Presentation on theme: "Objectives Understand how companies find and develop new-product ideas. Learn the steps in the new-product development process. Know the stages of the."— Presentation transcript:
0 New-Product Development and Product Life-Cycle Strategies Chapter 10
1 ObjectivesUnderstand how companies find and develop new-product ideas.Learn the steps in the new-product development process.Know the stages of the product life cycle.Understand how marketing strategies change during the product’s life cycle.
2 Case Study Microsoft $50 billion in profits over 27 years Early new-product development relied heavily on copying the competition$4.2 billion annually invested in R & DInnovation is critical to Microsoft’s future successMuch of R & D efforts are Internet relatedMany new products and services are in development
3 Definition New Product Development Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.
4 New Product Development Strategy New products can be obtained via acquisition or development.New products suffer from high failure rates.Several reasons account for failure.
5 New Product Development Strategy New Product Development Process:Stage 1: Idea GenerationInternal idea sources:R & DExternal idea sources:Customers, competitors, distributors, suppliers
6 New Product Development Strategy New Product Development Process:Stage 2: Idea ScreeningProduct development costs increase substantially in later stages.Ideas are evaluated against criteria; most are eliminated.
7 New Product Development Strategy New Product Development Process:Stage 3: Concept Development and TestingProduct concepts provide detailed versions of new product ideas.Concept tests ask target consumers to evaluate product concepts.
8 New Product Development Strategy New Product Development Process:Stage 4: Marketing Strategy DevelopmentStrategy statements describe:The target market, product positioning, and sales, share, and profit goals for the first few years.Product price, distribution, and marketing budget for the first year.Long-run sales and profit goals and the marketing mix strategy.
9 New Product Development Strategy New Product Development Process:Stage 5: Business AnalysisSales, cost, and profit projectionsStage 6: Product DevelopmentPrototype development and testing
10 New Product Development Strategy New Product Development Process:Stage 7: Test MarketingStandard test marketsControlled test marketsSimulated test marketsStage 8: Commercialization
11 Product Life-Cycle Strategies The Typical Product Life Cycle (PLC) Has Five StagesProduct Development, Introduction, Growth, Maturity, DeclineNot all products follow this cycle:FadsStylesFashions
12 Product Life-Cycle Strategies The product life cycle concept can be applied to a:Product class (soft drinks)Product form (diet colas)Brand (Diet Dr. Pepper)Using the PLC to forecast brand performance or to develop marketing strategies is problematic
13 Product Life-Cycle Strategies PLC StagesBegins when the company develops a new-product ideaSales are zeroInvestment costs are highProfits are negativeProduct developmentIntroductionGrowthMaturityDecline
14 Product Life-Cycle Strategies PLC StagesLow salesHigh cost per customer acquiredNegative profitsInnovators are targetedLittle competitionProduct developmentIntroductionGrowthMaturityDecline
15 Marketing Strategies: Introduction Stage Product – Offer a basic productPrice – Use cost-plus basis to setDistribution – Build selective distributionAdvertising – Build awareness among early adopters and dealers/resellersSales Promotion – Heavy expenditures to create trial
16 Product Life-Cycle Strategies PLC StagesRapidly rising salesAverage cost per customerRising profitsEarly adopters are targetedGrowing competitionProduct developmentIntroductionGrowthMaturityDecline
17 Marketing Strategies: Growth Stage Product – Offer product extensions, service, warrantyPrice – Penetration pricingDistribution – Build intensive distributionAdvertising – Build awareness and interest in the mass marketSales Promotion – Reduce expenditures to take advantage of consumer demand
18 Product Life-Cycle Strategies PLC StagesSales peakLow cost per customerHigh profitsMiddle majority are targetedCompetition begins to declineProduct developmentIntroductionGrowthMaturityDecline
19 Marketing Strategies: Maturity Stage Product – Diversify brand and modelsPrice – Set to match or beat competitionDistribution – Build more intensive distributionAdvertising – Stress brand differences and benefitsSales Promotion – Increase to encourage brand switching
20 Product Life-Cycle Strategies PLC StagesDeclining salesLow cost per customerDeclining profitsLaggards are targetedDeclining competitionProduct developmentIntroductionGrowthMaturityDecline
21 Marketing Strategies: Decline Stage Product – Phase out weak itemsPrice – Cut priceDistribution – Use selective distribution: phase out unprofitable outletsAdvertising – Reduce to level needed to retain hard-core loyalistsSales Promotion – Reduce to minimal level