Chapter 9
New-Product Development and Product Life-Cycle Strategies
New-Product Development Strategies
Strategies for Obtaining New Product Ideas
Acquired Companies
Acquired Patents Acquired Licenses
Original Products
Product Improvements Product Modifications New Brands
Causes of New Product Failures
One study estimated that as many as 80% of new consumer packaged products failed. Only about 40% of new consumer products are around 5 years after introduction. Why?
Overestimation of market size, Product design problems, Product incorrectly positioned, priced or advertised, Product may have been pushed despite poor marketing research findings, Costs of product development, or Competitive actions 3
Improving New-Product Success
New product success depends on having a:
Unique superior product (one with higher quality, features, and value in use), & Well-defined product concept (a defined target market, product requirements, and benefits).
To create successful new products, the company must:
understand its customers, markets and competitors, & develop products that deliver superior value to customers.
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Major Stages in New-Product Development (Fig. 9.1)
Marketing Strategy Concept Development and Testing Business Analysis
Product Development
Idea Screening
Test Marketing
Idea Generation
Commercialization
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New Product Development Process Step 1. Idea Generation
Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:
Customers
Competitors
Distributors
Suppliers
New Product Development Process Step 2. Idea Screening
Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate:
Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return
Then, the idea is evaluated against a set of general company criteria.
New Product Development Process Step 3. Concept Development
1. Develop New Product Ideas into Alternative Detailed Product Concepts
Product Image is the Way Consumers Perceive an Actual or Potential Product
2. Concept Testing - Test the New Product Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal to Target Customers
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New Product Development Process Step 4. Marketing Strategy
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share Products Planned Price Distribution Marketing Budget
Part Two Describes First-Year:
Part Three Describes Long-Term:
Sales & Profit Goals Marketing Mix Strategy
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Step 5. Business Analysis Step 6. Product Development
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business Analysis
If No, Eliminate Product Concept If Yes, Move to Product Development
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New Product Development Process Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Packaging Product Positioning
Branding Pricing
Elements that May be Test Marketed by a Company
Advertising Distribution
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New Product Development Process Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry new products for a fee.
Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.
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New Product Development Process Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When is the Right Time to Introduce Product?
Where to Launch a New Product?
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Speeding Up New Product Development
Sequential
Simultaneous (Team-Based)
Step 1
Step 1 Step 3
Step 4
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Step 2
Step 3
Step 4
Step 2
Discussion Connections
Suppose that youre on a panel to nominate the best new products of the year.
What products would you nominate and why?
In groups, apply the new-product development process youve just studied, and develop an idea for an innovative new snack food product and sketch out a brief plan for bringing it to market.
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Product Life Cycle (Fig. 9.2)
Sales and Profits ($) Sales
Profits
Time
Product Development
Losses/ Investments ($)
Introduction
Growth
Maturity
Decline
Sales and Profits Over the Products Life From Inception to Demise 16
Applications of the Product Life Cycle
The PLC concept can describe a:
Product class which has the longest life cycles (i.e. gas-powered cars), Product form which tend to have the standard PLC shape (i.e. minivans), Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus), Style which is a basic and distinctive mode of expression, Fashion which is a popular style in a given field, Fad which is a fashion that enters quickly, is adopted quickly and declines fast. 17
Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC Strategy is Both a Cause and a Result of the Products Life Cycle
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Egg Beaters had to first convince people that they needed an egg substitute (overcoming a strong negative response to fake eggs) then demonstrate that their product was a perfect solution.
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Low sales
Costs
Profits Marketing Objectives Product Price Distribution Advertising
High cost per customer
Negative or low Create product awareness and trial Offer a basic product Usually is high; use cost-plus formula High distribution expenses Build product awareness among early adopters and dealers
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Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Rapidly rising sales Average cost per customer
Profits
Marketing Objectives Product Price Distribution Advertising
Rising profits
Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Increase number of distribution outlets Build awareness and interest in the mass market
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Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Peak sales Low cost per customer High profits, then lower profits Maximize profits while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
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Maturity Stage of the PLC
Company tries to increase consumption of the current product.
Changing characteristics such as quality, features, or styles to attract new users.
Company tries to improve sales by changing one or more marketing mix elements.
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Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers
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Review of Concept Connections
Explain how companies find and develop new-product ideas. List and define the steps in the newdevelopment process. Describe the stages of the product lifecycle. Describe how marketing strategies change during the products life-cycle.
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