chapter 10copyright ©2008 by south-western, a division of thomson learning. all rights reserved 1...

Chapter 10 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1

MKTG

Designed byAmy McGuire, B-books, Ltd.

Prepared byDeborah Baker, Texas Christian University

Lamb, Hair, McDaniel 2007-2008

10

CHAPTERDeveloping and Managing Products


LO1

New Product

A product new to the

world, the market, the

producer, the seller,

or some combination

of these.

New ProductNew Product


LO1

Categories of New Products

New-to-the-WorldNew-to-the-World

New Product LinesNew Product Lines

Product Line AdditionsProduct Line Additions

Improvements or RevisionsImprovements or Revisions

Repositioned ProductsRepositioned Products

Lower-Priced ProductsLower-Priced Products


LO1B

eyond

the

Book

New Product for Starbucks

SOURCE: Janet Adamy, “Lights, Camera, Action at Starbucks,” Wall Street Journal, April 22-23/2006, A2.

Starbucks recently marketed the film Akeelah and the Bee.

It says the film is a natural extension of the Starbucks experience.

Critics say the pervasive chain is overextending its welcome.


REVIEW LEARNING OUTCOMELO1

Developing New Products


The New-Product Development Process

LO2

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

New Product Success Factors


New-Product Development Process

LO2

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product


LO2

Idea Generation

Customers

Employees

Distributors

Competitors

Vendors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

Online

http://www.ideo.com


LO2

Tips for New Product Development

Disperse R & D around the globe

Keep teams small and empower employees

Flatten hierarchy

Encourage generation of crazy new ideas

Welcome mistakes


LO2

Brainstorming

BrainstormingBrainstorming The process of getting a

group to think of unlimited

ways to vary a product or

solve a problem.


LO2

Idea Screening

Idea ScreeningIdea Screening The first filter in the product

development process, which

eliminates ideas that are

inconsistent with the

organization’s new-product

strategy or are inappropriate

for some other reason.


LO2

Concept Testing

Concept TestingConcept Testing A test to evaluate a

new-product idea, usually

before any prototype has

been created.


LO2

Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability


LO2

Development

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

Final government approvals if needed


LO2

Simultaneous Product Development

SimultaneousProduct

Development

SimultaneousProduct

Development

A new team-oriented

approach to new-product

development where all

relevant functional areas

and outside suppliers

participate in the

development process.


LO2

Test Marketing

TestMarketing

TestMarketing

Online

http://www.merwyn.com

The limited introduction of

a product and a marketing

program to determine the

reactions of potential

customers in a market

situation.


LO2

Alternatives to Test Marketing

Single-source research using supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

Online

http://www.newproductworks.com


Biz Flix

LO2 October Sky


LO2

Commercialization

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising



New-Product Development Process


Beyond

the

Book

Why New Products Fail

NOTE: Supplemental content – not in book.

No discernible benefits Poor match between features

and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product


Beyond

the

Book

Success Factors


Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products

Match between product and market needs

Different from substitute products

Benefit to large number of people


Beyond

the

Book

Success Factors


Listening to customers

Producing the best product

Vision of future market

Strong leadership

Commitment to new-product development

Project-based team approach

Getting every aspect right


Beyond

the

Book

Why Products Succeed and Others Fail



LO3

Global Marketing Questions

Develop product for potential worldwide distribution

Build in unique market requirements

Design products to meet regulations and key market requirements



Global Issues in New-Product Development

Single product worldwideSingle product worldwide

Modification of productsModification of products

Multiple products in multiple countriesMultiple products in multiple countries


Diffusion

LO4

The process by which the

adoption of an innovation

spreads.

DiffusionDiffusion


Categories of Adopters

LO4 LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators


Product Characteristics and the Rate of Adoption

LO4

TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

Online

http://www.electronicgadgetdepot.com


Sales of New Audio Products

LO4


Marketing Implications of the Adoption Process

LO4

Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process



Diffusion Process for New Products


Product Life Cycle

LO5

ProductLife Cycle

ProductLife Cycle

A concept that provides a

way to trace the stages of

a product’s acceptance,

from its introduction

(birth) to its decline

(death).


Product Life Cycle

LO5Time

Do

llar

s

Profits

SalesSalesIntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0


Product Life Cycles for Styles, Fashions, and Fads

LO5


U.S. Sales of Televisions

LO5


Introductory Stage

LO5

High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales

increases Promotion focuses on awareness and

information Communication challenge is to stimulate

primary demand


Introductory Stage in Europe

LO5


Growth Stage

LO5

Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the

differences between brands Wider distribution


Maturity Stage

LO5

Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge


Decline Stage

LO5

Long-run drop in sales Large inventories of

unsold items Elimination of all nonessential

marketing expenses “Organized abandonment”


Diffusion Process and PLC Curve

LO5

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

Introduction Growth Maturity DeclineS

ales

DiffusionDiffusioncurvecurve



Product Life Cycles

Time

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

Distribution

Strategy

PromotionStrategy

PricingStrategy

Limited modelsFrequent changes

More modelsFrequent changes.

Large number of models.

Eliminate unprofitable

models

LimitedWholesale/

retail distributors

Expanded dealers. Long-term relations

Extensive.Margins drop.Shelf space

Phase out unprofitable

outlets

Awareness. Stimulate

demand. Sampling

Aggressive ads.Stimulatedemand

Advertise. Promote heavily

Phase outpromotion

High to recoupdevelopment

costs

Fall as result ofcompetition &

efficient production.

Prices fall (usually).

Prices stabilize at low level.

Sa

les

chapter 10copyright ©2008 by south-western, a division of thomson learning. all rights reserved 1...

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