Innovation, Product Development, and the Product Life Cycle
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Presentation on theme: "Innovation, Product Development, and the Product Life Cycle"— Presentation transcript:
1 Innovation, Product Development, and the Product Life Cycle “It’s so new we don’t know what it does, but nobody else has it so we’re selling the hell out of it!”
2 64 ideas1 ideaTesting timeIdeasMarketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace10% of ideas reach the test market stage50% of new products fail in test marketing50% of those fail on national launchonly 2.5% ever enter the marketplace1 entrant for every 64 ideasthe average new product that fails costs about $50 millionsome product failures have losses of over $100 million for some companies
12 What’s your product lifecycle mix? Team activity: Construct a product life cycle diagram for one of the companies in your teamWhat’s your product lifecycle mix?
13 Boston Consulting Group (BCG) positions throughout the lifecycle
14 Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogsHigh growth business strong in competitive market; high point share & ideal business; promote question marks & support R&DLow relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestmentLow growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars
15 The GE/McKinsey Matrix Relative market shareProfit marginsAbility to compete on price & qualityKnowledge of customer & marketCompetitive strengths & weaknessesTechnological capabilityCaliber of managementThe GE/McKinsey MatrixBusiness StrengthsHigh Medium LowInvest in, growth strategyMarket size & growthIndustry profit marginsCompetitive intensitySeasonalityCyclicityEconomies of scaleTechnologySocial, environmental, legal, & human impactsMonitor performance, selective strategyIndustry AttractivenessHigh Medium LowNo growth or investment, consider divestment or liquidation
17 Ansoff’s Product/Market Matrix Existing products New Products Market Penetration:Increase product purchase in existing markets (withdrawal, do nothing, consolidate, retrenchment)Revitalize brand imageCoordinate advertising and sales trainingAdapt to market changeIncrease market shareIncrease consumer usage (frequency, quantity, new application)Product Development:Introduce new products into existing markets; can be risky & expensiveProduct launchAdd product features & refinementsDevelop new products for same marketExistingMarketsMarket Development:Explore new markets for existing products; when distinctive competencies rest with product not marketExpanding geographic distributionTargeting new customer segmentsDiversification:Introduce new products into new markets; horizontal, vertical, conglomerateAcquisition/mergerNew business ventureNewMarkets
18 Conclusions about marketing matrix models-- There is a risk of using matrix models is misclassifying businessesUse multiple models to ensure better coverageKnow the strengths and limits of each model; when to use and avoid themIntegrate the information from matrices with other sources of information and comparisonDon't let the matrix make decisions-- people make decisions!
19 Market Team Formation Form team, acquainted, communication & schedules Team name & member namesDecide on preference for marketing ethics team presentations (e.g., bottled water, marketing to kids, data mining/RFID & privacy, political campaigns, social media marketing)Current practices & factsPro/con argumentsEthical issuesYour position/resolution
20 S-e-g-m-e-n-t-a-t-i-o-n Next Week: MarketS-e-g-m-e-n-t-a-t-i-o-nBe able to describe yourself using segmentation conceptsBe able to discuss how your company uses (or can use) segmentationExplore a market segment for your company and how that might add value to your business