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 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.Explain how marketing strategies change during the product’s life cycle.
3 New-Product Development Strategy Strategies for Obtaining New-Product IdeasAcquiredCompaniesOriginalProductsAcquiredPatentsProductImprovementsAcquiredLicensesProductModificationsNewBrands
4 Causes of New-Product Failures One study estimated that as many as 80% of new consumer packaged products fail.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.
5 Improving New-Product Success New-product success depends on having a:Unique superior product (one with higher quality, features, and value in use), and aWell-defined product concept (a defined target market, product requirements, and benefits).To create successful new products, the company must:understand its consumers, markets, and competitors, anddevelop products that deliver superior value to customers.
6 Major Stages in New-Product Development (Fig. 9-1)
7 New Product Development Process New Product Development Process Step 1 New Product Development Process New Product Development Process Step 1. Idea GenerationSystematic Search for New Product Ideas Obtained From Employees and Also From:CompetitorsCustomersDistributorsSuppliers
8 New Product Development Process Step 2. Idea Screening Helps 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.
9 New Product Development Process Step 3. Concept Development 1. Develop New Product Ideasinto Alternative DetailedProduct ConceptsNew Product Development Process Step 3. Concept Development2. Concept Testing - Test theNew-Product Concepts withGroups of Target CustomersProduct Image is the Way Consumers Perceive an Actual or Potential Product3. Choose the One That Has theStrongest Appeal to TargetCustomers
10 DaimlerChrysler’s Electric Car The company’s task is to develop its fuel-cell powered electric car into alternative product concepts, find out how attractive each is to customers, and choose the best one.
11 New Product Development Process Step 4. Marketing Strategy Part One Describes Overall:Target MarketPlanned Product PositioningSales, Market Share, & Profit GoalsNew Product Development Process Step 4. Marketing StrategyPart Two Describes First-Year:Product’s Planned PriceDistributionMarketing BudgetPart Three Describes Long-Run:Sales & Profit GoalsMarketing Mix Strategy
12 Step 5. Business Analysis Step 6. Product Development Review of Product Sales, Costs, and ProfitsProjections to See if They Satisfy Company ObjectivesStep 5. Business Analysis Step 6. Product DevelopmentIf No, EliminateProduct ConceptIf Yes, Move toProduct Development
13 New Product Development Process Step 7. Test Marketing Product and marketing program are introduced into more realistic market settings.Can be very expensive and time consuming.Test the following:Positioning strategy,Advertising,Distribution,Pricing,Branding,Packaging,Budget levels.
14 New Product Development Process Step 8. Commercialization Introducing the New Product into the MarketWhen is theRight Time toIntroduceProduct?Where toLaunch aNewProduct?
15 Interactive Student Assignments Form students into groups of three to five. Each group should read the opening vignette to the chapter about Microsoft and the software industry. Each group should then answer the following questions:Comment on Microsoft’s ability to bring new products to the marketplace.What lies ahead for Microsoft?What secrets has Microsoft learned?
16 Speeding Up New-Product Development Step 1Step 2Step 3Step 4Simultaneous (Team-Based)Step 1Step 2Step 3Step 4Sequential
17 Product Life Cycle (Fig. 9-2) TimeProductDevelop-mentIntroductionProfitsSalesGrowthMaturityDeclineLosses/Investments ($)Sales andProfits ($)Sales and Profits Over the Product’s Life From Inception to Demise
18 Applications of the Product Life Cycle Product class which has the longest life cycles (i.e. gas-powered cars),Product form which tends to have the standard PLC shape (i.e. minivans),Brand which can change quickly because of changing competitive attacks and responses (i.e. Ford Taurus),Style which is a basic and distinctive mode of expression (formal clothing),Fashion which is a popular style in a given field (business casual),Fad which is a fashion that enters quickly, is adopted quickly, and declines fast (pet rocks).
19 Problems Using the PLCThe PLC Concept can be applied by marketers for describing how products and markets work, but may also present some problems: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
20 Introduction Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesCostsProfitsMarketing ObjectivesProductPriceLow salesHigh cost per customerNegative or lowCreate product awareness and trialOffer a basic productUsually is highDistributionHigh distribution expensesAdvertisingSpending is high to inform consumers
21 Growth Stage of the PLCSummary of Characteristics, Objectives, & StrategiesSalesCostsProfitsMarketing ObjectivesProductPriceRapidly rising salesAverage cost per customerRising profitsMaximize market shareOffer new product features and modelsRemain where they are or fall slightlyDistributionIncrease number of distribution outletsAdvertisingEducating consumers and meeting competition
22 Maturity Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesCostsProfitsMarketing ObjectivesProductPriceBegin to slowLow cost per customerHigh profits, then lower profitsMaximize profits while defending market shareMay modify productMay declineDistributionBuild more intensive distributionAdvertisingStress brand differences and benefits
23 Maturity Stage of the PLC Modifiying the MarketCompany tries to increase consumption of the current productModifying the ProductChanging characteristics such as quality, features, or styles to attract new usersModifying the Marketing MixCompany tries to improve sales by changing one or more marketing mix elements
24 Decline Stage of the PLC Summary of Characteristics, Objectives, & StrategiesSalesCostsProfitsMarketing ObjectivesProductPriceDeclining salesLow cost per customerDeclining profitsReduce expenditure and maintain, harvest, or drop the productPhase out weak itemsCut priceDistributionSelective: phase out unprofitable outletsAdvertisingReduce to level needed to retainhard-core loyal customers
25 Discussion QuestionPick a soft drink, car, or food product, and trace the product’s life cycle.Project when the product might enter a decline stage and discuss strategies to reverse the decline.This is an action-oriented discussion question intended to get the student to apply the information and knowledge gained from the text material to a “real-world” example. The instructor can apply more structure by specifically assigning which product the students will use (the instructor could select from any of the areas mentioned in the question) or the class can be divided into teams and given the assignment. However, the method of administration, the instructor should allow enough time to discuss the results of the project so all students can benefit from the learning experience.Students should carefully follow the life cycle description given in the chapter (See Table 9-2 for a good summary of the stages or Marketing at Work 9-3 for a practical application illustrations). If there is deviation, the student should be asked to explain the rationale for the deviation. In addition, students should be asked how they drew their conclusions on the decline of their chosen product. Factors that contributed to the decline should be discussed. How could the decline be reversed (if at all)?
26 Rest Stop: Reviewing 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.Explain how marketing strategies change during the product’s life cycle.