NEW PRODUCT DEVELOPMENT & PRODUCT LIFE CYCLE

Newport institute communication & economics Karachi

Ch # 9 –New Product Dev. & PLC

CATEGORIES OF NEW PRODUCTS
• Six categories of new products in terms of their newness to the company and to the market place: – New-to-the-world products
• new products that create an entirely mew market

– New product-lines
• new products that allow a company to enter an established market for the first time

– Additions to existing product-lines
• new products that supplement a company’s established product lines (package sizes, flavors, so on)

– Improvements or revisions to existing products
• new products that provide improved performance or greater perceived value and replace existing products

– Repositioning
• existing products that are targeted to new markets or new market segments

– Cost reductions

Ch # 9 –New Product Dev. & PLC

NEW PRODUCT DEVELOPMENT
the development of original products, product improvements, product modifications & new brands

• New-product failure
– nearly 80% of new packaged consumer goods & line extensions fail – nearly 33% of new industrial products fail at launch

• New successful products
– are unique superior products • higher quality, new features & offer higher value – have well-defined concept • by carefully defining and assessing the target markets, product requirements & benefits

• to remain successful companies must continuously develop new products - but the odds weigh heavily against success. The solution lies in strong new-product planning

Ch # 9 –New Product Dev. & PLC

THE NEW PRODUCT DEVELOPMENT PROCESS
• consists of eight major steps
– – – – – – – – idea generation idea screening concept development & testing marketing strategy business analysis product development test marketing commercialization

Ch # 9 –New Product Dev. & PLC

IDEA GENERATION
systematic search for new-product ideas

• • • • • •

internal sources customers competitors distributors suppliers others

Ch # 9 –New Product Dev. & PLC

IDEA SCREENING
to spot good ideas and drop poor ones
• • • • • • • • • • • is the product truly useful to consumers & society availability of market does it mesh well with company’s objectives & strategies do we have the people, skills & resources to make it succeed does it deliver more value to customers than competing products is it easy to advertise and distribute availability of technology availability of raw materials risk exposure, profitability, cost/benefit government priority any other factor

• CRITICAL SUCCESS FACTOR

Ch # 9 –New Product Dev. & PLC

NEW PRODUCT DEVELOPMENT PROCESS cont...
• Concept development & testing
– product concept is a detailed version of the new-product idea stated in meaningful consumer terms – concept development - a new product idea is developed into alternative product concepts – concept testing - calls for testing new-product concepts with groups of target customers

• Marketing strategy development
– – – – describe target market planned product positioning planned sales & market share & profit goals for first few years

Ch # 9 –New Product Dev. & PLC

NEW PRODUCT DEVELOPMENT PROCESS cont...
• Business analysis
– a review of the sales, costs & profit projections for a new product to find out whether these factors satisfy the company’s objectives – sales forecast – estimation of costs & profits

• Product development • Test marketing - in realistic market setting • Commercialization (launch)

Ch # 9 –New Product Dev. & PLC

PRODUCT LIFE-CYCLE (PLC)
has five distinct stages in sales history
• Product development • Introduction • Growth
– A period of slow sales growth as the product is introduced in the market – Profits are non-existent in this stage because of heavy expenses of product introduction – A period of rapid market acceptance and substantial profit improvement – A period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or even decline because of increased marketing outlays to defend the product against competition – The period when sales show a downward drift and profits erode

• Maturity

• Decline

Ch # 9 –New Product Dev. & PLC

IMPLICATIONS OF A PRODUCT’S LIFE CYCLE STAGE
• Product life cycle asserts four things:
– Products have limited life – Product sales pass through distinct stages, each posing different challenges to the seller – Profits rise and fall at different stages of the product life cycle – Products require different marketing, financial, manufacturing, purchasing and personnel strategies in each stage of their life cycle

• any product’s current PLC position therefore suggests the best marketing strategies

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