1. 1 Lamb, Hair, McDaniel CHAPTER 11 Developing and Managing Products 2010-2011

2. 2 LO 1 Explain the importance of developing new products and describe the six categories of new products LO 2 Explain the steps in the new-product development process LO 3 Discuss global issues in new-product development LO 4 Explain the diffusion process through which new products are adopted LO 5 Explain the concept of product life cycles Learning Outcomes

3. 3 Explain the importance of developing new products and describe the six categories of new products The Importance of New Products LO 1

4. 4 Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products LO 1

5. 5 Explain the steps in the new-product development process The New Product Development Process LO 2

6. 6 The New-Product Development Process Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors LO 2

7. 7 New-Product Development Process New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product LO 2

8. 8 Idea Generation Customers Employees Distributors Competitors Vendors R & D Consultants Sources of New-Product Ideas Online http://www.ideo.com LO 2

9. 9 Tips for New Product Development  Disperse R & D around the globe  Keep teams small and empower employees  Flatten hierarchy  Encourage extensive brainstorming and generation of crazy new ideas  Welcome mistakes LO 2

10. 10 Idea Screening The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new- product strategy or are inappropriate for some other reason. Concept test: A test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions. LO 2

11. 11 Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability LO 2

12. 12 Development  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility  Final government approvals if needed LO 2

13. 13 Simultaneous Product Development A new team-oriented approach to new- product development where all relevant functional areas and outside suppliers participate in the development process. LO 2

14. 14 Test Marketing Online foodcom.com/signup The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. LO 2

15. 15 Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing Online http://www.newproductworks.com LO 2

16. 16 Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising LO 2

17. 17 New-Product Success Factors Listening to customers Producing the best product Vision of future market Strong leadership Commitment to new- product development Project-based team approach Getting every aspect right LO 2

18. 18 Idea generation Idea screening Business analysis Development Test marketing Commercialization Number of new product ideas Time 0 New-Product Development Process LO 2

19. 19 Beyond the Book Why New Products Fail NOTE: Supplemental content – not in book. No discernible benefits Poor match between features and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product LO 2

20. 20 Beyond the Book Success Factors NOTE: Supplemental content – not in book. Factors in Successful New Products Match between product and market needs Different from substitute products Benefit to large number of people LO 2

21. 21 Discuss global issues in new- product development Global Issues in New-Product Development LO 3

22. 22 Global Marketing Questions Develop product for potential worldwide distribution Modify for unique market requirements Design products to meet regulations and key market requirements LO 3

23. 23 Explain the diffusion process through which new products are adopted The Spread of New Products LO 4

24. 24 Diffusion The process by which the adoption of an innovation spreads. Diffusion LO 4

25. 25 Laggards Late Majority Early Majority Early Adopters Innovators LO 4 Categories of Adopters

26. 26 Trialability Observability Relative Advantage Compatibility Complexity Online http://www.electronicgadgetdepot.com LO 4 Product Characteristics and the Rate of Adoption

27. 27 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process LO 4 Marketing Implications of the Adoption Process

28. 28 Explain the concept of product life cycles Product Life Cycles LO 5

29. 29 Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). LO 5 Product Life Cycle

30. 30 Product Life Cycle Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0 LO 5

31. 31 Product Life Cycles for Styles, Fashions, and Fads LO 5

32. 32 Introductory Stage  High failure rates  Little competition  Frequent product modification  Limited distribution  High marketing and production costs  Negative profits with slow sales increases  Promotion focuses on awareness and information  Communication challenge is to stimulate primary demand LO 5

33. 33 Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution LO 5

34. 34 Maturity Stage  Sales increase at a decreasing rate  Saturated markets  Annual models appear  Lengthened product lines  Service and repair assume important roles  Heavy promotions to consumers and dealers  Marginal competitors drop out  Niche marketers emerge LO 5

35. 35 Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” LO 5

36. 36 Diffusion Process and PLC Curve LO 5

37. 37 Time INTRODUCTION GROWTH MATURITYDECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models. Frequent changes. More models. Frequent changes. Large number of models. Eliminate unprofitable models. Limited wholesale/ retail distributors. Expanded dealers. Long- term relations. Extensive. Margins drop. Shelf space. Phase out unprofitable outlets. Awareness. Stimulate demand. Sampling. Aggressive ads. Stimulate demand. Advertise. Promote heavily. Phase out promotion. High to recoup development costs. Fall as result of competition and efficient production. Prices fall (usually). Prices stabilize at low level. Sales Product Life Cycles LO 5

38. 38 E-readers E-readers such as Amazon’s Kindle, Barnes & Noble’s Nook, and Sony’s e-reader are increasingly available products that have sparked serious debate among book lovers, publishers, and techies about the future of printed text. –In what stage of the product life-cycle are these different readers? Sony e-Readers Barnes & Noble's Nook Amazon's Kindle –Who is adopting these products now? –Discuss the different company’s attempts at competitive advantage. LO 5