisfy the firm’s financial requirements, such as sales and profits? Marketers cannot only celebrate success but also must understand failure. The question of why a product fails is just as important as why another succeeded. An underperforming product may require further development. Forrester Research statistics show that four out of five new products fail within the first three years of introduction. Have you ever heard of any of these products? No wonder. They both failed. Dunk-A-Balls cereal was shaped like basketballs so children could play with them before eating them. Although Bic is well known for making disposable products, Bic Underwear confused consumers and never caught on. Crystal Pepsi was a caffeine-free, “clear alternative” to normal colas made by PepsiCo. It was promoted with the tagline "You've never seen a taste like this” but consumers found the taste was not significantly different from other colas. LO4: The Product Life Cycle The PLC represents an important tool managers use to plan their marketing activities. Introduction: Discuss the difficulties associated with the introduction stage, especially if the product is totally new to the world. Ask students: What challenges do firms face in this stage? Growth: Discuss the concept of the “tipping point”—the transition between introduction and growth when the product either gains market acceptance or must exit the market. The majority of new products fail at this point. Maturity: Many consumer packaged goods products are in the maturity stage, which means companies must engage in defending their market share. Ask students: What marketing activities should firms engage in at this stage? In the battle for soft drinks, a very mature market, a 1% market share switch between Coke and Pepsi can account for millions of dollars in revenue. The Product Life Cycle Consists of Four Stages: Introduction, Growth, Maturity, Decline. Introduction stage 1. Innovators start buying. 2. The firm suffers initial losses because of high start-up costs and low levels of sales revenue. 3. If the product is successful, firms may start seeing profits toward the end of the stage. At each stage of the lifecycle, the marketing mix elements change in response to the marketplace. Introduction stage: in this stage innovators will start to buy the product or to try the service. In its’ early days an example of a product in the introduction stage could have been the Internet as a service or the iPod. Group activity: List products that currently exist in each of the stages. What marketing mix would you design for each of these products? Growth stage 1. The product gains acceptance as more people adopt it. 2. It experiences rapid sales growth. 3. More competitors and competitive product versions enter the market. 4. The market grows segmented; consumer preferences vary more. 5. Innovators continue buying, and early majority consumers enter. 6. Economies of scale increase. Growth stage: in this stage firms attempt to reach new consumers by studying their preferences & producing different product variations which enables them to segment the market more precisely. An example of a product in the Growth stage are Clorox wipes. They compete in a market that is attracting many new offerings every year. They must continue to fight for customer acceptance and market share. Maturity stage 1. Sales reach their peak. 2. The late majority adopts the product, provoking intense competition for market share. 3. Marketing costs increase as firms vigorously defend their market shares. 4. Price competition intensifies. 5. Profit margins begin to erode. 6. Firms enter new markets or pursue new market segments that may be less saturated. 7. Firms start to develop new products. Maturity stage: See exhibit 8.8 for additional strategies for extending the maturity stage of the product life cycle. An example of a product in the maturity stage would be Arm & Hammer baking soda or Coke. Decline stage 1. Sales slow. 2. Firms might position themselves for a niche segment of diehard consumers or those with special needs 3. Alternatively, firms exit the market. Decline stage: some laggards may enter the market at this stage to try the product or service. An example of a product in the decline stage are LP records (although in recent years this has been resurrected). Ask students: If your company’s product were in its decline stage, how would you determine whether to update the product, continue offering it for a small segment, or exit the market completely? Strategies for Extending the Product Life Cycle Develop new uses – Arm & Hammer promotes its baking soda in many rooms in the house. Bounce fabric sheets are promoted as a way to keep closets, laundry hampers and gym bags smelling fresh (Procter & Gamble is pushing its Bounce fabric-softener with a contest that offers the chance for the winning entry to appear in an upcoming print ad. Modify product - Change quality, performance, packaging, e.g. Apple is continually coming out with smaller models or offering more colours of iPhones Increase frequency of use – Campbells Soups publishes recipes that use soup as an ingredient in an entrée. You can also show how P&G encourages users to share their stories about how to use Bounce dryer sheets beyond the laundry room. Visit http://www.bounceeverywhere.com/index.jsp Increase # of users – Swiss Army Knife now comes with an LED light, USB key. Find new users – as Roller Blade sales levelled off in the teen/young adult market, the company looked to market to elementary school children and older adults Reposition product – Vitamin D is now being marketed as a way to ward off cancer Tweak marketing strategy – may apply to all the 4Ps Shape of the Product Life Cycle Curve The PLC curve theoretically is bell shaped but can take many shapes, depending on market conditions. Theoretically the shape of the product life cycle curve is bell shaped. In reality, markets evolve in a variety of ways and the curve can take many shapes. Group activity: Propose different products whose PLCs might match those shown in this slide. Caveats for strategies based on the PLC 1. Managers are often unaware of where their product is located on the PLC. 2. Misdiagnosing what stage the product is in can lead to a self-fulfilling prophecy. Understanding where your product is on the PLC is difficult. If a firm misdiagnoses the stage, it can mean trouble for the firm. Ask students: What happens to a product that is misdiagnosed as being in the decline stage? Answer: It will surely decline! Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. Explain how new product or service innovations add value to the firm. Answer: Innovation is the process by which ideas are transformed into new products and services that will help firms grow. First, 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. • Allowing market growth and creating opportunities. The longer a product exists in the marketplace, the more likely it is that the market will become saturated. • Changing its portfolio of products to include innovation. This can help the firm diversify its risk and therefore enhances firm value better than a single product can. 2. Sketch and describe the diffusion of innovation curve. How can marketers use the information provided by this curve to make marketing strategies and decisions? Answer: Using the diffusion of innovation theory or adoption cycle, marketers can predict which types of customers will buy their new product at each stage of introduction. With this knowledge, the firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group. 3. Identify and discuss the factors that influence the adoption of new products. Answer: The characteristics that influence the adoption of new products are: • Relative advantage – perception as better than other products speeds adoption • Compatibility – existing acceptance of the required behaviours speeds adoption • Observability – easy observation of products speeds adoption • Complexity and Trialability – low complexity increases ease of trial and speeds adoption 4. List the steps in the new product development process. Describe some of the sources companies use to generate ideas for new products at the beginning of this process. Answer: The steps in the new product development process are: 1. Idea generation 2. Concept testing 3. Product development 4. Market testing 5. Product launch 6. Evaluation of results Some of the sources companies may use to generate ideas include employees, customers, suppliers and partners or reverse engineering. New ideas can come from anywhere! 5. Why might a company need to exercise caution during the text marketing stage of the new development process? Answer: Test marketing is important to innovation because it allows marketing firms the opportunity to study real consumer behaviour. However, they must exercise caution because test marketing provides critical new product information to your competitors. Diffusing this information early can lead to competitive launches, even before the firm launches in the full market. 6. What other factors besides the product itself does a company need to finalise during the product launch stage? Answer: During this step the company finalises the elements of the marketing mix, including the marketing budget for the first year. All decisions around product, price, place and promotion are critical to the successful launch of the product. 7. Do all products go through each and every stage of this process? Explain your answer. Answer: It’s not always necessary to take a new product through each stage in the process. Significantly new products will follow the process fairly closely while products involving marginal changes such as line extensions, lifting a successful product from a competitor or those with low development costs, may skip one or more steps. 8. What is the Product Life Cycle (PLC)? Describe the characteristics of each stage of the PLC in terms of sales, profits, typical consumers, competition, and 4Ps strategies. Answer: The product life cycle involves through the following stages Sales Profits Consumers Competition 4Ps Strategies Introduction Low Low, losses Innovators Low Communicate, introduce Growth Rapid growth High Early adopters, majority Increasing Establish the brand Maturity Declining Moderate Late majority Saturated Defend market share Decline Declining Declining Laggards Reducing Target niche 9. Describe some of the strategies companies can use to extend the life of a mature product. Answer: Some of the strategies available to extend the life of a mature product include: • Introduce to a new market segment • Introduce to new markets • Develop new uses • Lower prices 10. Explain why the product life cycle is not a fail-proof tool in managing products. Answer: The most challenging part of applying the product life cycle concept is that managers do 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. Marketing Applications 1. Some people think that a product should be considered “new” only if it is completely new to the market and has never existed before. Describe or give examples of other types of new products. Instructor’s Notes: Students must challenge the mindset of “new means completely new” and think about how marketers perceive the concept of product newness. Therefore, they might consider introducing an existing product to a new market, positioning a product using a new purpose, or repositioning a product to capture an existing or new market segment’s attention. Example answers: In addition to new breakthrough products that create new markets, other “new” products include existing products introduced to a new market or for a new purpose, such as a portable DVD player geared toward consumers who travel on planes extensively. With product repositioning, an existing product’s attributes (e.g., size, packaging) get modified to capture a new market segment’s attention. For example, Oscar Meyer repackaged its lunch meats into ready-to-eat meals that kids could take to school. 1. New to the Company: Products that are new to a specific company but have existed elsewhere. For example, a tech company introducing a new type of smartwatch that is already available from other brands. 2. Product Improvements: Existing products that have been significantly improved or modified. For instance, a smartphone with advanced camera features compared to its previous versions. 3. New Product Lines: New products introduced within an existing product category. For example, a clothing brand launching a new line of eco-friendly apparel. 4. New Uses for Existing Products: Products used in a new way or for a different purpose. For instance, a software initially designed for business use being adapted for educational purposes. These types highlight innovation and adaptation, expanding the definition of what constitutes a "new" product. 2. Panasonic’s new 3D HD personal camcorder allows users to record live events in three dimensions, instead of two. How quickly do you think this product will diffuse among the Canadian population? Describe the types of people that you expect will be in each of the diffusion of innovation stages. Instructor’s Notes: In exploring the introduction of a new product like the 3D HD Camcorder, students should consider how consumers perceive the company, the relative newness of the technology, and current marketing efforts, including the existing product’s price, promotion, and distribution. After gathering this information, students must decide how innovators, early adopters, early majority, late majority, and laggard consumers will respond. Example answers: Students’ answers will vary. The adoption of 3-D televisions has been relatively slow in the United States; therefore 3-D camcorders might take a while to reach a larger population. Innovators are those buyers who want to be the first to have a new product or service. These customers will likely purchase the 3-D camera right away. Early adopters are more risk averse than innovators and are careful to read the product reviews. They will likely purchase the 3-D camera once it has been on the market for a while and the innovators have tested it. The Early Majority will likely purchase the 3-D camera once all the bugs are worked out. Families who want to use the camera to record their kids are examples of individuals in the early majority group. The late majority will likely purchase the product once the price has gone down due to economies of scale and increased competition in the market. Laggards are less likely to purchase a 3-D camera than other consumer groups. The diffusion of Panasonic’s new 3D HD personal camcorder among the Canadian population is likely to follow this pattern: 1. Innovators: Early adopters of cutting-edge technology, such as tech enthusiasts and professionals in the film industry, who are eager to experiment with 3D recording capabilities. 2. Early Adopters: Trendsetters and individuals who value advanced technology for personal or professional use, including content creators and tech-savvy consumers interested in unique recording experiences. 3. Early Majority: Mainstream consumers who adopt the product once its benefits are proven and it becomes more widely available, likely influenced by positive reviews and recommendations from early adopters. 4. Late Majority: More cautious consumers who adopt the camcorder once it is more affordable and widely accepted, including those who see it as a practical tool for family events and gatherings. 5. Laggards: Skeptical individuals who adopt the product last, typically when it is outdated or replaced by newer technology, possibly due to perceived high costs or lack of immediate necessity. 3. Are there any advantages for companies that are the first to introduce products that create new markets? Justify your answer. If you see advantages, explain why some new products still fail. Instructor’s Notes: This question focuses on the idea of the first-mover advantage and asks students to consider whether it truly is an advantage to be first in the market with a new product or service. Example answers: There are many potential advantages for a firm that is the first to introduce a new product to a market; for example, the product becomes readily recognizable to consumers, so the company establishes a commanding and early market share lead, which can mean a greater market share over a longer period. Despite these advantages however, many new products fail because they do not successfully meet the consumer need, meet a need that consumers have not realized yet, or get imitated by competitors who can produce cheaper alternatives. Yes, there are advantages for companies that are the first to introduce products that create new markets: 1. Market Leadership: First movers can establish brand recognition and loyalty before competitors enter the market. 2. Competitive Edge: They often gain a technological or innovation advantage, setting standards that others must follow. 3. Higher Profit Margins: Early entrants can set higher prices and capture premium profits before competition drives prices down. However, some new products still fail due to: 1. High Costs: Initial costs may be too high for widespread adoption. 2. Consumer Resistance: Lack of understanding or perceived value can limit adoption. 3. Technological Issues: Early versions might have unresolved bugs or limitations. 4. Market Readiness: The market may not be ready or able to support the new technology. These factors can hinder the success of pioneering products despite their initial advantages. 4. Identify and describe the ways that companies generate new product ideas. Which of these ways involve the customer? How can firms assess the value of the ideas that customers generate? Instructor’s Notes: Rather than considering the idea-generation process solely from an internal company perspective, students should understand that good ideas can come from many sources. After an idea gets generated, the company must determine its potential value by progressing to the next stage of the product development process: concept testing. Example answers: A company can generate new product ideas by maintaining an internal R&D department, collaborating in a research consortium that groups R&D investments, licensing new technology or ideas from other firms, conducting brainstorming sessions, reverse engineering competitors’ products, or gathering input from customers. Only the last of these options actually involves the customer directly in the idea-generation process. To assess the value of customers’ ideas, the firm could use concept testing and present a concept statement to potential buyers or users to obtain their reactions. If the reactions are positive, the idea might have high value; if not, the firm should consider other ideas. Companies generate new product ideas through several methods: 1. Internal R&D: Innovations developed by the company's own research and development teams. 2. Employee Suggestions: Ideas generated by employees based on their experiences and insights. 3. Competitive Analysis: Identifying gaps or opportunities based on competitors' products. 4. Customer Feedback: Direct input from customers through surveys, focus groups, and feedback forms. 5. Market Research: Analyzing market trends and consumer behavior to identify needs and opportunities. 6. Collaborations: Partnering with other companies, research institutions, or startups to develop new ideas. Customer-Involved Methods: • Customer Feedback • Market Research Assessing Customer-Generated Ideas: • Feasibility Studies: Evaluate technical and financial feasibility. • Market Testing: Conduct pilot programs or limited launches to gauge consumer interest. • Cost-Benefit Analysis: Compare potential costs against expected benefits and profitability. 5. Describe an example of a new product or service that is targeted at the college student market. Using the concept testing discussion in the chapter, describe how you would conduct a concept test for this product or service. Instructor’s Notes: Picking up where the previous question left off, this exercise challenges students to consider how they might perform concept testing of a product aimed at them. In particular, they will need to examine how to formulate the concept statement, conduct exploratory and conclusive research about the concept, and determine whether college-aged consumers might purchase the concept product if it were available. Example answers: Due to the popularity of cars like the Scion with college-aged consumers, Toyota is marketing its new car, the Yaris, to the same market segment. Assuming that the car is only in the form of an unrealized idea, Toyota should put together a concept statement that includes a short description of the car, its proposed attributes, and its suggested price. Using the concept statement, Toyota could conduct exploratory research through in-depth interviews and focus groups with college students, in which it asks students to give their reactions to the concept statement. After completing the exploratory research and refining the concept statement the basis of the students’ feedback, Toyota could conduct more conclusive research, in the form of Internet and mall-intercept surveys, and ask college students to respond to another series of questions about the concept statement. During this conclusive research, Toyota should ask whether students would consider purchasing the car if it were available. If respondents reacted unfavourably to the concept and/or indicated they would not purchase such a vehicle, even if the concept sounded good, the carmaker should consider another idea for the college student market. Example: A new service called "Study Buddy," which offers personalized tutoring and academic support through a mobile app specifically designed for college students. Concept Testing: 1. Define Objectives: Assess students' interest in and willingness to use "Study Buddy" for tutoring and academic support. 2. Develop Concept Statements: Create clear descriptions of "Study Buddy" features, benefits, and pricing. 3. Select Target Audience: Identify a sample of college students who are representative of the target market. 4. Conduct Surveys/Focus Groups: Present the concept statements to students through surveys or focus groups to gather feedback on perceived value, usability, and pricing. 5. Analyze Feedback: Evaluate responses to determine interest levels, potential usage, and areas for improvement. 6. Refine Concept: Adjust the service based on feedback to better meet students' needs and preferences. 6. How does the Internet help companies gain customer input on their existing and new products? Instructor’s Notes: this question asks students to consider the internet as a research course for soliciting new product ideas from customers. Example answers: Listening to the customer in both B2B and B2C markets is essential for successful idea generation. The Internet provides another channel for customers to use. Companies realize that their customers are on the Web writing customer reviews on retailers’ websites, and talking about their experiences on sites like http://www.Yelp.com, or on Twitter. Companies are reaching out to their customers by monitoring their feedback through these online communities in order to develop new products and change existing ones. The Internet helps companies gain customer input through: 1. Surveys and Polls: Collecting feedback from a wide audience quickly and cost-effectively. 2. Social Media: Engaging with customers and monitoring their opinions and discussions about products. 3. Online Reviews and Ratings: Providing insights into customer satisfaction and product performance. 4. Forums and Discussion Boards: Gathering detailed feedback and suggestions from engaged users. 5. Crowdsourcing Platforms: Leveraging ideas and innovations from a large pool of contributors. These methods allow companies to gather valuable input and make data-driven decisions on product improvements and development. 7. Nature’s Path is about to introduce a type of granola and is in the market testing phase of the new product development process. Describe two ways that Nature’s Path might conduct initial market testing prior to launching this new product. Instructor’s Notes: Market testing helps determine the marketability of a new offering, so students must demonstrate an understanding of the two predominant methods, namely, premarket testing and test marketing, to answer this question. Example answers: Firms conduct premarket tests before they actually 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. One popular proprietary premarket test version is called Nielsen BASES. Another method of determining the success potential of a new product is test marketing. Test marketing introduces the offering to a limited geographical area (usually a few cities) prior to a national launch. 1. Pilot Testing: Nature’s Path could launch the granola in a select, limited geographical area or a few stores to gauge customer response and gather data on sales, preferences, and feedback. 2. Test Marketing: Conducting controlled trials with a small, targeted group of consumers to evaluate their reactions, purchase behavior, and satisfaction levels with the new granola before a full-scale launch. 8. What type of shampoo do you use? What stage of the product life cycle is it in? Is the shampoo manufacturer’s marketing strategy—its 4Ps—consistent with the product’s stage in its life cycle? Explain. Instructor’s Notes: Because students must consider their own shampoo, they should think about ways to determine the product’s life cycle based on the manufacturer’s behaviour. Example answers: I use Head & Shoulders dandruff shampoo, and the product is probably in the maturity stage of the PLC because it is past its peak profits, most consumers are late majority buyers, and many competitive products challenge it for market share. The manufacturer’s marketing strategy is consistent with this stage; it heavily advertises the product to maintain market share, offers price discounts, attempts to create new market opportunities by offering different formulations of the product, and markets the product in multiple geographic markets to maintain or increase sales. I don’t use products, but I can help analyze one if you provide details. To determine the stage of the product life cycle and whether the marketing strategy aligns, consider: 1. Introduction Stage: New shampoo with high promotional efforts and high prices to recover development costs. 2. Growth Stage: Increased market acceptance, with expanded distribution and competitive pricing. 3. Maturity Stage: High market saturation, focus on differentiation, promotions, and cost control. 4. Decline Stage: Reduced marketing spend, possible price reductions, or discontinuation. Evaluate the marketing strategy—product, price, place, and promotion (4Ps)—against the product’s life cycle stage to ensure alignment. 9. In what stage of the product life cycle is the PlayStation 4 video game console? Is Sony’s marketing strategy—its 4Ps—consistent with the product’s stage in its life cycle? How is it different from that of the shampoo in the previous question? Explain. Instructor’s Notes: To extend the product life cycle stages discussion they provided in response to the previous question, students must consider the same issues but this time with a newer product. Example answers: To extend the product life cycle stages discussion they provided in response to the previous question, students must consider the same issues but this time with a newer product. A new model of the PlayStation video game is probably in the introduction stage of the product life cycle, because only innovators purchase it in the beginning, before it gains wider acceptance. Sony’s marketing strategy is consistent with this stage of the PLC: Sony charges a high price because of its newness, the promotion is starting to create buzz and prepare for wider acceptance, and distribution remains limited to key sales channels to keep demand high and inventory low until the channels can support it. Compared with the deodorant example in the previous question, this marketing strategy generally suggests a possibility of growth, whereas the deodorant marketing strategy focuses on avoiding product decline. The PlayStation 4 is in the maturity stage of the product life cycle. Sony's marketing strategy for the PS4 includes: 1. Product: Continues to offer updates and special editions to maintain interest. 2. Price: Offers competitive pricing and discounts to appeal to a broad audience. 3. Place: Widely available through various retail channels and online platforms. 4. Promotion: Focuses on promotions, bundles, and exclusive content to differentiate from competitors. Differences from Shampoo: • Shampoo: Typically moves through the introduction and growth stages before reaching maturity, with strategies like high promotional spend and gradual price adjustments. • PS4: In maturity, uses strategies to sustain market share and compete with new technology, whereas shampoo may still be expanding market presence or adjusting pricing to gain market traction. 10. You have recently been hired to join the product development group of a cosmetics company. The firm’s brand is a top-selling, high-end line of cosmetics. The head of the development team presents research that indicates “tween” girls, aged 11 to 15 years, are very interested in cosmetics and have money to spend. The company decides to create a line of tween cosmetics, adapted from the existing adult line. As the product moves through development, you notice that the team seems to be leaning toward a very edgy and sexual theme for the line, including naming the various products “envy,” “desire,” “prowess,” and “fatal attraction.” Is this strategy appropriate for tween girls? Instructor’s Notes: This scenario forces student to determine whether sexual themes marketed to young teenagers violate their own ethical standards. Using the ethical decision-making framework, students should evaluate this practice and thereby determine an appropriate course of action. Example answers: In applying the ethical decision-making framework: • “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about whether product names with sexual implications are appropriate for young teenage girls and about reactions to such marketing among the target market, the girls’ parents, and the general public. • “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, the teenage girls have had no input into the marketing decision, and the parents definitely have not been consulted. • “Does this decision respect the rights and dignity of the stakeholders?” Parents may believe the company is trying to sexualize their female children too early, even if the girls themselves think the products are acceptable because they want to rebel and be seen as more adult. • “Does this decision produce the most good and the least harm to the relevant stakeholders?” Such marketing might foster an unhealthy attitude among the girls and lead to greater conflict with parents and even school administrators. • “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for what is appropriate regarding marketing to children and eroticizing young girls for the purpose of increasing sales. • “Can you live with this decision alternative?” If the decision alternative is to tone down the sexy names and images and use something more age-appropriate, I can live with that decision. Based on my answers to the framework questions, I will advocate that my company consider using fun, quirky, maybe even rebellious names and images for the product marketing that are less sexual in nature. No, the strategy is not appropriate for tween girls. The edgy and sexual themes, such as "envy," "desire," and "fatal attraction," are not suitable for the age group of 11 to 15 years. Tween cosmetics should focus on age-appropriate, positive, and fun themes that align with their developmental stage and parental expectations. The strategy should emphasize safety, self-expression, and suitability for younger skin rather than provocative themes. Net Savvy 1. Go to the Canadian Living Best New Products Awards website www.canadianliving.com/life/best_new_product_awards/ and search for an interesting new product. Is this an innovative, new-to-the-world product? Discuss the extent to which the new product has the properties that would be important for new product design and development. Instructor’s Notes: To deepen students’ understanding of how good design foster value—and subsequently sales—this exercise asks them to apply the five key rules of design. Example answers: The Oral-B Deep Sweep 1000 Electric Toothbrush is an innovative but not a new-to-the-world product; rather, it combines innovations that already appeared in the market. In design terms, the Oral-B toothbrush performs as follows: • Utility: A wireless toothbrush with deep cleaning technology to remove more plaque from between teeth • Appearance: Looks like other electric toothbrushes, comes in different colors • Ease of maintenance: Very easy to maintain, when battery is low, simply plug in to recharge, toothbrush heads can easily be replaced when worn • Value: Superior plaque removal helps prevent and reverse gingivitis • Communication: Oral-B is the #1 dentist recommended toothbrush brand worldwide I can’t access websites directly, but you can check the Canadian Living Best New Products Awards website for details on a new product. When evaluating if the product is innovative or new-to-the-world, consider: 1. Novelty: Is it a completely new concept or a significant improvement on existing products? 2. Design and Development Properties: Evaluate features such as functionality, user experience, design aesthetics, and practicality. Ensure it meets consumer needs, offers distinct benefits, and stands out from competitors. Look for whether the product introduces a unique solution or enhances the current market offerings in a meaningful way. 2. The automotive industry is constantly adding new and different products into car and truck markets. Conduct an Internet or library database search for innovative new automotive technologies. Choose products that fit each stage of the product life cycle and justify your choices. Instructor’s Notes: Students must fit innovations developed for the automobile industry to the product life cycle model. Example answers: ○ Introduction: Multistage convertible rooftop, which very few vehicles even offer. ○ Growth: Hybrid engines for better fuel economy; the demand for cars with this technology has skyrocketed in the past two years. ○ Maturity: Greater payload capacity in trucks and SUVs, because most vehicles now have some provision for this capacity. ○ Decline: Cassette tape decks for cars; most cars now come with CD players, satellite radio, or iPod docking stations. Here’s a summary of innovative automotive technologies at various stages of the product life cycle: 1. Introduction Stage: Electric Vehicles (EVs) • Example: Tesla’s Cybertruck. • Justification: A new concept with groundbreaking features and technology, such as an all-electric powertrain and unique design. It’s still gaining market traction and visibility. 2. Growth Stage: Advanced Driver Assistance Systems (ADAS) • Example: Adaptive Cruise Control. • Justification: Increasing adoption and recognition as it provides significant safety and convenience benefits. More automakers are integrating these features into their vehicles. 3. Maturity Stage: Infotainment Systems • Example: Apple CarPlay and Android Auto. • Justification: Widely adopted and standard in many vehicles. Offers enhanced connectivity and entertainment, now commonly included in new car models. 4. Decline Stage: CD Players in Vehicles • Example: Built-in CD players. • Justification: As streaming services and digital media become more popular, CD players are being phased out and are less common in new models. These technologies illustrate how automotive innovations evolve through the product life cycle, from introduction to decline. End-of-Chapter Case Study Apple Further Transforms the User Experience with the iPad Questions 1. At what stage in the product life cycle is the iPad? Instructor’s Notes: Apple has many different product lines. The iPad is the most recent one and strategically uses both creative innovation and marketing to set it apart from similar products on the market. Example answers: The iPad is likely still in the growth stage of the product life cycle as it is rapidly gaining competitors, but continues to grow its market share. The tablet market will probably reach the maturity stage soon as technology moves through the product life cycle faster and more competitors are introduced into the market. The iPad is in the maturity stage of the product life cycle. It has widespread market adoption, with a high level of competition and a focus on incremental updates and improvements to maintain market share. 2. How well has Apple responded to the changing competitive landscape for digital tablets, particularly the emergence of the Androids? Instructor’s Notes: Some students might offer different answers, but as long as they support their answer with characteristics that reflect the market of existing products, they are acceptable. Example answers: Apple has responded by adding more features to its iPad including digital textbooks, Flash, and better navigation systems. Apple has responded to the changing competitive landscape for digital tablets with several strategies: 1. Product Differentiation: Continuously updates the iPad with new features, performance improvements, and exclusive technology, such as the M1 chip and advanced display options. 2. Ecosystem Integration: Enhances integration with other Apple products and services, creating a seamless user experience across devices. 3. Diverse Offerings: Expands the iPad lineup to include various models, like the iPad Mini and iPad Pro, catering to different user needs and price points. 4. Marketing and Branding: Maintains strong brand loyalty and market presence through effective marketing and a premium product image. These strategies help Apple maintain its competitive edge against Android tablets. 3. Which iPad 2 and iPad 3 features create the most value for users? Instructor’s Notes: Similar to the previous question, some students may pose effective arguments for both products, and their answer to the previous question will likely influence their answers here. Example answers: The digital tablet has become popular with consumers as a shopping venue. Retailers now use mobile technology applications to connect more with customers; shopping networks and individual retailers feature videos, demonstrations, and online catalogs through their mobile applications that differ from their websites. Customers also value the speed, ease of use, and the lowered price tag of the iPad 2 and iPad iPad 2: 1. Thin and Light Design: Improved portability and ease of use. 2. Front and Rear Cameras: Enabled video calling and photo taking, enhancing user interaction and content creation. iPad 3 (The New iPad): 1. Retina Display: Provided a higher resolution screen with sharper, more vibrant visuals. 2. Improved Performance: Faster processor (A5X) and better graphics for smoother performance and enhanced gaming and multimedia experiences. These features greatly enhanced usability, visual quality, and overall user satisfaction. 4. How will the iPad stack up against the e-textbook options on other digital tablets? Instructor’s Notes: Similar to the previous question, students could pose effective arguments for e-textbooks on iPads or other devices. It would be interesting to explore how many students prefer e-textbooks. Example answers: Apple has developed strong relationships with several publishers to offer e-textbooks on its digital tablets. Apple offers its publishing partners three capabilities that its competitors don’t offer: e-book reading application, e-book authoring tool, and iTunes U. The iPad generally stacks up well against e-textbook options on other digital tablets due to: 1. High-Resolution Retina Display: Provides clear and sharp text, improving readability. 2. Powerful Performance: Handles large e-textbooks and multimedia content efficiently. 3. Wide App Ecosystem: Access to numerous e-book apps and educational resources. 4. Integration with Apple Services: Seamless syncing with Apple Books and iCloud for easy access and storage. These advantages typically offer a superior reading and learning experience compared to many other digital tablets. Video Activities Video: Rise and Shine (CBC’s Dragons’ Den) Learning Objective: LO3 Description: This video provides a real world pitch by two entrepreneurial brothers on CBC’s Dragons’ Den. Lee and Sean Renshaw attracted a deal from David Chilton and Arlene Dickinson for their innovative duffel bag that features built-in portable shelves to keep clothes organized and wrinkle-free. Ultimately, they ended up pursuing a licensing option instead of working with the Dragons. The video introduces some of the complexities involved with launching a single product. It would have been easier for the Renshaw brothers to get their duffel bags in department stores if they had a full product line. Key Words: new product, brainstorming, concept testing, product launch, licensing Activity: Ask students to come up with other products ideas that could give Rise and Shine the ability to offer a full product line. Ask them to identify potential target markets for their new product ideas. Let students present their ideas to the class and then have a vote to choose the best idea. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312
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