Copyright Cengage Learning 2013 All Rights Reserved 1 Chapter 11: Developing and Managing Products Designed & Prepared by Laura Rush B-books, Ltd. Introduction to

2 Learning Outcomes Explain the importance of developing new products and describe the six categories of new products Explain the steps in the new-product development process Explain why some products succeed and others fail Discuss global issues in new-product development Explain the diffusion process through which new products are adopted Explain the concept of product life cycles LO 1 LO 2 LO 3 LO 4 LO 5 LO 6

3 New Product Advantages 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 Cengage Learning 2013 All Rights Reserved

4 Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products Copyright Cengage Learning 2013 All Rights Reserved

5 The New-Product Development Process Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors Copyright Cengage Learning 2013 All Rights Reserved

6 New-Product Development Process 1.New-Product Strategy 2.Idea Generation 3.Idea Screening 4.Business Analysis 5.Development 6.Test Marketing 7.Commercialization 8.New Product Copyright Cengage Learning 2013 All Rights Reserved

7 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 Copyright Cengage Learning 2013 All Rights Reserved

8 Success Factors Match between product and market needs Different from substitute products Factors in Successful New Products Benefit to large number of people Copyright Cengage Learning 2013 All Rights Reserved

9 Success Factors 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 Cengage Learning 2013 All Rights Reserved

10 Global Issues  Develop product for potential worldwide distribution  Build in unique market requirements  Design products to meet regulations and key market requirements Copyright Cengage Learning 2013 All Rights Reserved

11 Diffusion The process by which the adoption of an innovation spreads. Copyright Cengage Learning 2013 All Rights Reserved

12 Categories of Adopters Laggards Late Majority Early Majority Early Adopters Innovators Copyright Cengage Learning 2013 All Rights Reserved

13 Product Characteristics and the Rate of Adoption Trialability Observability Relative Advantage Compatibility Complexity Copyright Cengage Learning 2013 All Rights Reserved

14 Marketing Implications of the Adoption Process Direct from Marketer Word of Mouth Communication Aids the Diffusion Process Copyright Cengage Learning 2013 All Rights Reserved

15 Product Life Cycle A biological metaphor that traces the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Copyright Cengage Learning 2013 All Rights Reserved

16 U.S. Sales of Widgets Copyright Cengage Learning 2013 All Rights Reserved

17 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 Copyright Cengage Learning 2013 All Rights Reserved

18 Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution Copyright Cengage Learning 2013 All Rights Reserved

19 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 Copyright Cengage Learning 2013 All Rights Reserved

20 Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses “Organized abandonment” Copyright Cengage Learning 2013 All Rights Reserved