product development
TRANSCRIPT
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Chapter 9
Chapter 9
New Product Development
and
Product Life-Cycle Strategies
PRINCIPLES OF MARKETING
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Causes of New Product FailuresCauses of New Product Failures
• Overestimation of Market Size
• Product Design Problems
• Product Incorrectly Positioned, Priced or Advertised
• Costs of Product Development
• Competitive Actions
• To create successful new products, the company must:– understand it’s customers, markets and
competitors
– develop products that deliver superior value to customers.
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New Product Development ProcessNew Product Development Process
• Idea Generation and Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development• Test Marketing• Commercialization
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New Product Development ProcessStep 1. Idea Generation
New Product Development ProcessStep 1. Idea Generation
Systematic Search for New Product Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
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• Process to spot good ideas and drop poor ones
• Criteria– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
New Product Development ProcessStep 2. Idea Screening
New Product Development ProcessStep 2. Idea Screening
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New Product Development ProcessStep 3. Concept Development & Testing
New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas into Alternative
Product Concepts
1. Develop Product Ideas into Alternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One3. Choose the Best One
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New Product Development ProcessStep 4. Marketing Strategy Development
New Product Development ProcessStep 4. Marketing Strategy Development
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
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New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If Yes, Move to Product Development
If No, Eliminate Product Concept
If No, Eliminate Product Concept
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New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
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PRODUCT LIFE CYCLEPRODUCT LIFE CYCLE• THE COURSE OF A PRODUCT’S SALES AND PROFITS
OVER ITS LIFE TIME.• AFTER LAUNCHING NEW PRODUCT EVRY COMPANY
WANTS THE PRODUCT TO ENJOY A LONG AND HAPPY LIFE
PRODUCT LIFE CYCLE CONSISTS OF 5 STAGES• PRODUCT DEVELOPMENT• INTRODUCTION• GROWTH• MATURITY• DECLINE
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PRODUCT DEVELOPMENTPRODUCT DEVELOPMENT1. IT BEGINS WHEN THE COMPANY FINDS AND DEVELOPS
A NEW PRODUCT IDEA
2. DURING PRODUCT DEVLOPMENT,SALES ARE ZERO AND THE COMPANY’S INVESTMENT COSTS MOUNT
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Product Life CycleProduct Life Cycle
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
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INTRODUCTION STAGEINTRODUCTION STAGE• INTRODUCTION STAGE STARTS WHEN THE NEW
PRODUCT IS LAUNCHED• INTRODUCTION IS A PERIOD OF SLOW SALES GROWTH
AS THE PRODUCT IS INTRODUCED IN THE MARKET• PROFITS ARE NON EXISTENT IN THIS STAGE BECAUSE
OF THE HEAVY EXPENSES OF PRODUCT INTRODUCTION• IT TAKES TIME AND SALES GROWTH ARE SLOW
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Product Life CycleProduct Life Cycle
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
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Introduction StageIntroduction Stage
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awareness and trial
Create product awareness and trial
Offer a basic productOffer a basic product
Use cost-plus Use cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
AdvertisingAdvertising Build product awareness among early adopters and dealers
Build product awareness among early adopters and dealers
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GROWTH STAGEGROWTH STAGE• IF NEW PRODUCT SATISFIES THE MARKET,IT WILL
ENTER A GROWTH STAGE• SALES WILL CLIMB QUICKLY• EARLY ADOPTERS WILL CONTINUE TO BUY AND LATER
WILL FOLLOW,WHEN THEY WILL HEAR THE WORD OF MOUTH
• GROWTH IS A PERIOD OF RAPID ACCEPTANCE AND INCREASING PROFITS
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Growth StageGrowth Stage
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer product extensions, service, warranty
Offer product extensions, service, warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Build intensive distributionBuild intensive distribution
AdvertisingAdvertising Build awareness and interest in the mass market
Build awareness and interest in the mass market
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MATURITY STAGEMATURITY STAGE• MATURITY IS A PERIOD OF SLOW DOWN IN SALES
GROWTH BECAUSE THE PRODUCT HAS ACHIEVED ACCEPTABCE BY MOST POTENTIAL BUYERS.
• THE SLOW DOWN IN GROWTH SALES RESULTS IN MANY PRODUCERS WITH MANY PRODUCTS TO SELL,THIS LEADS TO GREATER COMPETITION
• COMPETITORS BEGIN MARKET DOWN PRICES,INCREASE THEIR ADVERTISEMENTS
• THESE STEPS LEAD TO DROP IN PROFIT
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Maturity StageMaturity Stage
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitors
Price to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress brand differences and benefits
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DECLINE STAGEDECLINE STAGE• DECLINE IS THE PERIOD WHEN SALES FALL OFF AND
PROFITS DROP• SALES MAY PLUNGE TO ZERO
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Decline StageDecline Stage
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profits
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outlets
Go selective: phase out unprofitable outlets
AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers