Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 11 Developing and Managing Products © Jasper White/Stone/Getty Images 1 © 2013 by Cengage Learning Inc. All Rights Reserved.

Explain the importance of developing new products and describe the six categories of new products Explain the steps in the new-product development process Discuss global issues in new-product development Explain the diffusion process through which new products are adopted Explain the concept of product life cycles Learning Outcomes © 2013 by Cengage Learning Inc. All Rights Reserved

Explain the importance of developing new products and describe the six categories of new products The Importance of New Products 3 © 2013 by Cengage Learning Inc. All Rights Reserved. 1

Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products 4 © 2013 by Cengage Learning Inc. All Rights Reserved. 1

Explain the steps in the new-product development process The New-Product Development Process 5 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

New Product Success Factors Long-term commitment Company-specific approach Capitalize on experience Establish an environment 6 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Exhibit 11.1 New-Product Development Process 7 © 2013 by Cengage Learning Inc. All Rights Reserved.

a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation. 8 © 2013 by Cengage Learning Inc. All Rights Reserved. 2 New-Product Strategy is…

Idea Generation Customers Employees Distributors Vendors Competitors R & D Consultants Sources of New-Product Ideas 9 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Approaches for New Product Development Brainstorming Focus Group The process of getting a group to think of umlimited ways to vary a product or solve a problem. The objective of focus group interviews is to stimulate insightful comments through group interaction. 10 © 2013 by Cengage Learning Inc. All Rights Reserved. 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. a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions Screening is… A Concept Test is…

Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability 12 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Development  Creation of prototype  Sketch marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility 13 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Simultaneous Product Development A new team-oriented approach to new- product development where all relevant functional areas and outside suppliers participate in the development process. 14 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. 15 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Costs of Test Marketing Often take 1 year or more Can cost over $1 million Exposes new product to competitors Competitors can “jam” testing programs with their own promotions 16 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing 17 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Commercialization Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements Customer Advertising Ordering Materials 18 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

New-Product 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 19 © 2013 by Cengage Learning Inc. All Rights Reserved. 2

Why New Products Fail NOTE: Supplemental content – not in book. 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 20 © 2013 by Cengage Learning Inc. All Rights Reserved.

Discuss global issues in new- product development Global Issues in New-Product Development 21 © 2013 by Cengage Learning Inc. All Rights Reserved. 3

Global Marketing Questions Develop product for potential worldwide distribution Modify for unique market requirements Design products to meet regulations and key market requirements © 2013 by Cengage Learning Inc. All Rights Reserved. 22 3

Explain the diffusion process through which new products are adopted 23 © 2013 by Cengage Learning Inc. All Rights Reserved. The Spread of New Products 4

The process by which the adoption of an innovation spreads. Diffusion © 2013 by Cengage Learning Inc. All Rights Reserved. 24 4

Laggards Late Majority Early Majority Early Adopters Innovators Categories of Adopters © 2013 by Cengage Learning Inc. All Rights Reserved. 25 4

Trialability Observability Relative Advantage Compatibility Complexity Product Characteristics and the Rate of Adoption 26 © 2013 by Cengage Learning Inc. All Rights Reserved. 4

Direct from Marketer Word of Mouth Communication Aids the Diffusion Process Marketing Implications of the Adoption Process 27 © 2013 by Cengage Learning Inc. All Rights Reserved. 4

Explain the concept of product life cycles Product Life Cycles 28 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

Product Life Cycle (PLC) A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Product Life Cycle 29 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

Exhibit 11.2 Four Stages of the Product Life Cycle 30 © 2013 by Cengage Learning Inc. All Rights Reserved.

Exhibit 11.3 Product Life Cycles for Styles, Fashion, and Fads 31 © 2013 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 32 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution 33 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

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 34 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” 35 © 2013 by Cengage Learning Inc. All Rights Reserved. 5

Exhibit 11.4 Relationships between the Diffusion Process and the Product Life Cycle Product life cycle curve Diffusion curve 36 © 2013 by Cengage Learning Inc. All Rights Reserved.

Chapter 11 Video Maine Media Workshops For most of its existence, Maine Media Workshops had several areas of study that developed as their own brands, but to keep the school afloat, Maine Media Workshops has pulled its various media into one brand as a nonprofit school. Having one brand has enabled the school to reach out to a variety of sponsors and students with a cohesive message. / _lamb/videos/ch11.html 37 © 2013 by Cengage Learning Inc. All Rights Reserved.