1. New product development & product life-cycle strategies
Chapter 9
New product development & product life-cycle strategies

2. New product development
New product development: the development of original products, product improvements, product modifications and new brands through the firm’s own product development efforts
New products can be obtained in 2 ways:
Through acquisition
Through new product development

3. New product development process
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing and
Commercialization

4. Step 1. Idea generation The systematic search for new product ideas
Internal idea sources: from employees, CEOs, board of directors, managers, supervisors etc.
External idea sources: from customers, suppliers, competitors etc.

5. Step 2. Idea screening
Screening new product ideas in order to spot good ideas and drop poor ones as soon as possible
New product screening asks three questions (RWW):
Is it real?
Can we win?
Is it worth doing?

6. Step 3. Concept development and testing
Product concept: a detailed version of the new product idea stated in meaningful consumer terms
Product idea: an idea for a possible product
Product image: the way consumers perceive an actual product
Concept development: developing the concept based on the idea and image
Concept testing: testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal

7. Step 4. Marketing strategy development
Designing an initial marketing strategy for a new product based on the product concept
Marketing strategy concept consists of three parts:
Target market, value proposition, sales, market share
Product’s planned price, distribution and marketing budget
Long run sales and profit goals

8. Step 5. Business analysis
A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives
Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable market offering
Step 6. Product development

9. Step 8. Commercialization
Step 7. Test marketing
The stage of new product development in which the product and marketing are tested in realistic market settings
Introducing a new product into the market
When to introduce?
Where to introduce?
Step 8. Commercialization

10. Style, fashion and fad
Style: a basic and distinctive mode of expression. It comes, goes away and comes back. For example, clothing (formal ,casual); art (realistic, abstract).
Fashion: a currently accepted or popular style in a given field. It comes and goes away slowly. For instance, formal business attire in 1990s, business casual look of 2000s.
Fad: a temporary period of usually high sales driven by consumer enthusiasm and immediate product or brand popularity. It comes and goes away quickly. For instance, Pokemon go reality game, Pet Rocks, crocs.

12. Product life-cycle strategies
PLC: the course of a product’s sales and profits over its lifetime.
5 stages of PLC:
Product development
Introduction
Growth
Maturity
Decline

13. Sales and profits over the product’s life from inception to decline

14. Stage 1. Product development
When a company finds and develops a new product idea
Firms develop new products
Product is still at the development stage
Zero sales
Zero profits
Lots of investment costs

15. Stage 2. Introduction
When the new product is first distributed and made available for purchase
Offer a basic product
Low sales
High promotion expenses
Build selective distribution
Profits are negative or low
Customers are innovators
Competitors are few in number

16. Stage 3. Growth When a product’s sales start climbing quickly
Offer product expansion
Rising sales
Rising profits
Reduce promotion
Build intensive distribution
Customers are early adopters
Competitors grow in number

17. Stage 4. Maturity When sales growth slows or levels off Peak sales
High profits
Increase promotion to encourage brand switching, stress brand differences and benefits
Customers are middle majorities
Competitors start declining from stable
Product managers should consider:
Modifying the market
Modifying the product and
Modifying the marketing mix

18. Stage 5. Decline When a product’s sales decline Declining sales
Declining profits
Reduce promotion to minimal level
Customers are laggards
Competitors decline in numbers
Management must decide what to do:
Maintain
Harvest or
Drop