1. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel 2008-2009 10 CHAPTER Developing and Managing Products

2. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 2 Learning Outcomes Explain the importance of developing new products and describe the six categories of new products Explain the steps in the new-product development process Discuss global issues in new-product development LO 1 LO 2 LO 3

3. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 3 Learning Outcomes Explain the diffusion process through which new products are adopted Explain the concept of product life cycles LO 4 LO 5

4. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 4 LO 1 New Product A product new to the world, the market, the producer, the seller, or some combination of these. New Product

5. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 5 LO 1 Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products

6. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 6 REVIEW LEARNING OUTCOME LO 1 Developing New Products

7. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 7 The New-Product Development Process LO 2 Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors

8. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 8 New-Product Development Process LO 2 New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product

9. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 9 LO 2 Idea Generation Customers Employees Distributors Competitors Vendors R & D Consultants Sources of New-Product Ideas Online http://www.ideo.com

10. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 10 LO 2 Tips for New Product Development  Disperse R & D around the globe  Keep teams small and empower employees  Flatten hierarchy  Encourage generation of crazy new ideas  Welcome mistakes

11. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 11 LO 2 Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem.

12. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 12 LO 2 Idea Screening 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.

13. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 13 LO 2 Concept Testing A test to evaluate a new-product idea, usually before any prototype has been created.

14. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 14 LO 2 Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability

15. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 15 LO 2 Development  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility  Final government approvals if needed

16. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 16 LO 2 Simultaneous Product Development Simultaneous Product Development 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.

17. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 17 LO 2 Test Marketing Online foodcom.com/signup.com.com The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

18. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 18 LO 2 Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing Online http://www.newproductworks.com

19. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 19 LO 2 Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising

20. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 20 REVIEW LEARNING OUTCOME LO 2 New-Product Development Process

21. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 21 Global Marketing Questions  Develop product for potential worldwide distribution  Build in unique market requirements  Design products to meet regulations and key market requirements LO 3

22. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 22 REVIEW LEARNING OUTCOME LO 3 Global Issues in New-Product Development Single product worldwide Modification of products Multiple products in multiple countries

23. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 23 Diffusion LO 4 The process by which the adoption of an innovation spreads. Diffusion

24. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 24 Categories of Adopters LO 4 Laggards Late Majority Early Majority Early Adopters Innovators

25. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 25 Product Characteristics and the Rate of Adoption LO 4 Trialability Observability Relative Advantage Compatibility Complexity Online http://www.electronicgadgetdepot.com

26. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 26 Sales of New Audio Products LO 4

27. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 27 Marketing Implications of the Adoption Process LO 4 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process

28. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 28 REVIEW LEARNING OUTCOME LO 4 Diffusion Process for New Products

29. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 29 Product Life Cycle LO 5 Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

30. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 30 Product Life Cycle LO 5 Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0

31. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 31 Product Life Cycles for Styles, Fashions, and Fads LO 5

32. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 32 U.S. Sales of Televisions LO 5

33. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 33 Introductory Stage LO 5  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

34. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 34 Growth Stage LO 5  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution

35. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 35 Maturity Stage LO 5  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

36. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 36 Decline Stage LO 5  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment”

37. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 37 Diffusion Process and PLC Curve LO 5

38. Chapter 10Copyright ©2009 Cengage Learning Inc. All rights reserved 38 REVIEW LEARNING OUTCOME LO 5 Product Life Cycles Time INTRODUCTION GROWTH MATURITYDECLINE 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