new productdevelopmentandproductlife

7/29/2019 New Productdevelopmentandproductlife

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New-Product Development and

Product Life-Cycle Strategies


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Road Map: Previewing the

Concepts Explain how companies find and develop

new-product ideas.

List and define the steps in the new-product

development process. Describe the stages of the product life cycle.

Describe how marketing strategies changeduring the products life cycle.


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New-Product Development

Strategy Strategies for Obtaining New-Product

Ideas:

Acquisition of companies, patients,licenses

Original products, improvements,

modifications


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New-Product Failures

Only 10% of new products still on the market andprofitable after 3 years.

Failure rate for industrial products as high as 30%.

Why? Overestimation of market size

Design problems

Incorrectly positioned, priced, or advertised

Pushed despite poor marketing research findings

Development costs Competition


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Major Stages in New-Product

Development Idea generation

Idea screening

Concept development and testing

Marketing strategy development

Business analysis

Product development

Test marketing

Commercialization


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Idea Generation

Company employees

Customers

Competitors

Distributors

Suppliers


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Idea Screening

Process to spot good ideas and drop poorones.

Develop system to estimate: market size,

product price, development time and costs,manufacturing costs, and rate of return.

Evaluate these findings against set of

company criteria for new products.


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Concept Development and

Testing Product Idea: idea for a possible product

that the company can see itself offering.

Product Concept: detailed version of the

idea stated in meaningful consumer terms. Product Image: the way consumers perceive

an actual or potential product.


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Marketing Strategy

Development Part One Describes:

The target market, planned product positions,

sales, market share, and profit goals

Part Two Outlines the First Years:

Products planned price, distribution, and

marketing budget

Part Three Describes Long-Run:

Sales and profit goals, marketing mix strategy


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Business Analysis

Involves a review of the sales, costs,

and profit projections to assess fit with

company objectives.

If yes, move to the product

development phase.


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Product Development

Develop concept into physical product

Calls for large jump in investment

Prototypes are made

Prototype must have correct physicalfeatures and convey psychologicalcharacteristics


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Test Marketing

Product and program introduced in

more realistic market setting.

Not needed for all products.

Can be expensive and time consuming,

but better than making major marketing

mistake.


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Commercialization

Must decide on timing(i.e., when tointroduce the product).

Must decide on where to introduce the

product (e.g., single location, state,region, nationally, internationally).

Must develop a market rolloutplan.


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Organizing New-Product

Development Sequential Approach: each stage

completed before moving to next phaseof the project.

Simultaneous Approach: Cross-functional teams work through

overlapping steps to save time andincrease effectiveness.


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The Product Life Cycle

Product development

Introduction

Growth Maturity

Decline


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Product Life Cycle Applications

Product classhas the longest life cycle (e.g., gas-poweredcars)

Product formtends to have the standard PLC shape (e.g.,dial telephone)

Brandcan change quickly because of changing competitiveattacks and responses (e.g., Tide, Cheer)

Styleis a basic and distinctive mode of expression (e.g.,formal clothing, Danish modern furniture)

Fashionis a popular style in a given field (e.g., business

casual) Fadis a fashion that enters quickly, is adopted quickly, and

declines fast (e.g., pet rocks)


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Practical Problems of PLC

Hard to identify which stage of the PLC the

product is in.

Hard to pinpoint when the product moves to the

next stage. Hard to identify factors that affect products

movement through stages.

Hard to forecast sales level, length of each stage,and shape of PLC.

Strategy is both a cause and result of the PLC.


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Introduction Stage of PLC

Sales: low

Costs: high cost per customer

Profits: negative Marketing Objective: create product

awareness and trial

Product: offer a basic product Price: use cost-plus formula

Distribution: build selective distribution

Promotion: heavy to entice product trial


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Growth Stage of PLC

Sales: rapidly rising

Costs: average cost per customer

Profits: rising

Marketing Objective: maximize market share

Product: offer extension, service, warranty

Price: penetration strategy

Distribution: build intensive distribution

Promotion: reduce to take advantage of demand


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Maturity Stage of PLC

Sales: peak

Costs: low cost per customer

Profits: high

Marketing Objective: maximize profits while

defending market share

Product: diversify brand and models

Price: match or best competitors Distribution: build more intensive distribution

Promotion: Increase to encourage brand switching


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Maturity Stage of the PLC

Modifying the Market: Increase theconsumption of the current product.

How?

Look for new users and market segments

Reposition the brand to appeal to larger orfaster-growing segment

Look for ways to increase usage among presentcustomers


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Modifying the Product: Changing characteristicssuch as quality, features, or style to attract newusers and to inspire more usage.

How? Improve durability, reliability, speed, taste Improve styling and attractiveness

Add new features

Expand usefulness, safety, convenience


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Modifying the Marketing Mix: Improvingsales by changing one or more marketingmix elements.

How? Cut prices

Launch a better ad campaign

Move into larger market channels Offer new or improved services to buyers


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Decline Stage of PLC

Sales: declining

Costs: low cost per customer

Profits: declining

Marketing Objective: reduce expenditures and milk

the brand

Product: phase out weak items

Price: cut price Distribution: selective--phase out unprofitable

outlets

Promotion: reduce to minimal level


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Rest Stop: Reviewing the Concepts

Explain how companies find and developnew-product ideas.

List and define the steps in the new-product

development process. Describe the stages of the product life cycle.

Explain how marketing strategies changeduring the products life cycle

new productdevelopmentandproductlife

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