New-Product Development and Product Life-Cycle Strategies

1
Chapter 9

• New-Product Development and Product Life-Cycle
  Strategies

2
Road Map Previewing the Concepts

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

3
New-Product DevelopmentStrategy
Original Products
Acquired Companies
Product Improvements
Acquired Patents
Product Modifications
Acquired Licenses
New Brands
4
Causes of New-Product Failures

• One study estimated that as many as 80 of new
  consumer 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
  marketing research findings,
• Costs of product development, or
• Competitive actions.

5
Improving New-Product Success

• New-product success depends on having a
• Unique superior product (one with higher quality,
  features, and value in use), and a
• Well-defined product concept (a defined target
  market, product requirements, and benefits).

• To create successful new products, the company
  must
• understand its consumers, markets, and
  competitors, and
• develop products that deliver superior value to
  customers.

6
Major Stages in New-Product Development (Fig. 9-1)
7
New Product Development Process New Product
Development Process Step 1. Idea Generation
Systematic Search for New Product Ideas Obtained
From Employees and Also From
Competitors
Distributors
Suppliers
Customers
8
New Product Development Process Step 2. Idea
Screening

• Helps 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.

9
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
10
DaimlerChryslers Electric Car

• The companys task is to develop its fuel-cell
  powered electric car into alternative product
  concepts, find out how attractive each is to
  customers, and choose the best one.

11
New Product Development Process Step 4. Marketing
Strategy
Part One Describes Overall Target
Market Planned Product Positioning Sales, Market
Share, Profit Goals
Part Two Describes First-Year Products Planned
Price Distribution Marketing Budget
Part Three Describes Long-Run Sales Profit
Goals Marketing Mix Strategy
12
Step 5. Business AnalysisStep 6. Product
Development
Business Analysis Review of Product Sales,
Costs, and Profits Projections to See if They
Satisfy Company Objectives
If No, Eliminate Product Concept
13
New Product Development ProcessStep 7. Test
Marketing

• Product and marketing program are introduced into
  more realistic market settings.
• Can be very expensive and time consuming.

• Test the following
• Positioning strategy,
• Advertising,
• Distribution,
• Pricing,
• Branding,
• Packaging,
• Budget levels.

14
New Product Development Process Step 8.
Commercialization
Introducing the New Product into the Market
When is the Right Time to Introduce Product?
Where to Launch a New Product?
15
Interactive Student Assignments

• Form students into groups of three to five. Each
  group should read the opening vignette to the
  chapter about Microsoft and the software
  industry. Each group should then answer the
  following questions
• Comment on Microsofts ability to bring new
  products to the marketplace.
• What lies ahead for Microsoft?
• What secrets has Microsoft learned?

16
Speeding Up New-Product Development
17
Product Life Cycle (Fig. 9-2)
Sales and Profits Over the Products Life From
Inception to Demise
18
Applications of the Product Life Cycle

• Product class which has the longest life cycles
  (i.e. gas-powered cars),
• Product form which tends to have the standard PLC
  shape (i.e. minivans),
• Brand which can change quickly because of
  changing competitive 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).

19
Problems Using the PLC
The PLC Concept can be applied by marketers for
describing how products and markets work, but may
also present some problems
20
Introduction Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
21
Growth Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
22
Maturity Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
23
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
24
Decline Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
25
Discussion Question

• Pick a soft drink, car, or food product, and
  trace the products life cycle.
• Project when the product might enter a decline
  stage and discuss strategies to reverse the
  decline.

26
Rest Stop Reviewing the Concepts

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