1. Chapter 11: Developing and Managing Products Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved1

2. Learning Outcomes 2 Explain the importance of developing new products and describe the six categories of new products Explain the steps in the new-product development process Explain why some products succeed and others fail LO 1 LO 2 LO 3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

3. Learning Outcomes 3 Discuss global issues in new-product development Explain the diffusion process through which new products are adopted Explain the concept of product life cycles LO 5 LO 6 LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

4. The Importance of New Products 4 Explain the importance of developing new products and describe the six categories of new products. LO 1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

5. New Product 5 A product new to the world, the market, the producer, the seller, or some combination of these. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

6. New Product Advantages 6 Being first on the market has numerous advantages: Increased sales through longer sales life Increased margins Increased product loyalty More resale opportunities Greater market responsiveness A sustained leadership position Copyright 2010 by Cengage Learning Inc. All Rights Reserved

7. Categories of New Products 7 New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products Copyright 2010 by Cengage Learning Inc. All Rights Reserved

8. Review Learning Outcome Developing New Products 8 LO 1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

9. The New Product Development Process 9 Explain the steps in the new-product development process. LO 2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

10. The New-Product Development Process 10 Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors Copyright 2010 by Cengage Learning Inc. All Rights Reserved

11. New-Product Development Process 11 New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product Copyright 2010 by Cengage Learning Inc. All Rights Reserved

12. Idea Generation 12 Customers Employees Distributors Vendors Competitors R & D Consultants Sources of New-Product Ideas Online http://www.ideo.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

13. Brainstorming 13 The process of getting a group to think of unlimited ways to vary a product or solve a problem. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

14. Idea Screening 14 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

15. Concept Test 15 A test to evaluate a new-product idea, usually before any prototype has been created. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

16. Business Analysis 16 Considerations in Business Analysis Stage Demand Cost Sales Profitability Copyright 2010 by Cengage Learning Inc. All Rights Reserved

17. Development 17  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility  Final government approvals if needed Copyright 2010 by Cengage Learning Inc. All Rights Reserved

18. Simultaneous Product Development 18 A team-oriented approach to new-product development. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

19. Test Marketing 19 The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

20. Alternatives to Test Marketing Single-source research using supermarket scanner data Simulated (laboratory) market testing Online test marketing 20 Online http://www.newproductworks.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

21. Commercialization 21 Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Copyright 2010 by Cengage Learning Inc. All Rights Reserved

22. Review Learning Outcome New-Product Development Process 22 LO 2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

23. Why Some Products Succeed and Others Fail 23 Explain why some products succeed and others fail. LO 3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

24. 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 24 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

25. Success Factors 25 Match between product and market needs Different from substitute products Factors in Successful New Products Benefit to large number of people Copyright 2010 by Cengage Learning Inc. All Rights Reserved

26. Success Factors 26 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 Willingness to fail occasionally Copyright 2010 by Cengage Learning Inc. All Rights Reserved

27. Review Learning Outcome Why Products Succeed or Fail 27 LO 3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

28. Global Issues in New-Product Development 28 Discuss global issues in new-product development. LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

29. Global Issues 29  Develop product for potential worldwide distribution  Build in unique market requirements  Design products to meet regulations and key market requirements Copyright 2010 by Cengage Learning Inc. All Rights Reserved

30. Review Learning Outcome Global Issues in New-Product Development 30 LO 4 Single product worldwide Modification of products Multiple products in multiple countries Copyright 2010 by Cengage Learning Inc. All Rights Reserved

31. The Spread of New Products 31 Explain the diffusion process through which new products are adopted. LO 5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

32. Diffusion 32 The process by which the adoption of an innovation spreads. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

33. Categories of Adopters 33 Laggards Late Majority Early Majority Early Adopters Innovators Copyright 2010 by Cengage Learning Inc. All Rights Reserved

34. Product Characteristics and the Rate of Adoption 34 Trialability Observability Relative Advantage Compatibility Complexity Online http://www.electronicgadgetdepot.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

35. Sales of New Audio Products 35 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

36. Marketing Implications of the Adoption Process 36 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process Copyright 2010 by Cengage Learning Inc. All Rights Reserved

37. Review Learning Outcome Diffusion Process for New Products 37 LO 5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

38. Product Life Cycles 38 Explain the concept of product life cycle. LO 6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

39. Product Life Cycle 39 A biological metaphor that traces the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Copyright 2010 by Cengage Learning Inc. All Rights Reserved

40. Product Life Cycle 40 Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

41. Product Life Cycles for Styles, Fashions, and Fads 41 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

42. U.S. Sales of Widgets 42 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

43. 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 43 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

44. Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution 44 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

45. 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 45 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

46. Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses “Organized abandonment” 46 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

47. Diffusion Process and PLC Curve 47 Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusioncurve Introduction Growth Maturity Decline Sales Copyright 2010 by Cengage Learning Inc. All Rights Reserved

48. Review Learning Outcome 48 LO 6 Product Life Cycles Time INTRODUCTIONGROWTHMATURITYDECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models; Frequent changes More models; Frequent changes Large number of models Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers; Long- term relations Extensive; Margins drop; Shelf space Phase out unprofitable outlets Awareness; Stimulate demand; Sampling Aggressive ads. Stimulate demand Advertise; Promote heavily Phase out promotion High to recoup development costs Fall as result of competition & efficient production Prices fall (usually) Prices stabilize at low level Sales Copyright 2010 by Cengage Learning Inc. All Rights Reserved