11 developing and managing products dr. close. new product development (1) new product: different or...
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11Developing and Managing
Products
Dr. Close
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New Product Development (1)
• New Product: different or new in ANY way (Pentium)
• Various categories of new products
- New to world
- New to market
- New to seller
- New to producer
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New Product Development (2)
• New product process includes:
1. New Product Strategy (NPD process to match objectives)
2. Idea Generation and Sources• Customers (Food Lion)• Employees• Competitors (reverse engineer; US – Japan
autos)• Need formal program: R&D• Any source of idea is good
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New Product Development (3)
3. Idea Screening (what do we have? +/-)• In pharmacy, 1 of 5,000 new drug ideas is
common• In autos, 1 of 20 new car concepts is made
to prototype• Point? Brainstorm, then cut via research
• Short and long run $ performance• Social issues:
• Consumer welfare (Ben and Jerry’s)• Safety ( Marlboro cigarettes) – liability
(McDonald’s hot coffee)
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New Product Development (4)
4. Business Analysis• Examine consumer perceptions (Coors banquet
beer)• Consider view of retailers and wholesaler (Frito Lay)
5. Development (can go hand-in-hand with analysis)• Product tests (New Coke, movies)• Risky: (leaks, skewed results)• Virtual product development: examine without
construction • Prototype product and marketing strategy• Longest process (Minute Rice took 18 years!)
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New Product Development (5)
6. Test Marketing and Test Marketing and CommercializationCommercialization
• Select Test Cities (Panama City or Dayton Ohio?)
• Does skipping test marketing save money?
• Sometimes, line extensions are not tested (Quaker Chewy)
• Commercialization takes a substantial amount of $ (New Coke)
• Some firms “roll out” their products gradually (movies; Pixar)
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Product Life Cycle (1)
• Product life cycle (4 stages): for product IDEA, not individual firms.
1. Introduction (phones with net access; plasma TV)• High marketing costs (inform)• Slow sales increase• Low or no profit (Amazon.com)• Low competition• Price often high (ex. Calculator)
• What other products can you think of that are What other products can you think of that are in introduction?in introduction?
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Advertising is key in the intro stage…
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Product Life Cycle (2)
• Product life cycle (cont…)2. Growth (solar changing lens)
• High marketing expense (inform and persuade)• Many small competitors – market entry (athletic
apparel)• Little price competition• Industry profits rise/peak and sales
increasing
• What other products What other products
are in growth?are in growth?
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Product Life Cycle (3)
3. Maturity (Beer and Auto)• Industry sales level off; profits down• Promotions stop rising: moderate marketing expense
(persuade)• Fewer, stronger competitors: tough competition in
general• Many consumers view product as homogeneous; price
competition
• What other products can you think of that are in maturity?
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Budweiser: in a mature market
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Product Life Cycle (4)
4. Decline: being replaced (VCR)• Decrease in industry sales/profits• Low marketing expense; small groups remain loyal• Dropouts: few competitors; most gone
• What other products can you think of that are What other products can you think of that are in decline?in decline?
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Are your old toys in decline?
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Product Life Cycle (5)
• Criticisms:– Self fulfilling prophecy (Is beer always going
to be a mature product?)– All do not follow pattern (fads; fashion;
scooters: comeback)– Product may be in different stages by the
market (B&W T.V.; Coke)
• What do you see are the advantages of the PLC? Why should m.managers care?
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Product Life Cycle (6)
• Factors that may speed products through PLC:
1. Ease of trial (supermarkets, no risk, test drive)
2. Ease of use (some assembly required; Toys R Us (bike); Gateway store)
3. Easy to communicate advantages (Always low price; cars)
4. Compatible with customer experience (Poland & free samples)
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Zara: Fashion Changes Quickly
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Spread of New Products
• Global and Domestic: Perceived as “new”
• Diffusion of Innovation
• Who are you?Who are you?
• Early adopter (first 2.5% to adopt)
• Early majority (next 13.5%)
• Late majority (next 34%)
• Laggard (last 16% to adopt)
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How to Have New Product Failure– New product failure (70-80% of brands; 80%
packaged goods)– How to fail:
• Offer no unique benefit (Pepsi’s clear soda vs. Secret’s clear deodorant)
• Race to market (Ford Pinto, Ford school bus, Netscape)
• Give little thought to promotion (Chevy NoVa)• Give little thought to competition (Wal-mart’s impact)• Skip research or conduct sloppy research• Try just one new product (top consumer goods
companies average trying 75 new products a year)
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Historic product failures
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Diversify with new products
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Summary
• Categories of New Products
• NPD Process
• Product life cycle
• Global/spread of new products
• Diffusion of Innovations
• New product failures