new product development and life cycle strategies
DESCRIPTION
Principles of Marketing, by Kotler, Philip; Armstrong, Gary. This chapters focuses on developing new products and managing products through their life cycles.TRANSCRIPT
Chapter 9New-Product
Development and Product Life-Cycle
Strategies
Learning Goals
1. Explain how companies find and develop new-product ideas
2. List and define the steps in the new-product development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change during the product’s life cycle
9 - 2
Case StudyNokia
Focus on Innovation• Names its culture of
continuous innovation “renewal”
• Organizes into autonomous units, which helps foster innovation
• Large R&D budget of $3 billion with 40% of employees involved in R&D
Corporate Results• Annual sales of $36
billion across 130 countries
• Global market share of 38%, greater than that of its nearest three rivals combined
9 - 3
Learning Goals
1. Explain how companies find and develop new-product ideas
2. List and define the steps in the new-product development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change during the product’s life cycle
9 - 4
Definition
• New Product Development– Development of original
products, product improvements, product modifications, and new brands through the firm’s own R&D efforts.
9 - 5
Video SnippetAMEX introduces a
new product
New Product Development Strategy
• New products can be obtained via acquisition or development.
• New products suffer from high failure rates.
• Several reasons account for failure.
9 - 6
Nike acquired Converse in 2003 for $305 million
Marketing in Action9 - 7
Discussion Question
• Think of products you have seen recently in stores. Can you think of any that seem doomed to fail?
• Why?
9 - 8
Learning Goals
1. Explain how companies find and develop new-product ideas
2. List and define the steps in the new-product development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change during the product’s life cycle
9 - 9
Stages of the New Product Development Process
Figure 9.1
9 - 10
Stages of the New Product Development Process
• Stage 1: Idea Generation– Internal idea sources:
•R & D
– External idea sources: •Customers, competitors,
distributors, suppliers
9 - 11
Intuit, a marketer of financial software, asks for
new product ideas from customers
Marketing in Action
Click on screenshot for website 9 - 12
Stages of the New Product Development Process
• Stage 2: Idea Screening– Product development costs
increase substantially in later stages so poor ideas must be dropped
– Ideas are evaluated against criteria; most are eliminated
9 - 13
Stages of the New Product Development Process
• Stage 3: Concept Development and Testing– Concept development creates a
detailed version of the idea stated in meaningful consumer terms.
– Concept testing asks target consumers to evaluate product concepts.
9 - 14
MIT Virtual Research
MIT has developed
online techniques
to gain consumer
feedback on new product
ideas
Marketing in Action
Click on screenshot for website 9 - 15
Stages of the New Product Development Process
• Stage 4: Marketing Strategy Development
•The target market, product positioning, and sales, share, and profit goals for the first few years.
•Product price, distribution, and marketing budget for the first year.
•Long-run sales and profit goals and the marketing mix strategy.
9 - 16
Stages of the New Product Development Process
• Stage 5: Business Analysis– Sales, cost, and profit
projections
• Stage 6: Product Development– Prototype development and
testing
9 - 17
Stages of the New Product Development Process
• Stage 7: Test Marketing– Standard test markets– Controlled test markets– Simulated test markets
• Stage 8: Commercialization
9 - 18
Online Test MarketingIs it in the Near Future?
• Silicon Valley startup called There launched their site in 2003.
• Users enter a virtual world where they can network, hang out, dress up and try new products.
• There is catching marketers’ attention as a tool to test brands and products.
• There will also help marketers identify leaders and heavy users of their products.
Marketing in ActionSource: Advertising Age
Click on screenshot for website 9 - 19
Online Test MarketingIs it in the Near Future?
• Levi and Nike have partnered with There for market research data.
• Levi’s has found that jeans and jean jacket buyers were more likely to be virtual club-goers.
• They can also track how long people wear a certain jean or jacket in their virtual world.
• Discussion Question: Do you believe the Internet can supply valuable test marketing data?
Marketing in Action9 - 20
Learning Goals
1. Explain how companies find and develop new-product ideas
2. List and define the steps in the new-product development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change during the product’s life cycle
9 - 21
Stages of the PLCFigure 9.2
9 - 22
Alternative Product Life Cycles
Figure 9.3
9 - 23
Product Life-Cycle Strategies
• The product life cycle concept can be applied to a:– Product class (soft drinks)– Product form (diet colas)– Brand (Diet Dr. Pepper)
• Using the PLC to forecast brand performance or to develop marketing strategies is problematic
9 - 24
Learning Goals
1. Explain how companies find and develop new-product ideas
2. List and define the steps in the new-product development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change during the product’s life cycle
9 - 25
Product Life-Cycle Strategies
• Product development
• Introduction• Growth• Maturity• Decline
• Begins when the company develops a new-product idea
• Sales are zero• Investment costs
are high• Profits are
negative 9 - 26
PLC Stages PLC Stages
Product Life-Cycle Strategies
• Product development
• Introduction• Growth• Maturity• Decline
• Low sales• High cost per
customer acquired
• Negative profits• Innovators are
targeted• Little
competition 9 - 27
PLC Stages PLC Stages
Which stage of the PLC?How do you
know?
• Product development
• Introduction• Growth• Maturity• Decline
Marketing in Action9 - 28
Marketing Strategies: Introduction Stage
• Product – Offer a basic product• Price – Use cost-plus basis to set• Distribution – Build selective
distribution• Advertising – Build awareness
among early adopters and dealers/resellers
• Sales Promotion – Heavy expenditures to create trial
9 - 29
Product Life-Cycle Strategies
• Product development
• Introduction• Growth• Maturity• Decline
• Rapidly rising sales
• Average cost per customer
• Rising profits• Early adopters
are targeted• Growing
competition 9 - 30
PLC Stages PLC Stages
Marketing in Action
Which stage of the PLC?How do you
know?
• Product development
• Introduction• Growth• Maturity• Decline
9 - 31
Marketing Strategies: Growth Stage
• Product – Offer product extensions, service, warranty
• Price – Penetration pricing• Distribution – Build intensive
distribution• Advertising – Build awareness and
interest in the mass market• Sales Promotion – Reduce expenditures
to take advantage of consumer demand
9 - 32
Product Life-Cycle Strategies
• Product development
• Introduction• Growth• Maturity• Decline
• Sales peak• Low cost per
customer• High profits• Middle majority
are targeted• Competition
begins to decline 9 - 33
PLC Stages PLC Stages
Which stage of the PLC?How do you
know?
• Product development
• Introduction• Growth• Maturity• Decline
Marketing in Action9 - 34
Marketing Strategies: Maturity Stage
• Product – Diversify brand and models• Price – Set to match or beat competition• Distribution – Build more intensive
distribution• Advertising – Stress brand differences
and benefits• Sales Promotion – Increase to encourage
brand switching
9 - 35
Product Life-Cycle Strategies
• Product development
• Introduction• Growth• Maturity• Decline
• Declining sales• Low cost per
customer• Declining profits• Laggards are
targeted• Declining
competition9 - 36
PLC Stages PLC Stages
Marketing Strategies: Decline Stage
• Product – Phase out weak items• Price – Cut price• Distribution – Use selective distribution:
phase out unprofitable outlets• Advertising – Reduce to level needed to
retain hard-core loyalists• Sales Promotion – Reduce to minimal
level
9 - 37
Discussion
• How can marketers help products bounce back from the decline stage?
9 - 38
Low-dose Aspirin Ad
• Baby Aspirin has been in the decline stage for over 10 years after discovery that it may have dangerous side effects for children.
• Recently it has been discovered it helping to prevent heart attacks in adults and is now marketed to this new target.
Click on screenshot for website with products
Marketing in Action9 - 39