7/29/2019 Mkt_Ch 9.ppt

1/23

1

Chapter 9

New-Product Development andProduct Life-Cycle Strategies

7/29/2019 Mkt_Ch 9.ppt

2/23

2

OriginalProducts

Product

ImprovementsProduct

Modifications

New

Brands

AcquiredCompanies

Acquired

PatentsAcquiredLicenses

New-Product Development

Strategy

Strategies for Obtaining New-Product

7/29/2019 Mkt_Ch 9.ppt

3/23

3

Causes of New-Product FailuresOne study estimated that as many as 80% of newconsumer packaged products fail.

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 marketingresearch findings,

Costs of product development, or

Competitive actions.

7/29/2019 Mkt_Ch 9.ppt

4/23

4

Improving New-Product SuccessNew-product successdepends on having a:

Unique superior product(one with higherquality, features, andvalue in use), and a

Well-defined productconcept(a definedtarget market, productrequirements, andbenefits).

To create successfulnew products, the

company must:understand itsconsumers, markets,and competitors, and

develop productsthat deliver superiorvalue to customers.

7/29/2019 Mkt_Ch 9.ppt

5/23

5

Major Stages in New-Product

Development (Fig. 9-1)

7/29/2019 Mkt_Ch 9.ppt

6/23

6

Customers Competitors Distributors Suppliers

Systematic Search for New Product Ideas

Obtained From Employees and Also From:

New Product Development Process

Step 1. Idea Generation

7/29/2019 Mkt_Ch 9.ppt

7/237

New Product Development Process

Step 2. Idea ScreeningHelps spot good ideas and drop poor ones assoon as possible.

Many companies have systems for rating andscreening ideas which estimate:Market Size

Product Price

Development Time & CostsManufacturing Costs

Rate of Return

Then, the idea is evaluated against a set of

general company criteria.

7/29/2019 Mkt_Ch 9.ppt

8/238

1. Develop NewProduct Ideasinto Alternative Detailed

Product Concepts

2. Concept Testing - Test theNew-Product Concepts withGroups of Target Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers

New Product Development Process

Step 3. Concept DevelopmentProduct Imageis theWay Consumers

Perceive an Actual orPotential Product

7/29/2019 Mkt_Ch 9.ppt

9/239

DaimlerChryslers Electric CarThe companys task isto develop its fuel-cell

powered electric carinto alternativeproduct concepts, findout how attractiveeach is to customers,and choose the bestone.

7/29/2019 Mkt_Ch 9.ppt

10/2310

New Product Development Process

Step 4. Marketing StrategyPart One Describes Overall:

Target Market

Planned Product PositioningSales, Market Share, & Profit Goals

Part Two Describes First-Year:Products Planned Price

DistributionMarketing Budget

Part Three Describes Long-Run:Sales & Profit Goals

Marketing Mix Strategy

7/29/2019 Mkt_Ch 9.ppt

11/2311

If No, EliminateProduct Concept

Business AnalysisReview of Product Sales, Costs, and Profits

Projections to See if They Satisfy Company Objectives

Step 5. Business Analysis

If Yes, Move toProduct Development

7/29/2019 Mkt_Ch 9.ppt

12/2312

Developing the product concept into physical

Product so that it turns into aworkable market offering

Step 5. Product Development

7/29/2019 Mkt_Ch 9.ppt

13/23

13

New Product Development Process

Step 7. Test MarketingProduct andmarketing program

are introduced intomore realisticmarket settings.

Can be veryexpensive and timeconsuming.

Test the following:

Positioning strategy,

Advertising,

Distribution,

Pricing,

Branding,

Packaging,

Budget levels.

7/29/2019 Mkt_Ch 9.ppt

14/23

14

When is theRight Time to

Introduce

Product?

Where toLaunch a

NewProduct?

Introducing the New Product into theMarket

New Product Development Process

Step 8. Commercialization

7/29/2019 Mkt_Ch 9.ppt

15/23

15

Step 1

Step 2

Step 3

Step 4

Sequential

Speeding Up New-Product

Development

Step

1

Step

2

Step 3

Step 4

Simultaneous (Team-Based)

7/29/2019 Mkt_Ch 9.ppt

16/23

16

Time

Product

Develop-ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Sales and Profits Over the Products Life From Inception to

Demise

Product Life Cycle (Fig. 9-2)

7/29/2019 Mkt_Ch 9.ppt

17/23

17

Applications of the Product Life

CycleProduct class which has the longest life cycles (i.e.gas-powered cars),

Product form which tends to have the standard PLCshape (i.e. minivans),

Brand which can change quickly because of changingcompetitive attacks and responses (i.e. Ford Taurus),

Style which is a basic and distinctive mode of

expression (formal clothing),Fashion which is a popular style in a given field(business casual),

Fad which is a fashion that enters quickly, is adopted

quickly, and declines fast (pet rocks).

7/29/2019 Mkt_Ch 9.ppt

18/23

18

Problems Using the PLCTrouble identifyingWhich Stage of thePLC the Product Is

In

Difficult to Forecastthe Sales Level, theLength of Each Stage,

and Shape of the PLCStrategy is Both a

Cause and a Resultof the Products Life

Cycle

The PLC Concept can beapplied by marketers fordescribing how products

and markets work, butmay also present someproblems:

7/29/2019 Mkt_Ch 9.ppt

19/23

19

Sales

Costs

Profits

Marketing Objectives

Product

Price

Low sales

High cost per customer

Create product awareness and trial

Offer a basic product

Usually is high

Distribution High distribution expenses

Advertising Spending is high to inform consumers

Negative or low

Create product awareness and trial

Offer a basic product

Usually is high

High distribution expenses

Summary of Characteristics, Objectives, & StrategiesIntroduction Stage of the PLC

7/29/2019 Mkt_Ch 9.ppt

20/23

20

Sales

Costs

Profits

Marketing Objectives

Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer new product features and models

Remain where they are or fall slightly

Distribution Increase number of distribution outlets

Advertising Educating consumers and meeting

competition

Summary of Characteristics, Objectives, & StrategiesGrowth Stage of the PLC

7/29/2019 Mkt_Ch 9.ppt

21/23

21

Sales

Costs

Profits

Marketing Objectives

Product

Price

Begin to slow

Low cost per customer

High profits, then lower profits

Maximize profits while defendingmarket share

May modify product

May decline

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

Summary of Characteristics, Objectives, & StrategiesMaturity Stage of the PLC

7/29/2019 Mkt_Ch 9.ppt

22/23

22

Maturity Stage of the PLC

Company tries to increase consumption ofthe current product

Changing characteristics such as quality,features, or styles to attract new users

Company tries to improve sales by changingone or more marketing mix elements

7/29/2019 Mkt_Ch 9.ppt

23/23

23

Sales

Costs

Profits

Marketing Objectives

Product

Price

Declining sales

Low cost per customer

Declining profits

Reduce expenditure and maintain,harvest, or drop the product

Phase out weak items

Cut price

Distribution Selective: phase out unprofitable outlets

Advertising Reduce to level needed to retain

hard-core loyal customers

Summary of Characteristics, Objectives, & StrategiesDecline Stage of the PLC