Question

Research suggests that it takes about 3,000 raw, unwritten ideas to produce a single, commercially-successful new product. To learn marketing lessons and convert potential failures to successes, we can analyze why new products fail and then study several failures in detail.

Both marketing and nonmarketing factors contribute to new-product failures. Using the research results from several studies on new-product success and failure, we can identify critical marketing factors—which sometimes overlap—that often separate new-product winners and losers:

1. Insignificant point of difference
2. Incomplete market and product protocol before product development starts
3. Not satisfying customer needs on critical factors
4. Bad timing
5. Too little market attractiveness
6. Poor product quality
7. Poor execution of the marketing mix: brand name, package, price, promotion, distribution
8. No economical access to buyers

Read the case below and answer the questions that follow.

Without question, one of the amazing new product stories of the last decade has been the Apple iPhone. However, no less of a story are the thousands of apps (applications) that have been developed for this device. Recent figures put the number of apps developed for the iPhone at close to 1.5 million—by the time you read this, the number will no doubt be much higher.

Here's the scenario. You are a venture capital investor looking at getting in on the fast-growing app business. You are seriously considering two different ideas that developers have brought to you seeking money for developing and rolling out their respective ideas. Being the careful and prudent investor, you know that most new product ideas never prove successful. But you have developed a checklist of items that you like to go through to improve the odds that the product you back will be a success.

Included on that checklist are:

1. Market size (at entry, subsequent years)
2. Market growth rate (how rapid, accelerating, slowing)
3. Number of competitors (initially, prospects for competition)
4. Product differentiation (significantly different, minor differences)
5. Is marketing plan consistent with market requirements?

App A's target market is expected to purchase 800,000 units this year, 900,000 next year, and 1 million units in the third year. The growth rate will level out for the next two years.

The market for App B is currently 400,000 units and is expected to grow to 600,000 units next year. Like App A, the third year will grow at about the same rate, as will the fourth and fifth years.

The App A target market has five other competitors, all of which are well-capitalized. App A is adding some features to its offering that will enhance the functionality of the application compared to the existing products. At least four other competitors are expected to enter the market in the next year.

App B will be facing two other competitors, but it is expected that four more will enter this market over the next two years. App B takes a very different approach to delivering its functionality. Customer reviews suggest that it is superior to the other offerings but it will be necessary to "train" customers on the new features.

Finally, your review of the respective marketing plans for the two apps suggests some differences that need to be considered. The developer for App A does not have to educate customers on how to use App A since it is similar to other products already in the market. App B's developer has put together a promotion plan that includes ads that will tell customers how this app is different and how customers can learn to use it.

1.

What are the growth rates for App A and App B in the first year?

12.5% and 50%

12.5% and 40%

10% and 33%

Answer 1

1. . Growth rate of App A= difference of units sold this year and next year divided by this year's units sold

Given: Expected purchase =800,000 units this year and 900,000 units next year

growth rate = (900,000-800,000)/800000 =100,000/800000= 0.125

growth rate in %= 0.125*100 = 12.5%

Growth rate of App B =

Given: This year =400,000 units this year and 600,000 units next year

growth rate = (600,000-400,000)/400,000 = 200,000/400,000= 0.5

growth rate in %= 0.5*100= 50%

Therefore 1st option is correct 12.5% and 50%