New Product Development and Product Life-Cycle Strategies Md. Abdur Rob B PHARM, MBA, PGD in DP

Major Stages in New Product Development Idea generation: systematic search for new ideas Internal sources: brainstorming External sources: customers, competitors, distributors and suppliers Idea screening: identify good ideas and drop poor ones Usefulness to consumers Good for company Fit with objectives and strategies Have the resources Add value

Major Stages in New Product Development Concept development: detailed version of the product concept in meaningful consumer terms Concept testing: testing new-product concepts for consumer appeal Marketing strategy: initial strategy for product concept: Target market, positioning, and sales, market share, and profit goals Price, distribution, and marketing budget Strategy statement, long-run sales, profit goals, and marketing mix

Major Stages in New Product Development Business analysis: review of sales, costs, and profit projections to determine if they meet company objectives. Product development: developing the product concept into a physical product Large investment Building a prototype Testing for safety, durability, and acceptability

Major Stages in New Product Development Test marketing: testing the product in more realistic market settings Determine the target market profile Assess consumer acceptability, trial, repeat purchase rate Evaluate trade reception and distribution penetration Design effective media plans Standard test markets Controlled test markets Simulated test market

Major Stages in New Product Development Commercialization: introducing a new product into the market Introduction timing Market rollout or full-scale introduction Sequential product development Simultaneous (team-based) product development

Product Life-Cycle Strategies

Product Life-Cycle Strategies Product life cycle (PLC): the course of a product’s sales and profits over its life

Summary of PLC

BCG Matrix

BCG MATRIX is one of the most FAMOUS AND SIMPLE portfolio planning matrix ,used by large companies having multi-products. Relative Market Share Cash Generation Market Growth rate Cash Usage Low High High Low It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories It is based on the combination of market growth and market share relative to the next best competitor.

STARS High growth, High market share Stars are leaders in business. They also require heavy investment, to maintain its large market share. It leads to large amount of cash consumption and cash generation. Attempts should be made to hold the market share otherwise the star will become a CASH COW. CASH COWS Low growth , High market share They are foundation of the company and often the stars of yesterday. They generate more cash than required. They extract the profits by investing as little cash as possible They are located in an industry that is mature, not growing or declining.

DOGS Low growth, Low market share Dogs are the cash traps. Dogs do not have potential to bring in much cash. Number of dogs in the company should be minimized. Business is situated at a declining stage. QUESTION MARKS High growth , Low market share Most businesses start of as question marks. They will absorb great amounts of cash if the market share remains unchanged. Why question marks? Question marks have potential to become star and eventually cash cow but can also become a dog. Investments should be high for question marks.

WHY BCG MATRIX? To assess : Profiles of products/businesses The cash demands of products The development cycles of products Resource allocation and ivestment decisions BENEFITS BCG MATRIX is simple and easy to understand. It helps to quickly and simply screen the opportunities open, and helps to think about how can make the most of them. It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.

Ansoff Matrix

Ansoff Matrix Long-term business strategy is depend on planning for their introduction of products and service Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth

Existing PRODUCTS New INCREASING RISK Existing MARKETS New MARKET PENETRATION Sell more in existing Markets This is the objective of higher market share in existing market Strategy: advertisement, awareness , trial, low price

MARKET EXTENSION/ DEVELOPMENT Existing PRODUCTS New INCREASING RISK Existing MARKETS New MARKET PENETRATION Sell more in existing Markets MARKET EXTENSION/ DEVELOPMENT Achieve higher sales/market share of existing products in new markets This is the strategy of selling an existing product to new markets. Strategy: selling to an overseas market, or a new market segment

Strategy: Develop new product, new test, new product personality Existing PRODUCTS New INCREASING RISK Existing MARKETS New MARKET PENETRATION Sell more in existing Markets PRODUCT DEVELOPMENT Sell new products in existing markets MARKET EXTENSION Achieve higher sales/market share of existing products in new markets Strategy: Develop new product, new test, new product personality

This is the most risky of all four strategies Existing PRODUCTS New INCREASING RISK Existing MARKETS New MARKET PENETRATION Sell more in existing Markets PRODUCT DEVELOPMENT Sell new products in existing markets MARKET EXTENSION Achieve higher sales/market share of existing products in new markets DIVERSIFICATION Sell new products in new markets This is the process of selling different, unrelated goods or services in unrelated markets This is the most risky of all four strategies Strategy: Develop new geographic or new location, Develop product to fulfil customer demand

Summary The matrix identifies different strategic areas in which a business COULD expand Managers need to asses the costs, potential gains and risks associated with the other options

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