Copyright © 2005 Pearson Education Inc. New Product Development and Product Life-Cycle Strategies Principles of Marketing

Copyright © 2005 Pearson Education Inc. Learning Objectives After studying this chapter, you should be able to: –Explain how companies find and develop new-product ideas –List and define the steps in the new-product development process –Describe the stages of the product life cycle –Describe how marketing strategies change during the product’s life cycle Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. Types of New Products Innovative Enhancements or Different from existing Imitative

Copyright © 2005 Pearson Education Inc. 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 Figure 11.1 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. 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 Figure 11.1 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. 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 Figure 11.1 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. 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 Figure 11.1 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. Test marketing Prof. Jahanzaib Yousaf When firms test market New product with large investment Uncertainty about product or marketing program When firms may not test market Simple line extension Copy of competitor product Low costs Management confidence

Copyright © 2005 Pearson Education Inc. 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 Figure 11.1 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. Product Life-Cycle Strategies Product life cycle (PLC): the course of a product’s sales and profits over its life Figure 11.2 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. Prof. Jahanzaib Yousaf Product Life-Cycle Strategies Slow sales growth Little or no profit High distribution and promotion expense Introduction Stage

Copyright © 2005 Pearson Education Inc. Prof. Jahanzaib Yousaf Product Life-Cycle Strategies Sales increase Increased Consumer awareness New competitors enter the market Price stability or decline to increase volume Profits increase Promotion and manufacturing costs gain economies of scale Growth Stage

Copyright © 2005 Pearson Education Inc. Prof. Jahanzaib Yousaf Product Life-Cycle Strategies Slowdown in sales High Competition & Market Saturation Substitute products Increased promotion and R&D to support sales and profits Increased Variants Maturity Stage

Copyright © 2005 Pearson Education Inc. Prof. Jahanzaib Yousaf Product Life-Cycle Strategies Market modification (New Segments) Product modification (New Variants) Marketing mix modification Maturity Stage Strategies

Copyright © 2005 Pearson Education Inc. Prof. Jahanzaib Yousaf Product Life-Cycle Strategies Low Sales Volumes resulting in decrease in revenues & profits Cost cuts Maintain the product Harvest the product Drop the product Decline Stage

Copyright © 2005 Pearson Education Inc. Styles, Fashions, and Fads Style: basic and distinctive mode of expression Fashion: currently accepted or popular style in a given field Fad: a fashion the enters quickly, adopted with great zeal, peaks early, and decline very fast Figure 11.3 Prof. Jahanzaib Yousaf

Copyright © 2005 Pearson Education Inc. Summary of PLC (Table 11.2) Prof. Jahanzaib Yousaf