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Marketing Management-II

Session 1

New Product Development

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Marketing Management-II

Module Objectives

After going through this module, you will be able to:


• Explain the new product development process.
• Explain the various stages of Product Life Cycle (PLC)
and the marketing strategies used in these stages.
• Explain the consumer adoption process.
• Identify the factors influencing consumer adoption
process.
• Explain the various types of competitive environments.
• List and explain the steps of competitor analysis
process.

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Marketing Management-II

Module Objectives

• Explain the various competitive strategies used by


marketers.
• Explain how brand equity can be built through brand
positioning and branding strategies.
• Explain the product line management and product mix
management.
• Explain the pricing process.
• Explain the pricing approaches and pricing strategies.
• Explain how goods are distributed among end users
through distribution channels.

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Marketing Management-II

Module Objectives

• Explain the importance of advertising for marketing


products.
• Explain the advertising process.
• Explain what kind of advertising is used in various PLC
stages.
• Explain a marketing plan and its components.
• Explain market testing, its need and importance.
• Explain what happens in the “implementation” stage.
• Explain the “selling” stage.
• Explain how the marketing function has evolved with direct
and social marketing.

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Marketing Management-II

Session Objectives

After going through this session, you will be able to:


• Identify the need for new product development for a
company.
• List and explain the strategies a company can use for
bringing new product in the market.
• Explain the new product development process.
• Identify the causes of new product failure.
• Explain the ways for improving the success of a new
product.
• Explain Product Life Cycle (PLC) and its relevance for
marketers.
• List and explain the PLC stages.
• Explain the marketing strategies used in various stages of
PLC.
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Marketing Management-II

The Marketing Process

CONCEPT DEVELOPMENT

ANALYSIS OF MARKET
SELLING OPPORTUNITY

MARKET STRATEGY
IMPLEMENTATION
DESIGN

MARKET TESTING

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Marketing Management-II

Case Study 1

The new venture of Coca Cola

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Marketing Management-II

New Product and its Need

• New Product
– Original Product
– Product Improvement
– Product Modifications
– New Brands

• Need
– Changes in customer needs
– Technological advances
– Competitive challenges
– Replace ageing products

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Marketing Management-II

Case Study 2

Gillette: Acquiring Success

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Marketing Management-II

Strategies For Obtaining New Products

Strategies for Obtaining New Product


Ideas
New
NewProduct
ProductDevelopment
Development
Acquisition
Acquisition (R
(R&&DDDepartment)
Department)
Acquired
Acquired
Companies
Companies

Acquired
Acquired
Patents
Patentsor
orProducts
Products

Acquired
Acquired
Licenses
Licenses
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Marketing Management-II

Acquisitions

• Acquired Companies
• Acquired Patents or Products
• Acquired Licenses

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Marketing Management-II

New Product Development: Sequential

• Idea Generation
• Idea Screening
• Concept Development and Testing
• Marketing Strategy
• Business Analysis
• Product Development
• Test Marketing
• Commercialisation

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Marketing Management-II

New Product Development: Flow of Responsibility

Product Planners  Designers  Engineers 

Manufacturers  Marketers

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Marketing Management-II

Sequential Development: Benefits and Limitations

• Benefits
– Have control on product development
– Reduce product failure chances

• Limitations
– Slow
– Competitor gets the time to imitate

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Marketing Management-II

New Product Development: Simultaneous

• Specialists from different functional areas of an


organisation work together in developing new product ,
such as:
– Design
– Manufacturing
– Marketing
– Sales

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Marketing Management-II

Causes Of New Product Failures

• One study estimated that as many as 80% of new


consumer packaged products failed.
• Only about 40% of new consumer products are around 5
years after introduction.
• Why?
– Inadequate market assessment
– Lack of market orientation
– Poor screening and Project evaluation
– Product design problems
– Product incorrectly positioned, priced or advertised
– Costs of product development
– Competitive actions
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Marketing Management-II

Case Study 3

Success of Tata Gold tea

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Marketing Management-II

Improving New-product Success

• New product success depends on having a:


– Unique superior product (one with higher quality, features, and
value in use), &
– Well-defined product concept (a defined target market, product
requirements, and benefits).
• To create successful new products, the company must:
– understand its customers, markets and competitors, &
– develop products that deliver superior value to customers.
– The company must also understand the method used by the
customer when he adopts a new product.

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Marketing Management-II

Definitions of Product Life Cycle (PLC)

• The succession of stages a product goes through


• The course of a product’s sales and profits over its
lifetime
• Life of a product in the market with respect to
business/commercial costs and sales measures

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Marketing Management-II

Applicability Of The PLC Concept

• Life cycles exist for Product categories or classes as


well as brands within such categories
Example : Cigarettes is a product category within
which Wills Filter Kings is a brand
• Product categories typically have longer life cycles
than the brands within them
Example : While the TV market is very much in
existence, many brands within it have become extinct
• It provides a good framework for product planning

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Marketing Management-II

Stages Of PLC

• Introduction
• Growth
• Maturity
• Decline

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Marketing Management-II

Characteristics of PLC Stages

• Introduction stage:
– A new product or a modified product
– No or little competition
– Initial costs are high (huge investments)
– Profits are non-existent due to heavy expenses of
product introduction (high distribution and promotion
costs)
– No sales revenue; Slow sales growth
– Demand has to be created by generating awareness
among people
– Target market mainly comprises the innovators and
early adopter categories
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Marketing Management-II

Characteristics of PLC Stages


• Growth stage:
– Growth in product demand as the product gains rapid
market acceptance
– Costs reduce as scale of operation increases due to
growing demand
– Sales volume increase significantly ; sales increase
– Profits start increasing
– Consumer trials pick up and product gains wider
acceptance
– Public awareness increases
– Product begins to get adopted by the early adopter
category and also to the early majority
– Cost per person increases
– Competition increases slowly as many players come with
very similar product offering (Market Expansion)
– Market share tends to stabilise
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Marketing Management-II

Characteristics of PLC Stages

• Maturity stage:
– A product is mature when it has become a familiar
offering
– Overcapacity in the market leads to greater competition
– Its consumer base is large and has the early majority
and the late majority categories of consumers
– Sales volume peaks but sales growth slows down due to
increase in competition
– Costs are very low as the product is well established in
the market
– Profits level off or decline as marketing costs increase
– Number of competitive offerings increase
– Weak players leave

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Marketing Management-II

Characteristics of PLC Stages

• Decline stage:
– Sales volume decrease or stabilise
– Profits and product sales fall as technologically
superior substitutes enter the market or customer
needs change
– Customer base reduces and may include few
laggards
– Competition becomes less
– More innovative products are brought in the market
due to changing customer needs, technological
advances and competition
– Profit depends more on challenge of production or
distribution efficiency than increase in sales

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Marketing Management-II

The Stages Of Product Life Cycle

A B C D
SALES

TIME
A - INTRODUCTION

A period of slow sales growth as the product is


Introduced in the market

B: GROWTH

A period of rapid market acceptance and


substantial profit improvement
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Marketing Management-II

The Stages Of Product Life Cycle

A B C D
SALES

TIME
C: MATURITY

A period of slowdown in the sales growth. Profit


stabilises or declines

D: DECLINE

A period when sales show a downward drift and


profits erode
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Marketing Management-II

Product Life Cycle Characteristics

Introduction Growth Maturity Decline

Sales Low sales Rapidly rising Stabilised Declining


peak sales
Costs High initial cost Average cost Low cost Low cost
Profits Negative Rising Peak, stabilising Low,
declining
Competitors Few Growing Stable Low

Customers Innovators Early adopters Early majority, Laggards


& early majority late majority &
some laggards

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Marketing Management-II

Marketing Strategies In The Stages Of PLC

• Introduction stage:
– Marketing objectives typically are to increase consumer
awareness and trial
– Product offered is a basic one with one or two models
only
– Price is typically cost plus or could be dependent on the
nature of the product
– Promotion objectives are focussed on providing
information and building awareness for the new product
– Distribution depends on the product category and target
segment ; limited number of products available in a few
channels of distribution

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Marketing Management-II

Marketing Strategies In The Stages Of PLC


• Growth stage:
– Marketing objectives are to expand distribution and increase
market shares
– Company enters new market segments
– Product differentiation is done to set the product apart from
that of competitive offerings
– The price becomes competitive and aims at penetrating the
maximum market ; maximise market share ; Prices are
reduced due to increase in competition
– Advertising with focus on brand building along with creating
awareness
– Product mix is widened with extensions at this time to
accommodate the growing market
– Distribution becomes intensive ; Company increases number
of outlets and adopts new distribution channels

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Marketing Management-II

Marketing Strategies In The Stages Of PLC


• Maturity stage:
– Marketing objective is to defend market share and
combat competition
– Modifications
• Market modifications
• Product modifications in R & D department
• Marketing mix modification
– Product Differentiation
– Price is competitive ; price wars
– Promotion is competitive and reminder ; Stresses brand
differences and benefits ; Promotion: a wide variety of
media is used; advertising and sales promotion increase
– Product mix is further expanded or maintained
– Distribution is intensive and extensive
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Marketing Management-II

Marketing Strategies In The Stages Of PLC

• Decline stage:
– Marketing objectives could be to either cut back on
marketing costs OR revive the brand by modifying its
product mix, repositioning OR by terminating the brand
– Marketers try to push up profits by reducing marketing
spend and through cost cutting
– Maintain, harvest or drop the ageing product ; product
pruning
– Intense price cutting to liquidate stocks
– Distribution is selective and limited
– Promotion is aimed at liquidating the available product
– Product mix is phased out, contracted or renewed

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Marketing Management-II

Case Study 4

Vim: Moving the Product Intelligently

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Marketing Management-II

Summary of Learning

• The stages in a Product Life cycle are distinguishable


based on the sales history
• Life cycles exist for Product categories or classes as
well as brands within such categories
• The stages in the product life cycle are:
– Introduction stage
– Growth stage
– Maturity stage
– Decline stage
• Each stage is identified based on the sales and profits,
competition, customer base, costs to the company etc.

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