For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 10: Product Management and New-Product Development

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Product Life Cycle 10-3 Exhibit 10-1 Total Industry Profit + – $ 0 Market Introduction Market Growth Market Maturity Sales Decline Time Total Industry Sales

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill How Quickly a New Product Moves through the Product Life Cycle Comparative advantage—is the new product really better? The new product is easy for consumers to use Product advantages are easy to communicate Product is easy to try on a limited basis Product is compatible with customers' values and experiences

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Fashion Cycles Follow Three Stages Distinctiveness stage Some consumers seek—and are willing to pay for—products different from those that satisfy the majority Emulation stage When many consumers want to buy what is satisfying the original users or fashion leaders Economic Emulation stage Many consumers want the currently popular fashion, but at a lower price

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Patterns of Fashion, Fad, and Style Cycles for Fashion Products Styles may come back over time as fashions and fads Fashion cycles may last for some time as they spread beyond the innovators Fad cycles may be very short Sales level

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill New Products New products are critical to survival markets change competition changes product life cycles march on What is a new product? Firm's perspective a product that is new in any way FTC's perspective a product must be entirely new, or changed in a functionally significant way can only be called new for six months

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Key Issues Top Level Support Market-Guided R & D Integration & Coordination Authority 10-7 New-Product Development Management

For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Idea Generation Ideas from: Customers and users Marketing research Competitors Other markets Company people Middlemen Screening Strengths and Weaknesses Fit with objectives Market trends Rough ROI estimate Idea Evaluation Concept testing Customer reactions Rough estimates of cost, sales, profits Development R & D Develop model or service prototype Test marketing mix Revise plans as needed ROI estimate Commercial -ization Finalize product and marketing plan Start production and marketing “Roll out” in select markets Final ROI estimate 10-5 Exhibit 10-4 New-Product Development Process