Marketing I

Chapter 9: New-product Development and Product Life Cycle

As a result of the rapid change in technology, competition, and consumer tastes companies have to be
“on top of their game” by developing a stream of new products and services. This can be done in two
ways:
Acquisition- meaning a firm can buy a
whole firm, a patent or a license to
someone else’s product

New-product development, this

happens in the firm’s own Research &
Development department.

Innovation through research and development and long term planning are vital aspects of developing
new products and has been a winning recipe for companies like Intel. Consumer preferences are
important considerations during product development (because new products are NB to both
consumers and marketers who serve them). New products are seen as the lifeblood of any business.
However studies show that 90% of all new consumer products fail. Why do so many new products fail?

 The firm may overestimate market size (of an idea),

 Actual product may be poorly designed
 It might be incorrectly positioned
 Might be launched at the wrong time
 Priced too high or poorly advertised.

Mrs Ball Chutney

Speedball Sasol Fuel

South African inventions, found on page 273 for more

details on each

Kreepy Krauly 1st heart transplant in 1967

CAT scan Pratley putty

Dolosse- large unusually shaped concrete blocks designed

to break up wave action & protect harbor walls and coastal
installations.
 Understand its consumers
The new-product development process:
Understand its market & competitors
For a firm to create successful new products, it needs to

Develop products that deliver superior

value to customers

It also needs to carry out strong new-product planning along with setting up a systematic new product
development process, to help find and grow new products.

Concept Marketing
Idea Generation Idea Screening development & strategy
testing development

Product
Business Analysis development Test Marketing Commercialization

1. Idea Generation,
Ideas for new products based on consumer research (external idea sources) and employee
(internal idea sources) suggestions.

2. Idea Screening,
Process designed to reduce the number of new-product ideas being worked on at any one time.

3. Concept development & testing,

New products are taken to target consumers to find out if the concepts have strong consumer
appeal.

4. Marketing strategy development,

Calls for designing an initial marketing strategy for a new product based on the product concept.

5. Business Analysis,
A process of making cost estimates and sales forecasts, to get a feeling for profitability of new
product ideas.
 6. Product development,
Product prototypes and samples are created.

7. Test marketing,
Both the product and marketing programme (positioning strategy, advertising, distribution,
pricing, branding, packaging, and budget levels) are tested in more realistic market settings.

8. Commercialization,
Promoting a product to distributors and retailers to get wide distribution, and developing strong
advertising and sales campaigns to generate and maintain interest in the product and among
distributors and consumers. (Basically, it is introducing a new product into the market).

Managing new-product development

New-product development means more than just following the new-product development process.
Firms need to take a holistic approach to managing this process.

Successful new-product requires a: 1. Customer-centered, 2. Team-based, 3. And Systematic effort.

1. Customer-centered new-product development

- Means understanding what customers need and value
- Focuses on finding new ways to solve customer problems & create more customer-
satisfying experiences.

2. Team-based new-product development

- Requires various departments of the firm working closely together (cross-functional effort)
- Overlap steps in the product development to save time and increase effectiveness.

3. Systematic new-product development

- The new-product development process should be holistic and systematic
- To avoid few new ideas surfacing and good ideas faltering, a firm can install an innovation
management to collect, review, evaluate and manage new-product ideas.
- Innovation management system helps create an innovation-orientated firm culture and will
yield a larger number of new-product ideas.

Product life cycle strategies (model of what happens to sales & profits for a product class over
time)

1. Product Development begins when the firm finds & develops a new-product idea. During
product development, sales are zero and the firm’s investment costs increase.
2. Introduction is a period of slow sales growth as the product is introduced into the market.
Profits are non-existent at this point because of heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance, product sales start climbing quickly and
increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance
by most potential buyers. Sales peak, profits level off or decline because of marketing outlays to
defend the product against competition.
5. Decline is the period when sales fall off and profits drop