1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 11 Developing and Managing Products Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10

Copyright ©2009 by Cengage Learning Inc. All rights reserved New Product 2 A product new to the world, the market, the producer, the seller, or some combination of these. LO I

Copyright ©2009 by Cengage Learning Inc. All rights reserved New Product Advantages 3 LO I Being first on the market has numerous advantages: Increased sales through longer sales life Increased margins Increased product loyalty More resale opportunities Greater market responsiveness A sustained leadership position

Copyright ©2009 by Cengage Learning Inc. All rights reserved Categories of New Products 4 LO I New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products

Copyright ©2009 by Cengage Learning Inc. All rights reserved The New-Product Development Process 5 LO 2 Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors

Copyright ©2009 by Cengage Learning Inc. All rights reserved New-Product Development Process 6 LO 2 New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product

Copyright ©2009 by Cengage Learning Inc. All rights reserved Idea Generation 7 LO 2 Customers Employees Distributors Competitors Vendors R & D Consultants Sources of New-Product Ideas Online

Copyright ©2009 by Cengage Learning Inc. All rights reserved Brainstorming 8 The process of getting a group to think of unlimited ways to vary a product or solve a problem. LO 2

Copyright ©2009 by Cengage Learning Inc. All rights reserved Idea Screening 9 Screening LO 2 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.

Copyright ©2009 by Cengage Learning Inc. All rights reserved Concept Test 10 LO 2 Concept Test A test to evaluate a new-product idea, usually before any prototype has been created.

Copyright ©2009 by Cengage Learning Inc. All rights reserved Business Analysis 11 LO 2 Considerations in Business Analysis Stage Demand Cost Sales Profitability

Copyright ©2009 by Cengage Learning Inc. All rights reserved Development 12 LO 2  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility  Final government approvals if needed

Copyright ©2009 by Cengage Learning Inc. All rights reserved Simultaneous Product Development 13 LO 2 Simultaneous Product Development Simultaneous Product Development A team-oriented approach to new-product development.

Copyright ©2009 by Cengage Learning Inc. All rights reserved Test Marketing 14 LO 2 Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

Copyright ©2009 by Cengage Learning Inc. All rights reserved Alternatives to Test Marketing Single-source research using supermarket scanner data Simulated (laboratory) market testing Online test marketing 15 LO 2 Online

Copyright ©2009 by Cengage Learning Inc. All rights reserved Commercialization 16 LO 2 Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising

Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 17 LO 3

Copyright ©2009 by Cengage Learning Inc. All rights reserved Success Factors 18 LO 3 Match between product and market needs Different from substitute products Factors in Successful New Products Benefit to large number of people

Copyright ©2009 by Cengage Learning Inc. All rights reserved Success Factors 19 LO 3 Listening to customers Producing the best product Vision of future market Strong leadership Commitment to new- product development Project-based team approach Getting every aspect right Willingness to fail occasionally

Copyright ©2009 by Cengage Learning Inc. All rights reserved Diffusion 20 LO 5 Diffusion The process by which the adoption of an innovation spreads.

Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Characteristics and the Rate of Adoption 21 LO 5 Trialability Observability Relative Advantage Compatibility Complexity Online

Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Implications of the Adoption Process 22 LO 5 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process

Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Diffusion Process for New Products 23 LO 5

Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Life Cycle 24 LO 6 Product Life Cycle A biological metaphor that traces the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Life Cycle 25 LO 6 Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0

Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Life Cycles for Styles, Fashions, and Fads 26 LO 6

Copyright ©2009 by Cengage Learning Inc. All rights reserved Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and information Communication challenge is to stimulate primary demand 27 LO 6

Copyright ©2009 by Cengage Learning Inc. All rights reserved Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution 28 LO 6

Copyright ©2009 by Cengage Learning Inc. All rights reserved Maturity Stage Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge 29 LO 6

Copyright ©2009 by Cengage Learning Inc. All rights reserved Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses “Organized abandonment” 30 LO 6

Copyright ©2009 by Cengage Learning Inc. All rights reserved Diffusion Process and PLC Curve 31 LO 6 Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusioncurve Introduction Growth Maturity Decline Sales