1. Developing New Products and Managing the Product Life-Cycle8
Developing New Products
and Managing the Product Life-Cycle

2. Chapter Outline New-Product Development Strategy
The New-Product Development Process
Managing New-Product Development
Product Life-Cycle Strategies
Product Decisions and Social Responsibility
International Product and Services Marketing

3. Today’s Outline
New product development process Class activity three

4. What do you think about these NEW PRODUCTS?
Smucker’s ketchup
Gerber’s beef mushroom gravy
Fruit of loom detergent
Eagle snacks (Anheuser-Busch)

5. Why New Products Fail LO3 No discernible benefits
Chapter 10 Developing and Managing Products
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
Notes:*
In consumer goods, 70 to 90 percent of all new products fail within the first year. Reasons are shown on this slide.
Failure can be a matter of degree. Absolute failure occurs when a company cannot recover its development, marketing, and production costs. A relative product failure occurs when the product returns a profit but fails to achieve sales, profit, or market share goals.
Discussion/Team Activity:
Discuss products that have failed. Attempt to characterize the likely reasons for the failure.
LO3

6. New-product Development Strategy
New-product development is the development of original products, product improvements, product modifications, and new brands through the firm’s own product- development efforts.
Notes to Accompany Slide:
Reasons for product failure may include the company overestimating market size, poor design, incorrect positioning, launching at the wrong time, priced too high, or poorly advertised. A high-level executive might push a favorite idea despite poor marketing research findings. Sometimes the costs of product development are higher than expected, and sometimes competitors fight back harder than expected.

7. The New-product Development Process

8. Idea Generation Internal Idea Sources External Idea Sources
Notes to Accompany Slide:
Idea Generation is the systematic search for new-product ideas.
Internal sources: includes formal research and development.
External sources: includes distributors and suppliers; competitors; online collaborative; customers.

9. Idea Generation

10. Idea screening
Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible.
Real
Any real need and wants from customer?
Win
Any competitive advantage?
Worthdoing
Sufficient profit?

11. Concept Development and Testing
Product concept is a detailed version of the new-product idea stated in meaningful consumer terms.

12. Concept Development and Testing
Concept testing is testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

13. Concept Testing Questions Battery-Powered Electric Car

14. Marketing Strategy Development
Marketing Strategy Statement
Step 1
Target market
Planned value proposition
Sales
Market share
Profit goals
Step 2
Price
Distribution
Marketing budget
Step 3
Long-run sales
Marketing mix strategy

15. Business Analysis
Business analysis is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

16. Product development
Product development is developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable market offering.

17. Test marketing
Test marketing is the stage of new-product development in which the product and marketing program are tested in realistic market settings.
Notes to Accompany Slide:
Test marketing costs can be high, and it takes time that may allow competitors to gain advantages. When the costs of developing
and introducing the product are low, or when management is already confident about the new product, the company may do little or no test marketing. In fact, test marketing by consumer-goods firms has been declining in recent years.

18. Commercialization
Commercialization involves introducing a new product into the market.

19. New Product Development Process

20. Customer-Centered New-Product Development
New-product development that focuses on finding new ways to solve customer problems and create more satisfying customer experiences.
Notes to Accompany Slide:
One study found that the most successful new products are ones that are differentiated, solve major customer problems, and offer a compelling customer value proposition. Another study showed that companies that directly engage their customers in the new-product innovation process had twice the return on assets and triple the growth in operating income of firms that don’t.

21. Class activity four
New product development

22. Systematic New-Product Development
The new-product development process should be holistic and systematic rather than compartmentalized and haphazard.

23. Product Life-cycle Strategies
Notes to Accompany Slide:
Product development begins when the company finds and develops a new product idea. During product development, sales are zero and the company’s investment costs mount.
Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.
Growth is a period of rapid market acceptance and increasing profits.
Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
Decline is the period when sales fall off and profits drop.

24. Style, Fashion, and Fads Notes to Accompany Slide:
A style is a basic and distinctive mode of expression.
A fashion is a currently accepted or popular style in a given field.
Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.

25. Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

26. Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

27. General Mills Video Case