1 new product development and product life-cycle strategies
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New Product Development and Product Life-Cycle Strategies
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New Product Development New product development (NPD): the development of:
Original products (“new-to-the world”), Product modifications Product category extensions Product line extensionsthrough the firm’s own R&D efforts
New products can also come from acquisition of other companies, patents, or licenses
NPD is important to: Follow changing market
demands Remain competitive Keep up to changing technology Replace dying products Diversify product offering to
reduce risk
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Consumers’ perspectives on Newness (Exhibit 10-1, page 255)
DiscontinuousInnovation
DiscontinuousInnovation
Breakthrough
DynamicallyContinuousInnovation
DynamicallyContinuousInnovation
Major change
ContinuousInnovation
ContinuousInnovation
Ongoing alteration
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Did your mother make you drink milk when you were young? Do you still drink it today? If you do not, what happened to make you stop? For many, a sign of maturity was when you could order something to drink other than milk at a restaurant. Sodas, water, juices, and just about any other liquid has had greater appeal for children for several decades. This may, however, be about to change if Mac Farms of Burlington, Vermont has anything to say about it. Responding to research efforts on what kids like to drink, Mac Farms has developed E-Moo. E-Moo is a carbonated, milk-based product that is designed to give a healthy alternative to sodas. E-Moo may just make it “cool” to drink milk. E-Moo is loaded with vitamins, low in cholesterol and sodium, and comes in three flavors—Orange Creamsicle, Bubble Gum, and Raspberry.
Is this a drink for the children born to the Internet age?.
What about P.B. Slices?
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Stages inNew Product Development
Idea generation
Idea screening
Commercialization
Business analysis
Product development
Figure 9-1
Am
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nt o
f investm
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+
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New Product Development at Gillette
Investment in NPD is large, $1.5 billion on the Mach3 razor system, with 35 patents
Company employees shave at work as part of new product testing
Same attitude towards innovation applies to promotional efforts
Founded in 1901, its success has been driven by new product innovation, to remain competitive
Dominates razor and blade markets, but also competes in batteries, toiletries, cosmetics, stationery products, dental care, and electrical appliances
Company-wide culture that supports innovation
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Characteristics of Success
Relative Advantage Compatibility with Existing Consumption
Patterns Trialability – The Opportunity for Buyer Testing Observability – The Chance to See the
Newness Simplicity of Usage
Blu-RayBlu-Ray
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Question #3.
Yoplait’s recent entry in the highly competitive $2 billion a year yogurt market—a tubular yogurt called Go-Gurt—seems to be a hit with the lunchbox set. Why tubular yogurt? Children like yogurt but are not impressed with it. Some believe yogurt is “old people food.” Not so with Go-Gurt. With flavors like Chill-Out Cherry and Rad Raspberry, Go-Gurt can be eaten like regular yogurt, frozen like a frozen pop, or carried in a shirt pocket.
see http://www.yoplait.com/products_gogurt.aspx
Can this product be expanded to an adult market? Devise a plan for testing the product concept for 25 to 45 year-old adults.
What factors would be critical to your test? What types of test subjects would you want for your test?
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Why do new products fail?
Insufficient superiority or uniqueness Inadequate/inferior planning Poor execution Technical problems Poor timing
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New Product Adoption Processes Awareness Interest Evaluation Trial Adoption
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The diffusion process (EXHIBIT 10-7, PAGE 272)
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Product Life-Cycle Strategies
Profits
Sales
Development Introduction Growth Maturity Decline
SalesProfit($)
Loss($)
Figure 9-2
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Alternative PLC CurvesExamples of fads?
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Summary of PLC/Marketing Mix
R & D Introduction Growth Maturity DeclineSales Low Increasing Peaking Declining
Costs High R&D High Average Low Low
Profits Negative Negative Rising High Declining
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing Stable number Declining
Marketing Product Maximize Market share Reduce costs
Objectives trial market share and profit milk brand
Product In development Basic Extensions Diversify brand Phase out weak
Price tbd Skimming or Penetrate Be price Cut
penetration market competitive price
Distribution tbd Selective Intensive Increase Reduce outlets
Advertising tbd Educate Awareness Brand Reduce
awareness interest differences and remind
Promotion tbd Heavy to Reduce Increase for Reduce costs
encourage trial heavy consumer brand switching minimum level
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Maturity Stage Strategy
Modify the market. Increase the consumption of the current product
(eg. Baking soda, Bounce) Modify the product
Changing characteristics such as quality, features or style to attract new users and to inspire more usage (eg. Tide, Crayola)
Modify the marketing mix Improving sales by changing one or more
marketing mix elements.