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Product Management and New-Product
Development
Product Management and New-Product
Development
CHAPTER TENCHAPTER TEN
For use only withPerreault/Cannon/McCarthy or Perreault/McCarthy texts.© 2008 McGraw-Hill Companies, Inc.McGraw-Hill/Irwin
1. Understand how product life cycles affect strategy planning.
2. Know what is involved in designing new products and what “new products” really are.
3. Understand the new-product development process.
4. See why product liability must be considered in screening new products.
5. Understand the need for product or brand managers.
When we finish this lecture you should
Product Decisions for Marketing Strategy Planning (Exhibit 10-1)
ready to start developing its marketing mix. Here, we continue the discussion on Product mix
Role of Product Management and New-Product Development in Marketing Strategy (Exhibit 10-1)
CH 10: ProductManagement & New-ProductDevelopment
CH 9: Elements ofProduct Planning forGoods & Services
The product life cycle
• Life cycle stages• Strategy planning
for stages
New-product development
• 5 Step process• Success factors
Managing Products over Their Life Cycles (Exhibit 10-2)
Total industry profit (initially loss)
Total industry sales
D
Managing Products over Their Life CyclesManaging Products over Their Life Cycles
Total industry profit (initially loss)
Little or no competition
more competitionMost competition
A glimpse to the future
“Minority Report” touch screens
Microsoft Surface
Mini PC and TV
A new way to shopA new way to shop
Market Introduction – Investing in the Future
In the market introduction stage, sales are low as the idea is first introduced to the market.
Key Issue
•Informative promotion is needed to tell potential customers about the advantages and uses of the new product.
Monopolistic Competition Develops
Monopolistic Competition Develops
Monopolistic Competition Develops
Monopolistic Competition Develops
Innovation Attracts Competition
Innovation Attracts Competition
Innovation Attracts Competition
Innovation Attracts Competition
Market Growth – Profits Go Up and Down
Profits Peak and Then Decline
Profits Peak and Then Decline
Don’t Ignore Long-Term Competitive Trends!Don’t Ignore Long-Term Competitive Trends!
Discussion Question: Why do consumers become more price sensitive in the market growth stage? D
Persuasive, More Costly Promotion
Persuasive, More Costly Promotion
Brands Are More SimilarBrands Are More Similar
Greater Price Competition/Price Sensitivity
Greater Price Competition/Price Sensitivity
Persuasive, More Costly Promotion
Persuasive, More Costly Promotion
Brands Are More SimilarBrands Are More Similar
Greater Price Competition/Price Sensitivity
Greater Price Competition/Price Sensitivity
Market Maturity – Sales Level Off, Profits Continue Down
Maturity May Last a Long Time
Maturity May Last a Long Time
Promotion costs increase and price competition in some segments cuts into profits. D
Sales Decline – A Time of Replacement
Kodak announced that it would no longer produce 35 millimeter film cameras, but would manufacture digital cameras exclusively. Sales of digital cameras have grown steadily and have far outpaced the sale of 35 mm cameras in recent years, even among professional photographers. Kodak’s decision indicates that 35 mm cameras are probably in the ________ stage of the product life cycle.
A. Market introductionB. Market growthC. Sales declineD. Market maturity
Checking your knowledge
Kodak announced that it would no longer produce 35 millimeter film cameras, but would manufacture digital cameras exclusively. Sales of digital cameras have grown steadily and have far outpaced the sale of 35 mm cameras in recent years, even among professional photographers. Kodak’s decision indicates that 35 mm cameras are probably in the ________ stage of the product life cycle.
A. Market introductionB. Market growthC. Sales declineD. Market maturity
Checking your knowledge
AND
IndividualBrands
IndividualBrands
•May not follow the classic pattern
•May be introduced in market growth or maturity
•Not all brands are equally strong
MarketDefinitions
MarketDefinitions
•Should be carefully developed
•Different markets, different stages
•Contribute to the length of the cycle
Product Life Cycles Should Be Related to Specific Markets
product life cycle concept applies mainly to product categories or product classes
Can Be TriedCan Be Tried
Easy to Communicate
Easy to Communicate
Competitive Advantage
Competitive Advantage
Can Be TriedCan Be Tried
Easy to Communicate
Easy to Communicate
Competitive Advantage
Competitive Advantage Easy to UseEasy to UseEasy to UseEasy to Use
CompatibleCompatible
Product Life Cycles Vary in Length
Some ProductsMove Fast
Some ProductsMove Fast
The Early Bird Usually ProfitsThe Early Bird Usually Profits
Product Life Cycles Are Getting Shorter
Product Life Cycles Are Getting Shorter
The Early Bird Usually ProfitsThe Early Bird Usually Profits
Product Life Cycles Are Getting Shorter
Product Life Cycles Are Getting Shorter
Fashions and FadsFashions and Fads
Other Issues in Product Life Cycle Length
Competitors May Help Adoption
Competitors May Help Adoption
Anticipate Speed of
Movement
Anticipate Speed of
Movement
Consider the Four Ps
Consider the Four Ps
Consider the Four Ps
Consider the Four Ps
Allocate Sufficient
Money
Allocate Sufficient
Money
Be FlexibleBe Flexible
Planning for Different Stages of the Product Life Cycle
MarketIntroduction
& Growth
MarketIntroduction
& Growth
Managing Mature Products
Improve the Product or Develop a New One (Exhibit 10-4)
e.g. new ipods
Are Product Modifications Really New Products?
More examples:New “Hungry Girl” Products
Diet PizzaDiet Burritos & TacosDiet Apple/Pecan Pies
Diet Ice-CreamDiet Chocolates
Don’t Pull the Plug So Quickly
Don’t Pull the Plug So Quickly
Don’t Pull the Plug So Quickly
Don’t Pull the Plug So Quickly
Phase-out May Be Necessary
Phase-out May Be Necessary
Phase-out May Be Necessary
Phase-out May Be Necessary
Phasing Out Dying Products
ProfitabilityProduct LineCustomer
SupportSales Decline Can
Be ProfitableSales Decline Can
Be Profitable
What Research Studies has found……
Studies showed that companies that led their industries in sales growth and profitability generated ½ of all revenues from products introduced within the previous 5 years.
But Product Development is a costly activity filled with uncertainty. About 35% of new products that reach the marketplace fail, a majority never even reach the market.
Managing Products over Their Life CyclesManaging Products over Their Life Cycles
5 years
½ of all revenues
Top 25 biggest product flops of all time
About 35% of new products that reach the marketplace failed!
What Is a New Product?What Is a New Product?What Is a New Product?What Is a New Product?
FTC Rule: 6 MonthsFTC Rule: 6 MonthsFTC Rule: 6 MonthsFTC Rule: 6 Months
Ethical Dilemmas ExistEthical Dilemmas Exist
New Product Planning
An Organized New-Product Development Process is Critical (Exhibit 10-5)
D
Step 1: Idea Generation
Step 2: Screening
Step 3: Idea Evaluation
D
Step 4: Development
Step 5: Commercialization
Commercialization
Involves the planning and execution of the launch strategy.
Consider 3 components in this stage:
Timing New-Product Introductions (e.g. festive seasons, beer during summer, razors for Christmas, Palm Pre phones launch a few months ago in summer.)
Selecting a Brand Strategy (to leverage brand equity, Lexus ad)
Coordinating Introductory Marketing Programs
Top management of a large company recently approached the dean of a major business school about starting a specialized MBA program for the company’s employees. After further discussions, the dean decided that the program did not fit well with the objectives and resources of the school, so the program was put on the “back burner” until conditions changed. The proposed MBA program was at what stage of the new-product development process when it was shelved?
A. Idea generationB. ScreeningC. Idea evaluationD. DevelopmentE. Commercialization
Checking your knowledge
Top management of a large company recently approached the dean of a major business school about starting a specialized MBA program for the company’s employees. After further discussions, the dean decided that the program did not fit well with the objectives and resources of the school, so the program was put on the “back burner” until conditions changed. The proposed MBA program was at what stage of the new-product development process when it was shelved?
A. Idea generationB. ScreeningC. Idea evaluationD. DevelopmentE. Commercialization
Checking your knowledge
New Product Development: A Total Company Effort (Exhibit 10-7)
And the process should have top management support.
Common in Large Companies
Common in Large Companies
Common in Large Companies
Common in Large Companies
Product/Brand Managers
Product/Brand Managers
Product/Brand Managers
Product/Brand Managers
Some Are “Product Champions”
Some Are “Product Champions”
Need for Product Managers
Which of the following statements about new-product development are true?
A. The process should be informal to encourage innovation.
B. The greatest number of product ideas is in the idea evaluation stage.
C. The best criteria for evaluating new product ideas in the early stages is return on investment (ROI).
D. The process should have top management support.
E. All of the above statement are true.
Checking your knowledge
Which of the following statements about new-product development are true?
A. The process should be informal to encourage innovation.
B. The greatest number of product ideas is in the idea evaluation stage.
C. The best criteria for evaluating new product ideas in the early stages is return on investment (ROI).
D. The process should have top management support.
E. All of the above statement are true.
Checking your knowledge
1. Understand how product life cycles affect strategy planning.
2. Know what is involved in designing new products and what “new products” really are.
3. Understand the new-product development process.
4. See why product liability must be considered in screening new products.
5. Understand the need for product or brand managers.
You now
• Product life cycle
• Market introduction
• Market growth
• Market maturity
• Sales decline
• Fashion
• Fad
• New product
• Federal Trade Commission (FTC)
Key Terms
• Consumer Product Safety Act
• Product liability
• Concept testing
• Product managers
• Brand managers
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