Major Stages in New Product Development

Major Stages in New Product Development

• Idea generation: systematic search for new ideas– Internal sources: brainstorming– External sources: customers, competitors, distributors

and suppliers

• Idea screening: identify good ideas and drop poor ones– Usefulness to consumers– Good for company– Fit with objectives and strategies– Have the resources– Add value

Major Stages in New Product Development

• Concept development: detailed version of the product concept in meaningful consumer terms

• Concept testing: testing new-product concepts for consumer appeal

• Marketing strategy: initial strategy for product concept:– Target market, positioning, and sales, market share, and

profit goals– Price, distribution, and marketing budget– Strategy statement, long-run sales, profit goals, and

marketing mix

Major Stages in New Product Development

• Business analysis: review of sales, costs, and profit projections to determine if they meet company objectives.

• Product development: developing the product concept into a physical product– Large investment– Building a prototype– Testing for safety, durability, and acceptability

• Test marketing: testing the product in more realistic market settings– Determine the target market profile

Major Stages in New Product Development

– Assess consumer acceptability, trial, repeat purchase rate– Evaluate trade reception and distribution penetration– Design effective media plans

• Standard test markets• Controlled test markets• Simulated test market

• Commercialization: introducing a new product into the market– Introduction timing– Market rollout or full-scale introduction

• Sequential product development• Simultaneous (team-based) product development

Product Life-Cycle Strategies

• Product life cycle (PLC): the course of a product’s sales and profits over its life

Product Life-Cycle Strategies

Characteristics: Introduction Growth Maturity DeclineSales Low Rapidly rising sales Peak Declining salesCosts High cost Average cost Low cost Low cost

per customer per customer per customer per customerProfits Negative Rising profits High profits Declining profitsCustomers Innovators Early adopters Middle majority LaggardsCompetitors Few Growing number Stable number Declining number

Marketing objectives:Create product Maximize market Maximize profit & Reduce expenditureawareness and trial share defend market share & milk brand

Strategies:Product Offer basic product Offer product Diversify brand and Phase out weak

extensions, service models itemsPrice Use cost-plus Price to penetrate Price to match or Cut price

market best competitorsDistribution Build selective Build intensive Build more Selective; phase out

distribution distribution intensive distribution unprofitable outletsAdvertising Build awareness Build awareness & Stress brand differences Reduce to level needed

early adopters/dealers interest mass market and benefits to retain hard-core loyalsSales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal

to entice trial to heavy demand brand switching level