FINAL STEPS OF NEW PRODUCT DEVELOPMENT

Test marketing- the stage at which the product and marketing program are introduced into a more realistic marketing setting

Test marketing provides the marketer with experience in testing the product and entire marketing program before full introduction

TEST MARKETING

Firms test market whenThey are developing a new product after a large investmentThere is uncertainty about a product or marketing program

Firms may not test marketIf the product is a copy of a competitor’s productIf there is a high degree of management confidenceTo keep costs low

TEST MARKETING

Approaches to test marketingStandard test marketsControlled test marketsSimulated test markets

TEST MARKETING

Standard test markets- small representative markets where the firm conducts a full marketing campaign and uses store audits, consumer and distributor surveys and other measures to gauge product performance

Results are used to Forecast national sales and profitsDiscover product problemsFine-tune the marketing program

TEST MARKETING

Challenges of standard test marketsCostTimeCompetitors can monitor the testCompetitor interferenceCompetitors gain access to the new product before introduction

TEST MARKETING

Controlled test markets- in panels of stores that have agreed to carry new products for a fee Pros

Less expensive than standard test markets Faster than standard test market

Cons Competitors gain access to the new products

TEST MARKETING

Simulated test markets- events where a firm will create a shopping environment and note how many consumers buy the new product and competing products. Provides a measure of trial and the effectiveness of promotion

Researchers can interview consumers

TEST MARKETING

Pros of simulated test markets Less expensive than other test methods Faster Restricts access by competitors

Cons of simulated test markets Not considered as reliable and accurate due to the controlled setting

TEST MARKETING

Commercialization- the introduction of the new product Includes When to launch Where to launch

COMMERCIALIZATION

PRODUCT LIFE CYCLE

Product Life Cycle (PLC)– the course that a product’s sales and profits take over its lifetime.

Stages Introduction Growth Maturity Decline

PRODUCT LIFE CYCLE

When the new product is first launchedSlow sales growth Little or no profit High distribution and promotion expense

Attempts to build product awareness

INTRODUCTION STAGE

When the new product satisfies the market Sales increase New competitors enter the market Price stabilizes or declines to increase volume Profits increase Promotion and manufacturing costs gain economies of scale

Product quality increases New features Attempts to maximize market share Goal is to generate interest

GROWTH STAGE

Long-lasting stage of a product that has gained consumer acceptance Peak sales High profits Many suppliersIncreased promotion and R&D to support sales and profits

Goal is to stress brand differences through advertising

MATURITY STAGE

When sales decline or level off for an extended time, creating a weak product

A company must decide whether to Maintain the product Harvest the product Drop the product

DECLINE STAGE

To combat the decreased sales and public attention, companies often change their approach to sell a product

Modifying strategies Market modifying Product modifying Marketing mix modifying

DECLINE STAGE

Market modifying strategy- trying to increase consumption of the current product A company tries to

Acquire new users Increase the usage of existing users Create new market segments

DECLINE STAGE

Marketing mix modifying strategy- changing one or more of the marketing mix elements Companies edit

Pricing Product promotion Distribution channels

DECLINE STAGE