New-Product Development and Product Life-Cycle Strategies
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1 New-Product Development and Product Life-Cycle Strategies Chapter 9New-Product Development and Product Life-Cycle Strategies
2 New-Product Development Strategies Strategies for Obtaining New Product IdeasAcquiredCompaniesOriginalProductsAcquiredPatentsProductImprovementsAcquiredLicensesProductModificationsNewBrands
3 Causes of New Product Failures One study estimated that as many as 80% of new consumer packaged products failed.Only about 40% of new consumer products are around 5 years after introduction.Why?Overestimation of market size,Product design problems,Product incorrectly positioned, priced or advertised,Product may have been pushed despite poor marketing research findings,Costs of product development, orCompetitive actions
4 Improving New-Product Success New product success depends on having a:Unique superior product (one with higher quality, features, and value in use), &Well-defined product concept (a defined target market, product requirements, and benefits).To create successful new products, the company must:understand its customers, markets and competitors, &develop products that deliver superior value to customers.
5 New Product Development Process MarketingStrategyBusinessAnalysisConceptDevelopmentand TestingProductDevelopmentIdeaScreeningTestMarketingIdeaGenerationCommercialization
6 New Product Development Process Step 1. Idea Generation Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:CUSTOMERCOMPETIRSDISTRBUOSUPLIER
7 New Product Development Process Step 2. Idea Screening Process to spot good ideas and drop poor ones as soon as possible.Many companies have systems for rating and screening ideas which estimate:Market SizeProduct PriceDevelopment Time & CostsManufacturing CostsRate of ReturnThen, the idea is evaluated against a set of general company criteria.
8 New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas intoAlternativeProduct Concepts2. Concept Testing - Test theProduct Concepts with Groupsof Target Customers3. Choose the Best One
9 New Product Development Process Step 4. Marketing Strategy Development Marketing Strategy Statement FormulationPart One Describes Overall:Target MarketPlanned Product PositioningSales & Profit GoalsMarket SharePart Two Describes Short-Term:Product’s Planned PriceDistributionMarketing BudgetPart Three Describes Long-Term:Sales & Profit GoalsMarketing Mix Strategy
10 New Product Development Process Step 5. Business Analysis Review of Product Sales, Costs,and Profits Projections to See ifThey Meet Company ObjectivesNew Product Development Process Step 5. Business AnalysisStep 6. Product DevelopmentIf No, EliminateProduct ConceptIf Yes, Move toProduct Development
11 Full marketing campaign representative cities. New Product Development Process Step 7. Test MarketingControlledTest MarketA few stores that haveagreed to carry newproducts for a fee.StandardTest MarketFull marketing campaignin a small number ofrepresentative cities.SimulatedTest MarketTest in a simulatedshopping environmentto a sample ofconsumers.
12 New Product Development Process Step 8. Commercialization Commercialization is the Introduction of the New Product into the Marketplace.When?Where?ToWhom?How?
13 Speeding Up Development SequentialSimultaneousStep 1Step 2Step 3Step 4Step 1Step 2Step 3Step 4
14 Sales and Profits Over the Product’s Life From Introduction to Decline Product Life CycleSales and Profits Over the Product’s Life From Introduction to DeclineSales andProfits ($)SalesProfitsTimeProductDevelop-mentIntroductionGrowthMaturityDeclineLosses/Investments ($)
15 Introduction Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesLow salesCostsHigh cost per customerProfitsNegativeMarketing ObjectivesCreate product awarenessand trialProductOffer a basic productPriceUse cost-plusDistributionBuild selective distributionAdvertisingBuild product awareness among early adopters and dealers
16 Growth Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSalesRapidly rising salesCostsAverage cost per customerProfitsRising profitsMarketing ObjectivesMaximize market shareProductOffer product extensions, service, warrantyPricePrice to penetrate marketDistributionBuild intensive distributionAdvertisingBuild awareness and interest in the mass market
17 Maturity Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesPeak salesCostsLow cost per customerProfitsHigh profitsMarketing ObjectivesMaximize profit while defendingmarket shareProductDiversify brand and modelsPricePrice to match or best competitorsDistributionBuild more intensive distributionAdvertisingStress brand differences and benefits
18 Decline Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesDeclining salesCostsLow cost per customerProfitsDeclining profitsMarketing ObjectivesReduce expenditure and milk the brandProductPhase out weak itemsPriceCut priceDistributionGo selective: phase out unprofitable outletsAdvertisingReduce to level needed to retainhard-core loyal customers
19 Problems Using the PLCThe PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:Trouble identifying Which Stage of the PLC the Product Is InDifficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLCStrategy is Both a Cause and a Result of the Product’s Life Cycle