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Chapter 9

New-Product Development and Product Life-Cycle Strategies
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Road Map: Previewing the Concepts
Explain how companies find and develop new-product ideas. List and define the steps in the newproduct development process. Describe the stages of the product life cycle. Explain how marketing strategies change during the product’s life cycle.
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New-Product Development Strategy Strategies for Obtaining New-Product Ideas Acquired Companies Acquired Patents Acquired Licenses Original Products Product Improvements Product Modifications New Brands 3 .

Product may have been pushed despite poor marketing research findings.Causes of New-Product Failures One study estimated that as many as 80% of new consumer packaged products fail. or advertised. Only about 40% of new consumer products are around 5 years after introduction. Product design problems. Why? Overestimation of market size. Product incorrectly positioned. or Competitive actions. priced. Costs of product development. 4 .

and a To create successful new products. and develop products that deliver superior value to customers.Improving New-Product Success New-product success depends on having a: Unique superior product (one with higher quality. features. and benefits). 5 Well-defined product concept (a defined target market. product requirements. and value in use). the company must: understand its consumers. and competitors. markets. .

9-1) 6 .Major Stages in New-Product Development (Fig.

New Product Development Process Step 1. Idea Generation Systematic Search for New Product Ideas Obtained From Employees and Also From: Customers Competitors Distributors Suppliers 7 .

Idea Screening Helps spot good ideas and drop poor ones as soon as possible. the idea is evaluated against a set of general company criteria. 8 .New Product Development Process Step 2. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Then.

Choose the One That Has the Strongest Appeal to Target Customers 9 .New Product Development Process Step 3. Concept Development 1. Concept Testing .Test the New-Product Concepts with Groups of Target Customers Product Image is the Way Consumers Perceive an Actual or Potential Product 3. Develop New Product Ideas into Alternative Detailed Product Concepts 2.

DaimlerChrysler’s Electric Car The company’s task is to develop its fuel-cell powered electric car into alternative product concepts. find out how attractive each is to customers. 10 . and choose the best one.

Marketing Strategy Part One Describes Overall: Target Market Planned Product Positioning Sales.New Product Development Process Step 4. Market Share. & Profit Goals Part Two Describes First-Year: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Run: Sales & Profit Goals Marketing Mix Strategy 11 .

Product Development Review of Product Sales.Step 5. Move to Product Development 12 . and Profits Projections to See if They Satisfy Company Objectives Business Analysis If No. Costs. Business Analysis Step 6. Eliminate Product Concept If Yes.

Branding. Pricing. Packaging. Advertising. 13 . Distribution. Can be very expensive and time consuming. Budget levels. Test the following: Positioning strategy.New Product Development Process Step 7. Test Marketing Product and marketing program are introduced into more realistic market settings.

New Product Development Process Step 8. Commercialization Introducing the New Product into the Market When is the Right Time to Introduce Product? Where to Launch a New Product? 14 .

What lies ahead for Microsoft? What secrets has Microsoft learned? 15 .Form students into groups of three to five. Each group should then answer the following questions: Comment on Microsoft’s ability to bring new products to the marketplace. Each group should read the opening vignette to the chapter about Microsoft and the software industry.

Speeding Up New-Product Development Simultaneous (Team-Based) Step 1 Step 1 Step 3 Step 4 16 Sequential Step 2 Step 3 Step 4 Step 2 .

Product Life Cycle (Fig. 9-2) Sales and Profits ($) Sales Profits Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline Sales and Profits Over the Product’s Life From Inception to Demise 17 .

Product form which tends to have the standard PLC shape (i.e. Style which is a basic and distinctive mode of expression (formal clothing).e. and declines fast (pet rocks).Applications of the Product Life Cycle Product class which has the longest life cycles (i. Ford Taurus). gas-powered cars). Fad which is a fashion that enters quickly. Brand which can change quickly because of changing competitive attacks and responses (i. is adopted quickly. minivans).e. 18 . Fashion which is a popular style in a given field (business casual).

and Shape of the PLC Strategy is Both a Cause and a Result of the Product’s Life Cycle 19 . the problems: Length of Each Stage. but may also present some Difficult to Forecast the Sales Level.Problems Using the PLC The PLC Concept can be Trouble identifying applied by marketers for Which Stage of the PLC the Product Is describing how products In and markets work.

& Strategies Sales Low sales Costs Profits Marketing Objectives Product Price Distribution Advertising High cost per customer Negative or low Create product awareness and trial Offer a basic product Usually is high High distribution expenses Spending is high to inform consumers 20 . Objectives.Introduction Stage of the PLC Summary of Characteristics.

Growth Stage of the PLC Summary of Characteristics. Objectives. & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer new product features and models Remain where they are or fall slightly Increase number of distribution outlets Educating consumers and meeting competition 21 .

Maturity Stage of the PLC Summary of Characteristics. then lower profits Maximize profits while defending market share May modify product May decline Build more intensive distribution Stress brand differences and benefits 22 . & Strategies Sales Begin to slow Costs Profits Marketing Objectives Product Price Distribution Advertising Low cost per customer High profits. Objectives.

Maturity Stage of the PLC Company tries to increase consumption of the current product Changing characteristics such as quality. features. or styles to attract new users Company tries to improve sales by changing one or more marketing mix elements 23 .

Objectives. harvest.Decline Stage of the PLC Summary of Characteristics. or drop the product Phase out weak items Cut price Selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers 24 . & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Declining sales Low cost per customer Declining profits Reduce expenditure and maintain.

and trace the product’s life cycle.Pick a soft drink. or food product. car. Project when the product might enter a decline stage and discuss strategies to reverse the decline. 25 .

List and define the steps in the newproduct development process. Explain how marketing strategies change during the product’s life cycle. 26 .Rest Stop: Reviewing the Concepts Explain how companies find and develop new-product ideas. Describe the stages of the product life cycle.