For use only with Perreault and McCarthy texts. © 2006 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin CHAPTER NINE Product Management and New Product Development

1. Understand how product life cycles affect strategy planning. 2. Understand what is involved in designing new products and what “new products” really are. 3. Understand the new-product development process. 4. See why product liability must be considered in screening new products Understand the need for product or brand managers Understand how total quality management can improve goods and services. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin When we finish this lecture you should

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Managing Products over Their Life Cycles Exhibit 9-1

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Market Introduction – Investing in the Future +

Monopolistic Competition Develops Innovation Attracts Competition Market Growth – Profits Go Up and Down © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Profits Peak and Then Decline Don’t Ignore Long-Term Competitive Trends!

Persuasive, More Costly Promotion Brands Are More Similar Greater Price Competition/Price Sensitivity Persuasive, More Costly Promotion Brands Are More Similar Greater Price Competition/Price Sensitivity © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Market Maturity – Sales Level Off, Profits Continue Down Maturity May Last a Long Time

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Sales Decline – A Time of Replacement +

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Which Stage of the PLC?

AND © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Individual Brands Individual Brands May not follow the classic pattern May be introduced in market growth or maturity Not all brands are equally strong Market Definitions Market Definitions Should be carefully developed Different markets, different stages Contribute to the length of the cycle Product Life Cycles Should Be Related to Specific Markets

Can Be Tried Easy to Communicate Competitive Advantage Competitive Advantage Can Be Tried Easy to Communicate Competitive Advantage Competitive Advantage Easy to Use Compatible © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product Life Cycles Vary in Length Some Products Move Fast

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Interactive Exercise: Adoption

The Early Bird Usually Profits Product Life Cycles Are Getting Shorter The Early Bird Usually Profits Product Life Cycles Are Getting Shorter Fashions and Fads © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Other Issues in Product Life Cycle Length

Competitors May Help Adoption Anticipate Speed of Movement Consider the Four Ps Allocate Sufficient Money Allocate Sufficient Money Be Flexible © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Planning for Different Stages of the Product Life Cycle Market Introduction & Growth

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Managing Mature Products +

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Improve the Product or Develop a New One Exhibit 9-3 ’’’

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Are Product Modifications Really New Products? +

Don’t Pull the Plug So Quickly Phase-out May Be Necessary © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Phasing Out Dying Products Profitability Product Line Customer Support Sales Decline Can Be Profitable

What Is a New Product? FTC Rule: 6 Months Ethical Dilemmas Exist New Product Planning © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

New Product

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An Organized New Product Development Process is Critical Exhibit 9-4

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step 1: Idea Generation

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step 2: Screening

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step 3: Idea Evaluation

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step 4: Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step 5: Commercialization

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin New Product Development: A Total Company Effort Exhibit 9-6 +

Common in Large Companies Product/Brand Managers Some Are “Product Champions” Need for Product Managers © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Building Quality into the Implementation Effort +

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin TQM Is Easier Said Than Done Exhibit 9-7

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Why Things Go Wrong Exhibit 9-8 +

Server Is Linked To the Service Training Is Crucial © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Building Quality into Services Empowerment Works

Separate the Routine from the Special Specify Jobs and Benchmark Managers Lead the Effort Manage Expectations with Good Communication © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Other Issues in Quality Implementation Efforts Get a Return on Quality

Product life cycle Market introduction Market growth Market maturity Sales decline Fashion New product Federal Trade Commission (FTC) Consumer Product Safety Act Product liability © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Key Terms Concept testing Product managers Brand managers Total quality management (TQM) Continuous improvement Pareto chart Fishbone diagram Empowerment Benchmarking