CHAPTER 8
New Product Development
and Product Life Cycle
Strategies
New Product Development
OBJECTIVES
1. Explain how companies find and develop new product
ideas.
2. List and define the steps in the new product
development process.
3. Describe the stages of the product life-cycle
4. Describe how marketing strategies change during the
products life cycle.
Product Life-Cycle
The two major challenges:
New Product Development Strategy
A firm can obtain new products in two ways:
Acquisition
Acquired
companies
Acquired Patents
and Licenses
New Product
Development
Original Product
Product Improvements,
Product Modification& New
brands
CAUSES OF NEW PRODUCT FAILURES
1. One study estimated that as many as 80% of
new products failed. Most of these are line
extensions.
2. Only about 40% of new products are still
around after 5 years past their introduction.
Failure rates for new industrial product may be
as high as 30 %.
Overestimation of market size
Product designer problem
WHY?
Product incorrectly positioned,
priced, or advertise
Product may have been pushed
despite poor marketing research
findings
Costs of product development
Competitive actions
Improving New Product Success
MAJOR STAGES IN NEW PRODUCT
DEVELOPMENT
IDEA GENERATION
Idea generation is the systematic search
for new product ideas.
SOURCES
IDEA SCREENING
Helps spot good ideas and drop poor ones as soon as
possible.
Apply systems for rating and screening ideas which
estimates:
Market size
Product size
Develop time and cost
Manufacturing cost
Rate of returns
CONCEPT DEVELOPMENT AND TESTING
Concepts may take on several forms:
PRODUCT IDEA
Idea for a possible product that the
company can see itself in the market
PRODUCT CONCEPT
Detailed version of the new product idea
stated in meaningful consumer terms
PRODUCT IMAGE
Way consumers perceive an actual or
potential product
Concept Development
It involves developing product ideas into some
alternative product concept, finding out how attractive
each concept is to consumers, and choosing the best
one.
Concept Testing
It involves testing the concepts with a group of target
consumers to find out if the concepts have strong
consumer appeal.
MARKETING STRATEGY DEVELOPMENT
Marketing Strategy Development
It involves designing an initial marketing strategy for
a new product based on the product concept.
Marketing Strategy Statement
This is a statement of the planned strategy for a new
product.
Marketing Strategy Statement
BUSINESS ANALYSIS
PRODUCT DEVELOPMENT
Product Development
It involves developing the product concept into a
physical product in order to ensure that the product
idea can be turned into a workable product.
TEST MARKETING
Product and marketing
program are introduced
into more realistic
marketing settings.
This process can be very
expensive and time
consuming
Test the following:
Positioning strategy
Advertising
Distribution
Pricing
Branding
Packaging
Budget levels
COMMERCIALIZATION
Commercialization
This step is introducing a new product into the
market.
PRODUCT LIFE-STRATEGIES
PRODUCT LIFE CYCLE
PLC is the course of a products sales and profits over its
time.
PRODUCT DEVELOPMENT
STAGE
It begins when the company find and develops
anew product idea.
INTRODUCTION STAGE
It is the period of slow sales growth as the
product is being introduced in the market.
GROWTH STAGE
It is the period of rapid market acceptance and
increasing profits.
MATURITY STAGE
It is the period of slowdown in sales growth
because the product has achieved
acceptance by most potential buyers.
DECLINE STAGE
It is the period when the sales fall off and
profits drop.
APPLICATIONS OF THE PRODUCT LIFE CYCLE
PRODUCT CLASSES
Longest life cycles
PRODUCT FORMS
Standard PLC shape
BRAND
Change quickly because of changing competitive
attacks and responses
STYLE
Basic and distinctive mode of expression
FASHION
Popular style in a given field
FAD
A fashion that enters quickly, is adapted quickly, and
declines fast.
PROBLEMS THAT MAY ARISE WHEN
USING PLC
INTRODUCTION STAGE
SALES
Low sales
COSTS
High cost per customer
PROFITS
Negative or low
MARKETING OBJECTIVES
Create product awareness and trial
PRODUCT
Offer a basic product
PRICE
Usually is high
DISTRIBUTION
High distribution expenses
ADVERTISING
Spending is high to inform consumers
MARKET PIONEER must launch its product with a strategy that
is consistent with along-term focus on the market rather than a
quick profit gain.
GROWTH STAGE
SALES
Rapidly rising sales
COSTS
Average cost per customer
PROFITS
Rising Profits
MARKETING OBJECTIVES
Maximize market share
PRODUCT
Offer new product features
PRICE
Remain where they are or fall
slightly
DISTRIBUTION
Increase number of distribution
outlets
ADVERTISING
Educating consumers and
meeting competition
MATURITY STAGE
Market Modification
is an approach in which the company tries to
increase the consumption of the current product.
Product Modification
is an approach to change product characteristics.
Marketing Mix Modification
Is an approach in which the product manager tries to improve
sales by changing one or more marketing mix elements.
SALES
Begin to slow
COSTS
Low cost per customer
PROFITS
High profits, then lower profits
MARKETING OBJECTIVES
Maximize while defending market
share
PRODUCT
May modify product
PRICE
May decline
DISTRIBUTION
Build more intensive distribution
ADVERTISING
Stress brand differences and benefits
DECLINE STAGE
1. Technological advances
2. Shifts in consumer tastes
3. Increase competition
SALES
Declining sales
COSTS
Low cost per customer
PROFITS
Declining profits
MARKETING OBJECTIVES
Reduce expenditure and maintain
harvest, or drop the product
PRODUCT
Phase out weak items
PRICE
Cut price
DISTRIBUTION
Selective; phase out unprofitable
outlets
ADVERTISING
Reduce to level needed to retain hardcore loyal customers