New-Product Development and Product Life-Cycle Strategies

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Chapter 9

• New-Product Development and Product Life-Cycle
  Strategies

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New-Product DevelopmentStrategies
Original Products
Acquired Companies
Product Improvements
Acquired Patents
Product Modifications
Acquired Licenses
New Brands
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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

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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)
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New Product Development ProcessNew Product
Development Process Step 1. Idea Generation
Idea Generation is the Systematic Search for New
Product Ideas Obtained Internally From Employees
and Also From
Distributors
Suppliers
Customers
Competitors
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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.

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New Product Development Process Step 3. Concept
Development
1. Develop New Product Ideas into Alternative
Detailed Product Concepts
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
Part Two Describes First-Year Products Planned
Price Distribution Marketing Budget
Part Three Describes Long-Term Sales Profit
Goals Marketing Mix Strategy
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Step 5. Business AnalysisStep 6. Product
Development
Business Analysis Review of Product Sales,
Costs, and Profits Projections to See if They
Meet Company Objectives
If No, Eliminate Product Concept
If Yes, Move to Product Development
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New Product Development ProcessStep
7. Test Marketing
Budget Levels
Product
Test Marketing is the Stage Where the Product and
Marketing Program are Introduced into More
Realistic Market Settings.
Packaging
Positioning
Advertising
Branding
Elements that May be Test Marketed by a Company
Distribution
Pricing
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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
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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 Over the Products Life From
Inception to Demise
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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.

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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
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Introduction Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Growth Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Maturity Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits, then lower profits
Maximize profits while defending market share
Marketing Objectives
Product
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
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Maturity Stage of the PLC
Modifiying the Market

Company tries to increase
consumption of the current product.
Modifying the Product
Changing characteristics such as quality,
features, or styles to attract new users.
Modifying the Marketing Mix

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
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Review of Concept Connections

• Explain how companies find and develop
  new-product ideas.
• List and define the steps in the new-development
  process.
• Describe the stages of the product life-cycle.
• Describe how marketing strategies change during
  the products life-cycle.