New Product Development

and
Product Life-Cycle
Strategies
 What is New Product
Development
 Done in the COs. Own R&D Department
 New Products mean- Original products
 Product improvements
 Product modifications
 New Brands the firm develops through its own R&D
efforts
 New-to-the-world products
 New product lines
 Additions to existing product lines
 Repositioned products
 Cost reduction products
Causes
Causes ofof New
New Product
Product
Failures
Failures
 Overestimation of Market Size
 Product Design Problems
 Product Incorrectly Positioned, Priced or
Advertised
 Costs of Product Development
 Competitive Actions

 To create successful new products, the

company must:
 understand it’s customers, markets and
competitors
 develop products that deliver superior value
to customers.
Successful new products:
Offer a strong relative advantage
Reflect better understanding of customer
needs, and beat the competition to market
Exhibit higher performance-to-cost ratios
and higher contribution margins
Are launched with larger budgets
Have stronger top management support
New Product Development Process
 Idea Generation and Screening
 Concept Development and Testing
 Marketing Strategy
 Business Analysis
 Product Development
 Test Marketing
 Commercialization
New
New Product
Product Development
Development Process
Process
Step
Step 1.
1. Idea
Idea Generation
Generation

Systematic Search for New Product

Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
New
New Product
Product Development
Development Process
Process
Step
Step 2.
2. Idea
Idea Screening
Screening

 Process to spot good ideas and drop poor

ones
 Criteria
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return
New
New Product
Product Development
Development Process
Process
Step
Step 3.
3. Concept
Concept Development
Development &
& Testing
Testing

1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theBest
BestOne
One
New
New Product
Product Development
Development Process
Process
Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
Marketing Strategy Statement Formulation

Part
Part One
One -- Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share

Part
Part Two
Two -- Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
New
New Product
Product Development
Development Process
Process
Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development
Business
Business Analysis
Analysis

Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
They Meet
Meet Company
Company Objectives
Objectives

IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

IfIf Yes,
Yes, Move
Move to
to
Product
Product Development
Development
New
New Product
Product Development
Development Process
Process
Step
Step 7.
7. Test
Test Marketing
Marketing

Standard
Standard Controlled
Controlled
Test
Test Market
Market Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign AAfew
fewstores
storesthat
thathave
have
in
inaasmall
smallnumber
numberof of agreed
agreedto
tocarry
carrynew
new
representative
representativecities.
cities. products
productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testininaasimulated
simulated
shopping
shoppingenvironment
environment
to
toaasample
sampleofof
consumers.
consumers.
New Product Development
Process
Step 8. Commercialization
 It’s the time to introduce the New
Product in the Market
 Decide on the Introduction Timing
 Where to launch the New Product- in
a single location, a region, the
National Market. (The Planned
Market rollout Time)
 Product
Product Life
Life Cycle
Cycle

Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments ($)
Product
Product Development
Development Stage
Stage of
of
PLC
PLC
Sales
Sales Zero
Zero
Costs
Costs Cost
Cost mounts
mounts
Profits
Profits Nil
Nil
Marketing
Marketing Objectives
Objectives Nil
Nil
Product
Product Offer
Offer any
any kind
kind of
of product
product
Price
Price Use
Use cost-plus
cost-plus
Introduction
Introduction Stage
Stage of
of the
the
PLC
PLC
Sales
Sales Low
Low sales
sales
Costs
Costs High
High cost
cost per
per customer
customer
Profits
Profits Negative
Negative
Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product
Price
Price Use
Use cost-plus
cost-plus
Distribution
Distribution Build
Build selective
selective distribution
distribution
Build
Build product
product awareness
awareness
Advertising
Advertising among
among early
early adopters
adopters and
and
dealers
dealers
 Growth
Growth Stage
Stage of
of the
the PLC
PLC

Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Product Offer
Offer product
product extensions,
extensions,
Product service,
service, warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market
Distribution
Distribution Build
Build intensive
intensive distribution
distribution
Advertising
Advertising Build
Build awareness
awareness and
and interest
interest in
in
the
the mass
mass market
market
Maturity
Maturity Stage
Stage of
of the
the PLC
PLC

Sales
Sales Peak
Peak sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits High
High profits
profits
Marketing Maximize
Maximize profit
profit while
while defending
defending
Marketing Objectives
Objectives
market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models
Price
Price to
to match
match or
or best
best
Price
Price competitors
competitors
Build
Build more
more intensive
intensive
Distribution
Distribution distribution
distribution
Advertising
Advertising Stress
Stress brand
brand differences
differences and
and
benefits
benefits
Decline
Decline Stage
Stage of
of the
the PLC
PLC

Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing Reduce
Reduce expenditure
expenditure and
and milk
milk
Marketing Objectives
Objectives
the
the brand
brand
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Go
Go selective:
selective: phase
phase out
out
Distribution
Distribution unprofitable
unprofitable outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed toto retain
retain
hard-core
hard-core loyal
loyal customers
customers
BCG MATRIX