1. Chapter 1 New-Product Development and Product Life-Cycle Strategies8
New-Product Development and Product Life-Cycle Strategies

2. ROAD MAP: Previewing the Concepts
Chapter 1
ROAD MAP: Previewing the Concepts
Explain how companies find and develop new-product ideas.
List and define the steps in the new-product development process.
Describe the stages of the product life cycle.
Describe how marketing strategies change during the product’s life cycle.

3. New-Product Development Strategy
Chapter 1
New-Product Development Strategy
Strategies for Obtaining New-Product Ideas
Acquisition of:
Companies
Patents
Licenses
New Products:
Original Products
Improvements
Modifications

4. Chapter 1
New-Product Failures
Only 10% of new products are still on the market and profitable after 3 years.
Failure rate for industrial products is as high as 30%.
Why?
Overestimation of market size
Design problems
Incorrectly positioned, priced, or advertised
Pushed despite poor marketing research findings
Development costs
Competition

5. Major Stages in New-Product Development
Chapter 1
Major Stages in New-Product Development

6. Idea Generation Company Employees Customers Competitors Distributors
Chapter 1
Idea Generation
Competitors
Distributors
Suppliers

7. Chapter 1
Idea Generation
When Heinz asked kids what would make the product more fun, they said, “Change the color!” so, Heinz developed and launched EZ Squirt, now in a variety of colors targeted at kids. The EZ Squirt bottle’s special nozzle also emits a thin stream so tykes can autograph their burgers.

8. Idea Screening Process to spot good ideas and drop poor ones.
Chapter 1
Idea Screening
Process to spot good ideas and drop poor ones.
Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return.
Evaluate these findings against set of company criteria for new products.

9. Concept Development and Testing
Chapter 1
Concept Development and Testing
Product Idea: idea for a possible product that the company can see itself offering.
Product Concept: detailed version of the idea stated in meaningful consumer terms.
Product Image: the way consumers perceive an actual or potential product.

10. DiamlerChrysler’s Fuel-Cell-Powered Electric Car
Chapter 1
DiamlerChrysler’s Fuel-Cell-Powered Electric Car
The company’s task is to develop its fuel-cell-powered electric car into alternative product concepts, find out how attractive each is to customers, and choose the best one.

11. Interactive Student Assignment
Chapter 1
Choose a partner and cast yourself back in time. Try to figure out how you might convert the idea of a personal computer into a concept that could be tested.

12. Marketing Strategy Development
Part One Describes:
The Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
Chapter 1
Marketing Strategy Development
Part Two Outlines the First-Year’s:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy

13. Chapter 1
Business Analysis
Involves a review of the sales, costs, and profit projections to assess fit with company objectives.
If yes, move to the product development phase.

14. Product Development Develop concept into physical product
Chapter 1
Product Development
Develop concept into physical product
Calls for large jump in investment
Prototypes are made
Prototype must have correct physical features and convey psychological characteristics

15. Click the picture above to play video
Chapter 1
Product Development
Dunkin’ Donuts takes its product development process very seriously in order to meet consumers’ needs.
Click the picture above to play video

16. Chapter 1
Test Marketing
Product and program introduced in more realistic market setting.
Not needed for all products.
Can be expensive and time consuming, but better than making major marketing mistake.

17. Chapter 1
Test Marketing
Nokia test-marketed its new N-Gage cell phone/mobile game player extensively before introducing it worldwide.

18. Chapter 1
Commercialization
Must decide on timing (i.e., when to introduce the product).
Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally).
Must develop a market rollout plan.

19. The Fiesta Story
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

20. The Fiesta Story
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

21. Organizing New-Product Development
Chapter 1
Organizing New-Product Development
Sequential Approach: each stage completed before moving to next phase of the project.
Simultaneous Approach: Cross-functional teams work through overlapping steps to save time and increase effectiveness.

22. Sales and Profits Over the Product’s Lifetime
Chapter 1
Product Life Cycle
Sales and
Profits ($)
Sales
Profits
Time
Product
Develop-
ment
Introduction
Growth
Maturity
Decline
1). The product development stage begins when the company finds and develops a new product idea. During product development, sales are zero and the company’s investment costs mount. This is a pre-stage.
2). The introduction stage is a period of slow sales growth as the product is being introduced in the market. Profits are nonexistent in this stage because of heavy expenses of product introduction.
3). The growth stage is a period of rapid market acceptance and increasing profits.
4). The maturity stage is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
5). The decline stage is the period when sales fall off and profits drop.
Losses/
Investments ($)
Sales and Profits Over the Product’s Lifetime

23. Product Life Cycle Applications
Chapter 1
Product Life Cycle Applications
Product class has the longest life cycle (e.g., gas-powered cars)
Product form tends to have the standard PLC shape (e.g., dial telephone)
Brand can change quickly because of changing competitive attacks and responses (e.g., Tide, Cheer)
Style is a basic and distinctive mode of expression (e.g., formal clothing, Danish modern furniture)
Fashion is a popular style in a given field (e.g., business casual)
Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., pet rocks)

24. Alternative PLC Shapes
Chapter 1
Alternative PLC Shapes

25. Product life cycle for the stand-alone fax machine for business use: 1970–2006
Slide 11-8

26. Practical Problems of PLC
Chapter 1
Practical Problems of PLC
Hard to identify
which stage of the
PLC the product is in
Hard to pinpoint
when the product
moves to next stage
Hard to identify
factors that affect
product’s movement
through stages
Hard to forecast
sales level, length of
each stage, and
shape of PLC
Strategy is both a
cause and result of
the PLC

27. Introduction Stage of the PLC
Chapter 1
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low
High cost per customer
Negative
Create product awareness and trial
Offer a basic product
Use cost-plus formula
Distribution
Build selective distribution
Promotion
Heavy to entice product trial

28. Chapter 1
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising
Average cost per customer
Rising
Maximize market share
Offer extension, service, warranty
Penetration strategy
Distribution
Build intensive distribution
Promotion
Reduce to take advantage of demand

29. Maturity Stage of the PLC
Chapter 1
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak
Low cost per customer
High
Maximize profits while defending market share
Diversify brand and models
Match or best competitors
Distribution
Build more intensive distribution
Promotion
Increase to encourage brand switching

30. Maturity Stage of the PLC
Chapter 1
Maturity Stage of the PLC
Modifying the Market: Increase the consumption of the current product.
How?
Look for new users and market segments
Reposition the brand to appeal to larger or faster-growing segment
Look for ways to increase usage among present customers

31. Chapter 1
Modifying the Market
The WD-40 company’s knack for finding new uses has made this popular substance one of the truly essential survival items in most American homes.

32. Maturity Stage of the PLC
Chapter 1
Maturity Stage of the PLC
Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and to inspire more usage.
How?
Improve durability, reliability, speed, taste
Improve styling and attractiveness
Add new features
Expand usefulness, safety, convenience

33. Crayola has added a steady stream of new colors, forms, and packages
Chapter 1
Modifying the Product
Crayola has added a steady stream of new colors, forms, and packages

34. Maturity Stage of the PLC
Chapter 1
Maturity Stage of the PLC
Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements.
How?
Cut prices
Launch a better ad campaign
Move into larger market channels
Offer new or improved services to buyers

35. Modifying the Marketing Mix
Chapter 1
Modifying the Marketing Mix
New ads and promotions to reposition and revitalize mature product.

36. Decline Stage of the PLC
Chapter 1
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining
Low cost per customer
Reduce expenditures and milk the brand
Phase out weak items
Cut price
Distribution
Selective: phase out unprofitable outlets
Promotion
Reduce to minimum level

37. Rest Stop: Reviewing the Concepts
Chapter 1
Rest Stop: Reviewing the Concepts
Explain how companies find and develop new-product ideas.
List and define the steps in the new-product development process.
Describe the stages of the product life cycle.
Explain how marketing strategies change during the product’s life cycle.

38. Q: If you were designing a new product, which properties of the product would you consider first?
1. Styling
2. Features
3. Price
AK, 7e – Chapter 8

39. Q: You turn your new line of soda called ZING
Q: You turn your new line of soda called ZING! over to a marketing research firm that stocks the product in a group of New York grocery stores and then gathers data about consumers’ reactions to the product and its promotions. The firm is employing a:
1. controlled test market. 
2. standard test market. 
3. simulated test market. 
4. virtual test market.
AK, 7e – Chapter 8

40. Q: Because your test consumers love being wired on ZING
Q: Because your test consumers love being wired on ZING!, your firm decides to take a chance on introducing the drink simultaneously in the United States, Western Europe, Japan, and South Korea. The firm is planning a:
1. market rollout. 
2. regional rollout. 
3. strategic rollout. 
4. global rollout.
AK, 7e – Chapter 8

41. Q: If a product concept survives the business test, it moves into:
1. concept testing. 
2. market testing. 
3. market development. 
4. product development.
AK, 7e – Chapter 8

42. Q: Your digital camera gradually gains popularity and seems to have settled into a long maturity, yet you must introduce your camera to new segments of the international market in order to keep sales healthy . In other words, you must:
a.modify the product. 
b.modify the market. 
c.modify the marketing mix. 
d.modify the promotion budget.
AK, 7e – Chapter 8