Course Title

Advanced Lean and Agile Manufacturing (3+0)

Department of Industrial Engineering & Management

MS. Batch 2021 n 2022

Lecture: 4-6

Products and product development processes

(Ch. 09. New-Product Development and Product Life-Cycle Strategies From Kotler)

1
New-Product Development Strategy

• Two ways to obtain new products

• Acquisition refers to the buying of a whole company, a patent, or a license to
produce someone else’s product

• New product development refers to original products, product improvements,

product modifications, and new brands developed from the firm’s own research
and development

2
New-Product Development

• Reasons for new product failure

3
New-Product Development

• New product development process

4
New-Product Development

• New product development process

• Idea Generation
• New-product development starts with idea generation.

• It is systematic search for new-product ideas.

• Sources of new-product ideas

• Internal

• External

5
New-Product Development

• New product development process

• Idea Generation

• Sources of new-product ideas

• Internal sources refer to the company’s own formal research and development,
management and staff, and entrepreneurial programs

• External sources refer to sources outside the company such as customers, competitors,
distributors, suppliers, and outside design firms

6
New-Product Development

• New product development process

• Idea Screening
• Identify good ideas and drop poor ideas.

• Company wants to go ahead only with those product ideas that will turn into profitable
products.

• Write up new-product ideas in a standard format that can be reviewed by a new-product

committee.

7
New-Product Development

• New product development process

• Concept Development and Testing
• Product concept is a detailed version of the idea stated in meaningful consumer terms.

• Product idea is an idea for a possible product that the company can see itself offering to the
market.

• A product image is the way consumers perceive an actual or potential product.

• Concept testing refers to testing new-product concepts with groups of target consumers

8
New-Product Development

• New product development process

• Marketing Strategy Development
• The marketing strategy development designs an initial marketing strategy for a new product
based on the product concept.

• The marketing strategy statement consists of three parts.

• Describes the target market; the value proposition; and the sales, market share, and profit goals
for the first few years.

• Value proposition, Outlines the product’s price, distribution, and marketing budget for the first
year.

• Sales and profit goals, Describes the long-run sales, profit goals, and marketing mix strategy.

9
New-Product Development

• New product development process

• Business Analysis
• Business analysis involves a review of the sales, costs, and profit projections for a new
product to find out whether they satisfy the company’s objectives.

10
New-Product Development

• New product development process

• Product Development
• Product development develops the product concept into a physical product to ensure that the
product idea can be turned into a workable market offering.

• R&D hopes to design a prototype that will satisfy and excite consumers and that can be
produced quickly and at budgeted costs.

• Often, products undergo rigorous tests to make sure that they perform safely and effectively,
or that consumers will find value in them.

11
New-Product Development

• New product development process

• Test Marketing
• Test marketing is the stage at which the product and marketing program are introduced into
more realistic marketing settings

• Provides the marketer with experience in testing the product and entire marketing program
before full introduction

• Types of Test Markets

12
New-Product Development

• New product development process

• Test Marketing

13
New-Product Development

• New product development process

• Commercialization
• Commercialization is the introduction of the new product:
• When to launch

• Planned market rollout

14
Managing New-Product Development

• Successful new-product development should be:

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Managing New-Product Development

• Successful new-product development should be:

• Customer-centered new product development focuses on finding new ways to
solve customer problems and create more customer satisfying experiences.

• Begins and ends with solving customer problems.

16
Managing New-Product Development

• Team-Based New-Product Development

• Team-based new-product development is a development approach where
company departments work closely together in cross-functional teams,
overlapping in the product-development process to save time and increase
effectiveness

17
Managing New-Product Development

• Systematic new-product development

• Systematic new-product development is an innovative development approach
that collects, reviews, evaluates, and manages new-product ideas

• Creates an innovation-oriented culture

• Yields a large number of new-product ideas

18
Product Life-Cycle Strategies

19
Product Life-Cycle Strategies

• Introduction Stage
• Slow sales growth

• Little or no profit

• High distribution and promotion expense

20
Product Life-Cycle Strategies

• Growth Stage
• Sales increase
• New competitors enter the market
• Price stability or decline to increase volume
• Consumer education
• Profits increase
• Promotion and manufacturing costs gain economies of scale

21
Product Life-Cycle Strategies

• Maturity Stage
• Slowdown in sales

• Many suppliers

• Substitute products

• Overcapacity leads to competition

• Increased promotion and R&D to support sales and profits

22
Product Life-Cycle Strategies

• Maturity Stage Modifying Strategies

• Market modifying

• Product modifying

• Marketing mix modifying

23
Product Life-Cycle Strategies

• Decline Stage
• Maintain the product

• Harvest the product

• Drop the product

24
Additional Product and Service Considerations

• There are two additional considerations:

• Social responsibility in product decisions

• Issues of international product and services

25
Additional Product and Service Considerations

• Product Decisions and Social Responsibility

• Public policy and regulations regarding developing and dropping products,
patents, quality, and safety

26
Additional Product and Service Considerations

• International Product and Services Marketing—Challenges

• Determining what products and services to introduce in which countries

• Standardization versus customization

• Packaging and labeling

• Customs, values, laws

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• Reasons for new product failure
Over estimation of market size
Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
• New product development process • Consumer education
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization
Product Life-Cycle Strategies
• Introduction Stage
• Slow sales growth
• Little or no profit
• High distribution and promotion expense
• Growth Stage
• Sales increase
• New competitors enter the market
• Price stability or decline to increase volume
• Profits increase
• Promotion and manufacturing costs gain economies of scale
• Maturity Stage
• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to support sales and profits
• Decline Stage
• Maintain the product
• Harvest the product
• Drop the product
28