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Chapter 9: Product innovation and the life cycle approach - Coggle Diagram

- - - - A style is a basic and distinctive mode of expression. For example, styles appear in homes (colonial, ranch, transitional), clothing (formal, casual), and art (realist, surrealist, abstract). Once a style is invented, it may last for generations, passing in and out of vogue. A style has a cycle showing several periods of renewed interest.
      - A fashion is a currently accepted or popular style in a given field. Fashions tend to grow slowly, remain popular for a while, and then decline slowly.
      - Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity A fad may be part of an otherwise normal life cycle, Or the
        fad may comprise a brand’s or product’s entire life cycle. EX: selfie sticks
      - https://drive.google.com/file/d/17m_WB8zwPdhZcT6IPtTBj171VFrzi5ER/view?usp=sharing
    - - For example, in practice, it is difficult to forecast the sales level at each PLC stage, the length of each stage, and the shape of the PLC curve.
      - Using the PLC concept to develop marketing strategy also can be difficult because strategy is both a cause and a result of the PLC.
      - The product’s current PLC position suggests the best marketing strategies, and the resulting marketing strategies affect product performance in later stages
      - Moreover, marketers should not blindly push products through the traditional product life-cycle stages. Instead, marketers often defy the “rules” of the life cycle and position or reposition their products in unexpected ways.
        
        By doing this, they can rescue mature or declining products and return them to the growth phase of the life cycle. Or they can leap frog obstacles that slow consumer acceptance and propel new products forward into the growth phase.
  - - - Because the market is not generally ready for product refinements at this stage, the company and its few competitors produce basic versions of the product. These firms focus their selling on those buyers who are the most ready to buy.
    - - If the pioneer chooses its launch strategy to make a “killing,” it may be sacrificing long-run revenue for the sake of short-run gain. The pioneer has the best chance of building and retaining market leadership if it plays its cards correctly from the start
    - - New and uncertain technology.
      - Limited consumer awareness.
      - Distribution constraints.
      - Low competition.
      - Example: Early personal computers where smaller firms led before IBM entered.
  - - - Most products are in the maturity stage of the life cycle, and therefore most of marketing management deals with the mature product.
    - - These steps lead to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well-established competitors.
    - - Product managers should do more than simply ride along with or defend their mature products—a good offense is the best defense. They should consider modifying the market, product offering, and marketing mix.
    - - The company tries to increase consumption by finding new users and new market segments for its brands. EX: Bath & Body Works, which have typically targeted women, have created products and programs aimed at men.
      - The company may also look for ways to increase usage among present customers.
      - The company might also try modifying the product—changing characteristics such as quality, features, style, packaging, or technology platforms to retain current users or attract new ones. EX: Digital games for the old ones to appeal to new tech-savy gen of kids
      - the company can try modifying the marketing mix—improving sales by changing one or more marketing mix elements. T
        
        he company can offer new or improved services to buyers. It can cut prices to attract new users and competitors’ customers. It can launch a better advertising campaign or use aggressive sales promotions—trade deals, cents-off, premiums, and con tests. In addition to pricing and promotion, the company can also move into new marketing channels to help serve new users.
  - - - A weak product may take up too much of management’s time.
      - It often requires frequent price and inventory adjustments.
      - It requires advertising and sales-force attention that might be better used to make “healthy” products more profit able
      - A product’s failing reputation can cause customer concerns about the company and its other products.
      - The biggest cost may well lie in the future. Keeping weak products de lays the search for replacements, creates a lopsided product mix, hurts current profits, and weakens the company’s foothold on the future.
    - - If successful, harvesting will increase the company’s profits in the short run. Finally, management may decide to drop the product from its line.
      - The company can sell the product to another firm or simply liquidate it at salvage value. If the company plans to find a buyer, it will not want to run down the product through harvesting
    - - New substitute technologies.
      - Changing consumer needs.
      - External changes (e.g. fuel prices).
      - Example: Potential decline of petrol-powered cars.
  - - - It improves product quality and adds new product features and models.
      - It enters new market segments and new distribution channels.
      - It shifts some advertising from building product awareness to building product conviction and purchase, and it lowers prices at the right time to attract more buyers.
    - - Customer satisfaction and positive word-of-mouth.
        Wider distribution and visibility.
      - More competitors enter, expanding the market.
        Example: Early automobile industry with many competing firms.
  - - - Reposition or relaunch products.
        Find new markets or uses.
    - - Mini Cooper relaunched successfully by BMW.
        Without relaunch, products may disappear entirely.
  - - - Replace older ones.
        May later be replaced themselves.
  - - - Technologies.
      - Industries.
      - Market segments.
    - - LPs and 45s declined when CDs appeared.
      - Tapes survived longer as complementary products.
      - CDs later declined due to mp3s and digital downloads.
  - - - Understand market dynamics.
        Adjust marketing strategies over time.
    - - Buyer behaviour.
        Competitive environment.
  - - - High-learning products
      - Fads (short shelf-life)
      - Low-learning products with long shelf-life
  - - - Rapid sales growth followed by rapid decline.
      - Easy to sample; little learning required.
      - Often appeals to young consumers.
      - Example: tATu’s 2003 hit “Not Gonna Get Us”.
    - - Easy to adopt like a fad.
      - Maintains long-term popularity.
      - Example: The Beatles.
      - Reason for longevity:
        
        Combination of simple melodies and complex musical structures.
        Broad appeal across generations.
    - - Complex, difficult to evaluate quickly.
      - Requires time and effort to appreciate.
      - Often appeals to older consumers.
      - Example: Classical music (e.g. Mozart).
        Consistent long-term sales.
- - - - Invention = conception of an idea
      - Innovation = practical & commercial application of the idea
      - Equation: Innovation = theoretical conception + technical invention + commercial exploitation
  - - - Unsustainable competitive advantage
      - Increased competition
      - Shorter product life cycles
  - - - o Focused internally, controlling all R&D
        o Rules include hiring the best people, self-reliance, IP protection
      - This self-reliance is rooted in certain implicit rules (Chesbrough, 2003) as stated below:
        
        A company should hire the best people.
        
        To ensure profits, a firm should discover, develop and market everything itself.
        
        Being first to market requires that research discoveries originate within the firm.
        
        Being first to market also ensures that the firm will win the competition.
        
        Leading the industry in R&D investments results in coming up with the best and greatest number of ideas and eventually in winning the competition.
        
        Restrictive Intellectual Property management must prevent other firms from profiting from the firm’s ideas and technologies
    - - Encourages internal & external idea sourcing
      - Integrates external technologies with firm capabilities
      - Exploits opportunities via multiple channels
  - - - o Key elements
        
        Innovation
        
        Social system impacted
        
        Communication channels
        
        Time
    - - transfer of information about the innovation
      - decision by customer to adopt
      - eventual saturation of the market.
    - - Relative advantage: ‘The degree to which an innovation is perceived as being better than the idea it supersedes’
      - Compatibility: ‘The degree to which an innovation is perceived as consistent with existing values and values of the potential adopter’
      - 3.Complexity: ‘The degree to which an innovation is perceived as relatively difficult to understand and use’
      - 4.Trialability: ‘The degree to which an innovation may be experimented with on a limited basis’
      - 5.Observability: ‘The degree to which the results of an innovation are visible to others
- - - - Musicians/authors buying their own works.
      - Ancient Rome: professional mourners.
      - Claque: hired to clap/heckle at performances.
    - - Informational effects: learning from others’ behavior.
        Preference effects: desire to fit in.
  - - - E.g., a book or film may be valued more if others also consume it.
    - - Driven by desire to conform, be fashionable, or “be in the swim of things.”
  - - - Direct: more users allow greater direct interaction or benefits.
      - Indirect: more users increase complementary products/services.
- - - - Their private signal (high or low quality).
        Observed actions of earlier decision-makers.
    - - Later consumers follow the crowd regardless of their own information.
        No new information enters the system.
    - - Upward (product succeeds)
        Downward (product fails)
  - - - Observe others’ actions.
        Copy decisions rather than investigate themselves.
  - - - Works best for infrequent, uncertain decisions.
      - Applies strongly to:
        
        Experience goods: quality known only after consumption (e.g. restaurants, holidays).
        Credence goods: quality difficult to judge even after consumption (e.g. investments, medical procedures, car repairs).
    - - More individualistic societies:
        
        Less social conformity
        More cascade-based herding behaviour.
    - - Too much choice increases reliance on:
        External cues
        Existing standards
      - Less choice → more reliance on own experience → weaker cascades.
    - - More informed consumers: Less likely to follow cascades.
      - Less informed consumers: More prone to herding.
  - - - Optimism about product quality.
      - Higher risk tolerance.
      - Expectation of high future returns.
      - Mistake or imperfect rationality.