©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 0 in Chapter 10 Chapter 10 Developing, Positioning, and Differentiating Products through the Life Cycle PowerPoint by Karen E. James Louisiana State University - Shreveport

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 1 in Chapter 10 Objectives  Understand the challenges a company faces in developing and introducing new products.  Learn the main stages in developing new products and how they can be better managed.  Know the factors that affect the rate at which consumers adopt new products.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 2 in Chapter 10 Objectives  Learn what marketing strategies are appropriate at each stage of the product life cycle.  Understand how a company can choose and communicate an effective market position.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 3 in Chapter 10 New Product Development  What is a “New” Product? –New-to-the-world products –New product lines –Additions to existing product lines –Improvements and revisions of existing products –Repositioned products –Cost reduction products

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 4 in Chapter 10 New Product Development  New Product Failure is Rampant: –95% of new U.S. consumer products –90% of new European consumer products  Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 5 in Chapter 10 New Product Development  Successful new products: –Offer a strong relative advantage –Reflect better understanding of customer needs, and beat the competition to market –Exhibit higher performance-to-cost ratios and higher contribution margins –Are launched with larger budgets –Have stronger top management support

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 6 in Chapter 10 Managing New Products  Idea generation  Idea screening  Concept development  Concept testing  Marketing strategy development  Business analysis New Product Development Process: Ideas to Strategy

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 7 in Chapter 10 Managing New Products  Product development  Market testing  Commercialization New Product Development Process: Development to Commercialization

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 in Chapter 10 Consumer Adoption Process  Adopters of new products move through five stages: –Awareness –Interest –Evaluation –Trial –Adoption

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 9 in Chapter 10 Consumer Adoption Process  People adopt new products at different rates –Innovators –Early adopters –Early majority –Late majority –Laggards

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 in Chapter 10 Consumer Adoption Process  Five product characteristics influence the rate of adoption: –Degree of relative advantage –Degree of compatibility –Degree of complexity –Degree of divisibility (trialability) –Degree of communicability

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 in Chapter 10 Marketing Through the Product Life Cycle  Five product characteristics influence the rate of adoption: –Degree of relative advantage –Degree of compatibility –Degree of complexity –Degree of divisibility (trialability) –Degree of communicability

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 in Chapter 10 Stages of the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Low sales  High costs per customer  Negative profits  Innovator customers  Few competitors

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 in Chapter 10 Stages of the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Rising sales  Average costs  Rising profits  Early adopters customers  Growing competition

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 in Chapter 10 Stages of the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Peak sales  Low costs  High profits  Middle majority customers  Stable/declining competition

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 15 in Chapter 10 Stages of the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Declining sales  Low costs  Declining profits  Laggard customers  Declining competition

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 16 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Objective: to create awareness and trial  Offer a basic product  Price at cost-plus  Selective distribution  Awareness – dealers and early adopters  Induce trial via heavy sales promotion

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 17 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Objective: maximize market share  Offer service, product extensions, warranty  Price to penetrate  Intensive distribution  Awareness and interest – mass market  Reduce promotions due to heavy demand

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 18 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Objective: maximize profit while defending market share  Diversify brands/items  Price to match or beat competition  Intensive distribution  Stress brand differences and benefits  Increase promotions to encourage switching

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 19 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages  Introduction  Growth  Maturity  Decline  Objective: reduce costs and milk the brand  Phase out weak models  Cut price  Selective distribution  Reduce advertising to levels needed to retain hard-core loyalists  Reduce promotions to minimal levels

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 20 in Chapter 10 Positioning and Differentiation  Two views of positioning: –Ries and Trout: products are positioned in the mind of prospect –Treacy and Wiersema: positioning via value disciplines Product leader firm Operationally excellent firm Customer intimate firm

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 21 in Chapter 10 Positioning and Differentiation  Positioning statements: –To (target group and need) our (brand) is (concept) that (point-of-difference) Example: To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 22 in Chapter 10 Positioning and Differentiation  Differentiated products feature meaningful and valuable differences that distinguish the company’s offering from the competition.  Differences are stronger when they are important, distinctive, superior, preemptive, affordable, and profitable.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 23 in Chapter 10 Positioning and Differentiation  Form  Features  Performance  Conformance  Durability  Reliability  Repairability  Style  Design Product Differentiation Tools

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 24 in Chapter 10 Positioning and Differentiation  Ordering ease  Delivery  Installation  Customer training  Customer consulting  Maintenance and repair  Miscellaneous Services Differentiation Tools

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 25 in Chapter 10 Positioning and Differentiation  Competence  Courtesy  Credibility  Reliability  Responsiveness  Communication Personnel Differentiation Tools

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 26 in Chapter 10 Positioning and Differentiation  Coverage  Expertise  Performance Channel Differentiation Tools  Symbols  Media  Atmosphere  Events Image Differentiation Tools