1. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 11 Developing and Managing Products 2011-2012 © imagesource/photolibrary

2. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 LO 1 Explain the importance of developing new products and describe the six categories of new products LO 2 Explain the steps in the new-product development process LO 3 Discuss global issues in new-product development LO 4 Explain the diffusion process through which new products are adopted LO 5 Explain the concept of product life cycles Learning Outcomes

3. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 Explain the importance of developing new products and describe the six categories of new products The Importance of New Products LO 1

4. Chapter 11 Copyright ©2012 by Cengage Learning Inc. 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 LO 1

5. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Explain the steps in the new-product development process The New-Product Development Process LO 2

6. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 The New-Product Development Process Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors LO 2

7. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 LO 2 Exhibit 11.1 New-Product Development Process

8. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 New-Product Strategy a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation. New-Product Strategy is… LO 2

9. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Idea Generation Customers Employees Distributors Vendors Competitors R & D Consultants Sources of New-Product Ideas LO 2

10. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Approaches for New Product Development LO 2 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.

11. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Idea Screening LO 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. Screening is… a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions. A Concept Test is…

12. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability LO 2

13. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Development  Creation of prototype  Sketch marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility LO 2

14. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 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. LO 2

15. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. LO 2

16. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 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 LO 2

17. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing LO 2

18. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Commercialization LO 2 Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements Customer Advertising Ordering Materials

19. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 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 LO 2

20. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Beyond the Book 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

21. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Discuss global issues in new- product development Global Issues in New-Product Development LO 3

22. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Global Marketing Questions Develop product for potential worldwide distribution Modify for unique market requirements Design products to meet regulations and key market requirements LO 3

23. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Explain the diffusion process through which new products are adopted The Spread of New Products LO 4

24. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Diffusion The process by which the adoption of an innovation spreads. Diffusion LO 4

25. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Laggards Late Majority Early Majority Early Adopters Innovators LO 4 Categories of Adopters

26. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Trialability Observability Relative Advantage Compatibility Complexity LO 4 Product Characteristics and the Rate of Adoption

27. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process LO 4 Marketing Implications of the Adoption Process

28. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 Explain the concept of product life cycles Product Life Cycles LO 5

29. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 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). LO 5 Product Life Cycle

30. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 LO 5 Exhibit 11.2 Four Stages of the Product Life Cycle

31. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 LO 5 Exhibit 11.3 Product Life Cycles for Styles, Fashion, and Fads

32. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 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 LO 5

33. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution LO 5

34. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 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 LO 5

35. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” LO 5

36. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 LO 5 Exhibit 11.4 Relationships between the Diffusion Process and the Product Life Cycle Product life cycle curve Diffusion curve

37. Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Beyond the Book Chapter 11 Videos Kodak – Developing and Managing Products Place Kodak’s digital cameras in the product life cycle. http://www.cengage.com/marketing/boo k_content/1439039429_lamb/company_c lips/ch11.html Kodak – Developing and Managing Products Place Kodak’s digital cameras in the product life cycle. http://www.cengage.com/marketing/boo k_content/1439039429_lamb/company_c lips/ch11.html