FINAL STEPS OF NEW PRODUCT DEVELOPMENT

 Test marketing- the stage at which the product and marketing program are introduced into a more realistic marketing setting  Test marketing provides the marketer with experience in testing the product and entire marketing program before full introduction TEST MARKETING

 Firms test market when  They are developing a new product after a large investment  There is uncertainty about a product or marketing program  Firms may not test market  If the product is a copy of a competitor’s product  If there is a high degree of management confidence  To keep costs low TEST MARKETING

 Approaches to test marketing  Standard test markets  Controlled test markets  Simulated test markets TEST MARKETING

 Standard test markets- small representative markets where the firm conducts a full marketing campaign and uses store audits, consumer and distributor surveys and other measures to gauge product performance  Results are used to  Forecast national sales and profits  Discover product problems  Fine-tune the marketing program TEST MARKETING

 Challenges of standard test markets  Cost  Time  Competitors can monitor the test  Competitor interference  Competitors gain access to the new product before introduction TEST MARKETING

 Controlled test markets- in panels of stores that have agreed to carry new products for a fee  Pros  Less expensive than standard test markets  Faster than standard test market  Cons  Competitors gain access to the new products TEST MARKETING

 Simulated test markets- events where a firm will create a shopping environment and note how many consumers buy the new product and competing products.  Provides a measure of trial and the effectiveness of promotion  Researchers can interview consumers TEST MARKETING

 Pros of simulated test markets  Less expensive than other test methods  Faster  Restricts access by competitors  Cons of simulated test markets  Not considered as reliable and accurate due to the controlled setting TEST MARKETING

 Commercialization- the introduction of the new product  Includes  When to launch  Where to launch COMMERCIALIZATION

PRODUCT LIFE CYCLE

 Product Life Cycle (PLC)– the course that a product’s sales and profits take over its lifetime.  Stages  Introduction  Growth  Maturity  Decline PRODUCT LIFE CYCLE

 When the new product is first launched  Slow sales growth  Little or no profit  High distribution and promotion expense  Attempts to build product awareness INTRODUCTION STAGE

 When the new product satisfies the market  Sales increase  New competitors enter the market  Price stabilizes or declines to increase volume  Profits increase  Promotion and manufacturing costs gain economies of scale  Product quality increases  New features  Attempts to maximize market share  Goal is to generate interest GROWTH STAGE

 Long-lasting stage of a product that has gained consumer acceptance  Peak sales  High profits  Many suppliers  Increased promotion and R&D to support sales and profits  Goal is to stress brand differences through advertising MATURITY STAGE

 When sales decline or level off for an extended time, creating a weak product  A company must decide whether to  Maintain the product  Harvest the product  Drop the product DECLINE STAGE

 To combat the decreased sales and public attention, companies often change their approach to sell a product  Modifying strategies  Market modifying  Product modifying  Marketing mix modifying DECLINE STAGE

 Market modifying strategy- trying to increase consumption of the current product  A company tries to  Acquire new users  Increase the usage of existing users  Create new market segments DECLINE STAGE

 Marketing mix modifying strategy- changing one or more of the marketing mix elements  Companies edit  Pricing  Product promotion  Distribution channels DECLINE STAGE