developing new products developing new products and managing the product life-cycle chapter 8
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Developing New ProductsDeveloping New Productsand
Managing the Product Life-Cycle
Chapter 8
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Chapter OutlineChapter Outline
New-Product Development Strategy The New-Product Development Process Managing New-Product Development Product Life-Cycle Strategies Product Decisions and Social
Responsibility International Product and Services
Marketing
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1. Explain how companies find and develop new-product ideas.
2. List and define the steps in the new-product development process and the major considerations in managing this process.
3. Describe the stages of the product life cycle and how marketing strategies change during the product’s life cycle.
4. Discuss two additional product and services issues: socially responsible product decisions and international product and services marketing.
Previewing the ConceptsPreviewing the Concepts
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New-Product Development New-Product Development
A firm can obtain new products through:1) Acquisition2) New-product development
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New-Product Development New-Product Development
• Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product.
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New-Product DevelopmentNew-Product Development
The development of original The development of original products, product improvements, products, product improvements, product modifications, and new product modifications, and new brands through the firm’s own brands through the firm’s own research & development efforts.research & development efforts.
New product development and innovation is very expensive and very risky.
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New-Product FailuresNew-Product Failures
Why do new products fail?– Overestimation of market size.– Product design problems.– Incorrectly positioned, priced, or
advertised.– Pushed by high level executive despite
poor marketing research findings.– Excessive development costs.– Competitive reaction.
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Figure 8.1:Figure 8.1:
Major Stages in Major Stages in New-Product DevelopmentNew-Product Development
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New-Product Development ProcessNew-Product Development Process
Idea generation:– Internal sources:
• Company employees at all levels.
• Example: Samsung built a special Value Innovation Program Center in which firm engineers, designers, and researchers comingle to come up with creative new-product ideas.
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New-Product Development ProcessNew-Product Development Process
Idea generation:– External sources:
• Customers• Competitors• Distributors• Suppliers• Outsourcing (design
firms, product consultancies, online collaborative communities)
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Fuel for ThoughtFuel for Thought
Consumers are often excellent sources of new product ideas.
What type of new product would you like to see commercialized?
Think about the products you use now—can they be changed or improved? What do you wish you could buy that currently is not available?
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New-Product Development ProcessNew-Product Development Process
Idea screening:– Process used to spot good ideas and
drop poor ones.– Executives provide a description of the
product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return.
– Evaluated against a set of company criteria for new products.
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Concept development and testing:– Product idea:
• Idea for a possible product that the company can see itself offering to the market.
– Product concept: • Detailed version of the new-product idea stated
in meaningful consumer terms.– Concept testing:
• Testing new-product concepts with groups of target consumers to find out if the concepts have strong consumer appeal.
New-Product Development ProcessNew-Product Development Process
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Concept Testing QuestionsConcept Testing QuestionsBattery-Powered Electric CarBattery-Powered Electric Car
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New-Product Development ProcessNew-Product Development Process
Marketing strategy development:– Part One:
• Describes the target market, planned value proposition, sales, market share, and profit goals.
– Part Two:• Outlines the product’s planned price,
distribution, and marketing budget.– Part Three:
• Describes the planned long-run sales and profit goals, marketing mix strategy.
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Marketing Strategy Marketing Strategy DevelopmentDevelopment
Marketing Strategy Statement
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New-Product Development ProcessNew-Product Development Process
Business analysis:– Involves a review of
the sales, costs, and profit projections to assess fit with company objectives.
– If results are positive, project moves to the product development phase.
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New-Product Development ProcessNew-Product Development Process
Product development:– Develops concept into a physical product.– Calls for a large jump in investment.– Prototypes are made.– Prototypes must have correct physical features
and convey psychological characteristics.– Prototypes are subjected to physical tests.
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Marketing in ActionMarketing in Action
Gillette uses employee-volunteers to test new shaving products.
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Test Marketing:– Product and marketing program are
introduced in a more realistic market setting.– Provides the marketer with experience in
testing the product and entire marketing program before full introduction.
– Not needed for all products.– Can be expensive and time consuming, but
better than making a major marketing mistake.
New-Product Development ProcessNew-Product Development Process
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New-Product Development ProcessNew-Product Development ProcessTest Marketing
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Marketing in ActionMarketing in Action
Test marketing is appropriate when a large investment is required, when the risk is high, or when management is not sure of the product or marketing program.
KFC test-marketed its new Kentucky Grilled Chicken for three years before rolling it out nationally.
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New-Product Development ProcessNew-Product Development Process
Commercialization involves introducing a
new product into
the market.
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Commercialization:– Must decide on timing (i.e., when to
introduce the product).– Must decide on where to introduce the
product (e.g., single location, state, region, nationally, internationally).
– Must develop a market rollout plan.
New-Product Development ProcessNew-Product Development Process
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Customer-Centered Customer-Centered New-Product DevelopmentNew-Product Development
Focuses on finding new ways Focuses on finding new ways to solve customer problems to solve customer problems and create more satisfying and create more satisfying customer experiences – customer experiences – begins and ends with solving begins and ends with solving customer problems customer problems
New product development must focus on creating customer value.
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Team-based new-product development:– Various company departments work closely
together, overlapping the steps in the product development process to save time and increase effectiveness.
Systematic new-product development:– The new-product development process should be
holistic and systematic rather than compartmentalized and haphazard.
– Innovation management systems collect, review, evaluate, and manage new-product ideas.
Managing New-Product Managing New-Product DevelopmentDevelopment
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Product Life-Cycle StrategiesProduct Life-Cycle Strategies Product life-cycle (PLC) is the course
that a product’s sales and profits take over its lifetime.– Product development– Introduction– Growth– Maturity– Decline
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Figure 8.2:Figure 8.2:
Sales and Profits Over the Product’s Life Sales and Profits Over the Product’s Life from Inception to Decline (PLC Curve)from Inception to Decline (PLC Curve)
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Marketing in ActionMarketing in Action
Some products die quickly, while others stay in the mature stage for a long, long time. TABASCO® sauce is “over 130 years old and yet still able to whup your butt!”
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Applying the Product Life-CycleApplying the Product Life-Cycle Product class has the longest life cycle. Product form tends to have the standard PLC
shape. Brand can change quickly because of changing
competitive attacks and responses.
Style is a basic and distinctive mode of expression.
Fashion is a popular style in a given field. Fads result in a temporary period of unusually
high sales driven by consumer enthusiasm. Fads decline quickly.
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Figure 8.3:Figure 8.3:
Styles, Fashions, and FadsStyles, Fashions, and Fads
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Practical Problems of PLCPractical Problems of PLC
When used carefully, the PLC may help develop good marketing strategies.
However, in practice, it is difficult to:– Forecast sales level, length of each stage, and
shape of PLC.– Develop marketing strategy because strategy
is both a cause and result of the PLC. Marketers should avoid blindly pushing
products to next stage and instead seek ways to rescue products and growth sales.
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Introduction Stage of PLCIntroduction Stage of PLC Introduction stage is when the new
product is first launched. Sales: Low Costs: High cost per customer Profits: Negative or low Customers: Innovators Competitors: Few
Marketing objective: Create product awareness and trial.
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Introduction Stage of PLCIntroduction Stage of PLC
Marketing strategies:– Product: Offer a basic product.– Price: Use cost-plus pricing.– Distribution: Build selective distribution.– Advertising: Build product awareness
among early adopters and dealers.– Promotion: Use heavy promotion to
entice product trial.
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Growth Stage of PLCGrowth Stage of PLC Growth stage is when the new
product satisfies the market. Sales: Rapidly rising Costs: Average cost per customer Profits: Rising profits Customers: Early adopters Competitors: Growing number
Marketing objective: Maximize market share.
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Growth Stage of PLCGrowth Stage of PLC
Marketing Strategies:– Product: Offer product extensions, service,
warranty.– Price: Price to penetrate the market.– Distribution: Build intensive distribution.– Advertising: Build awareness and interest in
the mass market.– Promotion: Reduce to take advantage of
heavy consumer demand.
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Maturity Stage of PLCMaturity Stage of PLC Maturity stage is a long-lasting stage of a
product that has gained consumer acceptance.
Sales: Peak sales Costs: Low cost per customer Profits: High profits Customers: Middle majority Competitors: Stable number beginning to
decline
Marketing objective: Maximize profits while defending market share.
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Maturity Stage of PLCMaturity Stage of PLC
Marketing Strategies:– Product: Diversify brand and models.– Price: Match or best competitors.– Distribution: Build more intensive
distribution.– Advertising: Stress brand differences and
benefits.– Promotion: Increase to encourage brand
switching.
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Maturity Stage of the PLCMaturity Stage of the PLC
Strategies used to manage the PLC during maturity include:– Modifying the market– Modifying the product– Modifying the marketing mix
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Maturity Stage of the PLCMaturity Stage of the PLC
Modifying the market: – Increase the consumption of the current
product. How?
– Look for new users and market segments.– Reposition the brand to appeal to larger or
faster-growing segment.– Look for ways to increase usage among
present customers.
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Maturity Stage of the PLCMaturity Stage of the PLC
Modifying the product: – Changing characteristics such as quality,
features, or style to attract new users and to inspire more usage.
How?– Improve durability, reliability, speed,
taste.– Improve styling and attractiveness.– Add new features.
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Maturity Stage of the PLCMaturity Stage of the PLC
Modifying the marketing mix: – Improving sales by changing one or more
marketing mix elements. How?
– Cut prices.– Launch a better ad campaign.– Move into new market channels.
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Marketing in ActionMarketing in Action
As part of its market modification efforts, 101-year old card marketer American Greetings created Kiwee.com to reach out to younger consumers. The site makes use of social-networking widgets, instant messaging channels and more!
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Decline Stage of PLCDecline Stage of PLC Decline stage is when sales decline or
level off for an extended time, creating a weak product.
Sales: Declining sales Costs: Low cost per customer Profits: Declining profits Customers: Laggards Competition: Declining number
Marketing objective: Reduce expenditures and milk the brand.
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Strategies:– Product: Phase out weak items.– Price: Cut price.– Distribution: Go selective—phase out
unprofitable outlets.– Advertising: Reduce to level needed to
retain hard-core loyals.– Promotion: Reduce to minimal level.
Decline Stage of PLCDecline Stage of PLC
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Summary of Product Life-Cycle Summary of Product Life-Cycle Characteristics, Objectives, and StrategiesCharacteristics, Objectives, and Strategies
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Summary of Product Life-Cycle Summary of Product Life-Cycle Characteristics, Objectives, and StrategiesCharacteristics, Objectives, and Strategies
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Additional ConsiderationsAdditional Considerations
Product decisions and social responsibility:– Consider public policy issues, regulations
regarding acquiring or dropping products, patent protection, product quality and safety, and warranties.
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Additional ConsiderationsAdditional Considerations
International product and service marketing:– Must determine which products and
services to introduce in which countries, and how much to standardize or adapt the offering.
– Packaging presents new challenges for international marketers.
– Many services businesses are global.
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Marketing in ActionMarketing in Action
The Kit Kat chocolate bar benefits from a coincidental similarity between the bar’s name and the Japanese phrase, kitto katsu, which roughly translates to “Surely you win!”
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1. Explain how companies find and develop new-product ideas.
2. List and define the steps in the new-product development process and the major considerations in managing this process.
3. Describe the stages of the product life cycle and how marketing strategies change during the product’s life cycle.
4. Discuss two additional product and services issues: socially responsible product decisions and international product and services marketing.
Reviewing the ConceptsReviewing the Concepts