9. new product development and product life-cycle strategies
TRANSCRIPT
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Chapter 9
New-Product Development and
Product Life-Cycle Strategies
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Causes of New Product
Failure (pp. 336-337)~ 80% of new consumer packaged goods fail (mostare line extensions)
Only about 40% of new consumer products & 30%
of new industrial products are around 5 years afterintroduction
Why? Overestimation of market size
Product design problems
Product incorrectly positioned, priced, or promoted
Product may have been pushed despite poor marketingresearch findings
Costs of product development Competitive actions
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Improving New-Product
Success (pp. 336-337, continued)New product success depends upon having a:
Unique superior product(one with higher quality,
and higher value in use as defined by customers) Well-defined product concept(i.e., well-defined
target market, product requirements, and benefits)
To create successful new products, a companymust:
understand its customers, markets, and competitors
develop products that deliver superior value to
customers
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1. IdeaGeneration
2. IdeaScreening
3. Concept Development& Testing
4. MarketingStrategy
5. BusinessAnalysis
6. ProductDevelopment
7. TestMarketing
8. Commercialization
Major Stages in New-ProductDevelopment(Figure 9.1, pp. 337-352)
Many -- employees, customers, suppliers, distributors, competitors
Reduce # quickly
Alternative versions,describe in consumer terms
Physical pr
oduct, $$$
To speed up simultaneous (team-based) vs. sequential(pp. 352-353)
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Advertising
Packaging
ProductBudget levels
Positioning
DistributionPricing
Branding
Elements that
may be testmarketed
Product (& marketing program) are tested in realistic marketsettings
Reduces risk tests customer interest & acceptancecompany can find & correct problems early
New-Product Development
Step 7. Test Marketing (pp. 346-349)
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New-Product DevelopmentStep 7. Test Marketing (pp. 346-349)
But has some risks costly & time consumingexposes to competition copy, sabotage
Sometimes not used - costs low, confident - e.g., Revlon, Rubbermaid
StandardTest Market
Full marketing effortin a small number ofrepresentative cities
SimulatedTest Market
Test in a simulatedshopping environment(e.g., laboratory store)
ControlledTest Market
Test in cooperatingstores with
consumer panel(Nielsen, IRI)+ most realistic+ tests entire strategy- time consuming, costly- exposes to competition
+ faster, less costly- less realistic
(fewer cities, smallsample, no test of
channel acceptance)-exposes to competition
+ fastest, least costly+ no exposure to
competition- least realistic- no test of repeat
purchasing+ good pre-test
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Growth Maturity Decline
Shapes:
Product class (e.g., gas-powered automobile) longest
Product form (e.g., minivan) most likely to be standard shape
Brand any shape, can change rapidly
Other shapes: fad, style, extended maturity / no decline, revival
CAUTION: Strategy is both an effect and a cause
Product Life Cycle(Figure 9.2, pp. 353-361)
Slow growth
Rapid growth,competition
Profits
Sales andprofits ($)(or losses/
investment)
Time
Not inevitable:revive?reposition?
Sales
ProductDevelop-
ment
Introduction
Growth slows,Longest stage,Most marketingmanagement
activity
+$
-$
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Sales
Costs
Profits
Mktg. Objectives
Product
Price
Low sales
High cost per customer
Negative or low
Build product awareness & stimulate trial
Offer a basic product
Usually is high
Distribution High distribution expenses
Promotion Build product awareness among earlyadopters, & secure distribution
Summary of Characteristics, Objectives, & Strategies
Introduction Stage of the PLC(p. 356 & Table 9.2)
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Sales
Costs
Profits
Mktg. Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer new product features,extensions, service
Price to penetrate market
Distribution Increase number of distribution outlets
Promotion Build awareness and interest in themass market
Summary of Characteristics, Objectives, & Strategies
Growth Stage of the PLC(pp. 356-357 & Table 9.2)
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Sales
Costs
Profits
Mktg. Objectives
Product
Price
Peak sales (growth slows, levels off)
Low cost per customer
High profits, then lower profits
Maximize profits while defendingmarket share
Diversify brand (many line extensions)
Price to match or best competitors
Distribution Build more intensive distribution
Promotion Stress brand differences and benefits
Summary of Characteristics, Objectives, & Strategies
Maturity Stage of the PLC(p. 357 & Table 9.2)
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Sales
Costs
Profits
Mktg. Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits (or profitable niche)
Reduce expenditure and maintain, harvest,or drop the product; or reposition & revive
Phase out weak items (back to basics)
Cut price
Distribution Selective (phase out unprofitable outlets)
PromotionReduce to level needed to retainloyal customers & distribution
Summary of Characteristics, Objectives, & Strategies
Decline Stage of the PLC(pp. 360-361 & Table 9.2)
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Review of Concept
ConnectionsExplain how companies find and developnew-product ideas
List and define the steps in the new-product development process
Describe test markets, and the 3 types
Describe the stages of the product life-cycle
Describe how marketing strategies changeduring a products life-cycle