1Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Developing and Managing Products Prepared by Deborah Baker Texas Christian University Chapter 10

2Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objectives 1.Explain the importance of developing new products and describe the six categories of new products. 2. Explain the steps in the new-product development process. 3. Explain why some products succeed and others fail.

3Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objectives (continued) 4. Discuss global issues in new-product development. 5. Explain the diffusion process through which new products are adopted. 6. Explain the concept of product life cycles.

4Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Explain the importance of developing new products and describe the six categories of new products. 1 1 On Line On Line

5Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning New Product A product new to the world, the market, the producer, the seller, or some combination of these. 1 1

6Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning New Product Introductions, On Line On Line

7Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Categories of New Products New-To-The-World New Product Lines Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Six Categories of New Products Six Categories of New Products 1 1

8Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Explain the steps in the new-product development process. 2 2

9Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning The New-Product Development Process New Product Success Factors Long-Term Commitment New Product Strategy Capitalize on Experience Establish an Environment 2 2

10Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product New-Product Development Process 2 2

11Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas 2 2 On Line On Line

12Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. 2 2

13Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning 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. 2 2

14Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Concept Test A test to evaluate a new-product idea, usually before any prototype has been created. 2 2

15Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability 2 2

16Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Development  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Manufacturing feasibility  Final government approvals if needed 2 2

17Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Simultaneous Product Development A new team-oriented approach to new-product development. 2 2

18Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. 2 2 On Line On Line

19Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Checklist for Selecting Test Markets 2 2

20Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing 2 2

21Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Steps in Marketing a New Product Steps in Marketing a New Product 2 2

22Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Explain why some products succeed and others fail. 3 3

23Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Why New Products Fail  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 3 3

24Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Success Factors Match between product and market needs Unique but superior product Benefit to large number of people Factors in Successful New Products 3 3 On Line On Line

25Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Success Factors 3 3

26Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Discuss global issues in new-product development. 4 4

27Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Global Issues  Develop product for potential worldwide distribution  Build in unique market requirements  Design products to meet regulations and key market requirements 4 4 On Line On Line

28Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Explain the diffusion process through which new products are adopted. 5 5

29Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Diffusion The process by which the adoption of an innovation spreads. 5 5

30Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Categories of Adopters Laggards Late Majority Early Majority Early Adopters Innovators Categories of Adopters in the Diffusion Process 5 5

31Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Diffusion of Three Familiar Products among U.S. Households 5 5

32Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Categories of Adopters Percentage of Adopters Time Innovators 2.5% Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16% 5 5

33Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Product Characteristics and the Rate of Adoption Trialability Observability Relative Advantage Compatibility Complexity Product Characteristics Predict Rate of Adoption 5 5 On Line On Line

34Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Marketing Implications of the Adoption Process Direct from Marketer Word of Mouth Communication Aids the Diffusion Process 5 5

35Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Learning Objective Explain the concept of product life cycles. 6 6

36Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning 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). 6 6

37Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Product Life Cycle Time Dollars Product Category Profits Product Category SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0 6 6

38Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Product Life Cycles for Styles, Fashions, and Fads 6 6

39Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Extending the PLC  Change product  Change product use  Change product image  Change product positioning 6 6

40Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Introductory Stage  High failure rates  Little competition  Frequent product modification  Limited distribution  High marketing and production costs  Negative profits  Promotion focuses on awareness and information  Intensive personal selling to channels Full-Scale Launch of New Products 6 6

41Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Promotion emphasizes brand ads  Goal is wider distribution  Prices normally fall  Development costs are recovered Offered in more sizes, flavors, options Offered in more sizes, flavors, options 6 6

42Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Maturity Stage  Declining sales growth  Saturated markets  Extending product line  Stylistic product changes  Heavy promotions to dealers and consumers  Marginal competitors drop out  Prices and profits fall  Niche marketers emerge Many consumer products are in Maturity Stage Many consumer products are in Maturity Stage 6 6 On Line On Line

43Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses Rate of decline depends on change in tastes or adoption of substitute products Rate of decline depends on change in tastes or adoption of substitute products 6 6

44Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Marketing Strategies for PLC INTRODUCTIONGROWTHMATURITYDECLINE 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 Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. 6 6

45Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Diffusion Process and PLC Curve Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusioncurve Introduction Growth Maturity Decline Sales 6 6