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Innovation, Product Development, and the Product Life Cycle

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Presentation on theme: "Innovation, Product Development, and the Product Life Cycle"— Presentation transcript:

1 Innovation, Product Development, and the Product Life Cycle
“It’s so new we don’t know what it does, but nobody else has it so we’re selling the hell out of it!”

2 64 ideas 1 idea Testing time Ideas Marketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace 10% of ideas reach the test market stage 50% of new products fail in test marketing 50% of those fail on national launch only 2.5% ever enter the marketplace 1 entrant for every 64 ideas the average new product that fails costs about $50 million some product failures have losses of over $100 million for some companies

3 The Four Ps Target Market Product Price Product variety Quality Design
Features Accessories Brand name Packaging Sizes Services Warranties Returns, repairs & support List price Wholesale pricing Seasonal pricing Discounts Price flexibility Allowances Payment period Payment methods Credit terms Product bundling Target Market Place Promotion Distribution channels Coverage Assortments Locations Inventory management Warehousing availability Order processing Transportation costs Sales promotion Personal selling Advertising Sales force Public relations Direct marketing


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11 Fairchild Semiconductor Product Lifecycle

12 What’s your product lifecycle mix?
Team activity: Construct a product life cycle diagram for one of the companies in your team What’s your product lifecycle mix?

13 Boston Consulting Group (BCG) positions throughout the lifecycle

14 Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogs High growth business strong in competitive market; high point share & ideal business; promote question marks & support R&D Low relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestment Low growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars

15 The GE/McKinsey Matrix
Relative market share Profit margins Ability to compete on price & quality Knowledge of customer & market Competitive strengths & weaknesses Technological capability Caliber of management The GE/McKinsey Matrix Business Strengths High Medium Low Invest in, growth strategy Market size & growth Industry profit margins Competitive intensity Seasonality Cyclicity Economies of scale Technology Social, environmental, legal, & human impacts Monitor performance, selective strategy Industry Attractiveness High Medium Low No growth or investment, consider divestment or liquidation


17 Ansoff’s Product/Market Matrix Existing products New Products
Market Penetration: Increase product purchase in existing markets (withdrawal, do nothing, consolidate, retrenchment) Revitalize brand image Coordinate advertising and sales training Adapt to market change Increase market share Increase consumer usage (frequency, quantity, new application) Product Development: Introduce new products into existing markets; can be risky & expensive Product launch Add product features & refinements Develop new products for same market Existing Markets Market Development: Explore new markets for existing products; when distinctive competencies rest with product not market Expanding geographic distribution Targeting new customer segments Diversification: Introduce new products into new markets; horizontal, vertical, conglomerate Acquisition/merger New business venture New Markets

18 Conclusions about marketing matrix models--
There is a risk of using matrix models is misclassifying businesses Use multiple models to ensure better coverage Know the strengths and limits of each model; when to use and avoid them Integrate the information from matrices with other sources of information and comparison Don't let the matrix make decisions-- people make decisions!

19 Market Team Formation Form team, acquainted, communication & schedules
Team name & member names Decide on preference for marketing ethics team presentations (e.g., bottled water, marketing to kids, data mining/RFID & privacy, political campaigns, social media marketing) Current practices & facts Pro/con arguments Ethical issues Your position/resolution

20 S-e-g-m-e-n-t-a-t-i-o-n
Next Week: Market S-e-g-m-e-n-t-a-t-i-o-n Be able to describe yourself using segmentation concepts Be able to discuss how your company uses (or can use) segmentation Explore a market segment for your company and how that might add value to your business

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