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MKTG

Lamb, Hair, McDaniel

2007-2008

1

CHAPTER
Designed by
Amy McGuire, B-books, Ltd.
Chapter 10

Developing
and
Prepared by
Managing
Deborah Baker, Texas Christian University
Products

Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

1

Learning Outcomes

LO1

Explain the importance of developing
new products and describe the six
categories of new products

LO2

Explain the steps in the new-product
development process

LO3

Discuss global issues in new-product
development

Chapter 10

Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

2

Learning Outcomes

LO4

Explain the diffusion process through
which new products are adopted

LO5

Explain the concept of product life
cycles

Chapter 10

Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

3

LO1 The Importance of New Products

Explain the importance
of developing new
products and describe
the six categories of
new products

Chapter 10

Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

4

New Product
New
New Product
Product
A product new to the
world, the market, the
producer, the seller, or
some combination of
these.

LO1
Chapter 10

Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

5

All rights reserved 6 . a division of Thomson Learning.Categories of New Products New-to-the-World New-to-the-World New New Product Product Lines Lines Product Product Line Line Additions Additions Improvements Improvements or or Revisions Revisions Repositioned Repositioned Products Products LO1 Chapter 10 Lower-Priced Lower-Priced Products Products Copyright ©2008 by South-Western.

Action at Starbucks. All rights reserved 7 .Beyond the Book LO1 New Product for Starbucks  Starbucks recently marketed the film Akeelah and the Bee.” Wall Street Journal.  Critics say the pervasive chain is overextending its welcome. Chapter 10 Copyright ©2008 by South-Western. April 22-23/2006. a division of Thomson Learning. “Lights. A2. SOURCE: Janet Adamy.  It says the film is a natural extension of the Starbucks experience. Camera.

LO1 REVIEW LEARNING OUTCOME Developing New Products Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning. All rights reserved 8 .

a division of Thomson Learning.LO 2 The New Product Development Process Explain the steps in the new-product development process Chapter 10 Copyright ©2008 by South-Western. All rights reserved 9 .

All rights reserved 10 .The New-Product Development Process New Product Success Factors Long-term Long-term commitment commitment Company-specific Company-specific approach approach Capitalize Capitalize on on experience experience LO 2 Chapter 10 Establish Establish an an environment environment Copyright ©2008 by South-Western. a division of Thomson Learning.

a division of Thomson Learning.New-Product Development Process New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization LO2 Chapter 10 New Product Copyright ©2008 by South-Western. All rights reserved 11 .

ideo.Idea Generation Customers Employees Distributors Competitors Sources of New-Product Ideas Vendors R&D Consultants LO 2 Chapter 10 http://www.com Online Copyright ©2008 by South-Western. All rights reserved 12 . a division of Thomson Learning.

Tips for New Product Development  Disperse R & D around the globe  Keep teams small and empower employees  Flatten hierarchy  Encourage generation of crazy new ideas  Welcome mistakes LO2 Chapter 10 Copyright ©2008 by South-Western. All rights reserved 13 . a division of Thomson Learning.

All rights reserved 14 . a division of Thomson Learning.Brainstorming Brainstorming Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. LO2 Chapter 10 Copyright ©2008 by South-Western.

Idea Screening Idea IdeaScreening Screening The first filter in the product development process. All rights reserved 15 . which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason. LO2 Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning.

usually before any prototype has been created.Concept Testing Concept Concept Testing Testing A test to evaluate a new-product idea. LO2 Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning. All rights reserved 16 .

a division of Thomson Learning. All rights reserved 17 .Business Analysis Demand Considerations Considerations in in Business Business Analysis Analysis Stage Stage Cost Sales Profitability LO2 Chapter 10 Copyright ©2008 by South-Western.

and distribution strategy  Manufacturing feasibility  Final government approvals if needed LO2 Chapter 10 Copyright ©2008 by South-Western. All rights reserved 18 . price. a division of Thomson Learning. branding.Development  Creation of prototype  Marketing strategy  Packaging. labeling  Promotion.

Simultaneous Product Development Simultaneous Simultaneous Product Product Development Development A new team-oriented approach to new-product development where all relevant functional areas and outside suppliers participate in the development process. LO2 Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning. All rights reserved 19 .

Test Marketing Test Test Marketing Marketing http://www.merwyn. a division of Thomson Learning. All rights reserved 20 .com The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Online LO2 Chapter 10 Copyright ©2008 by South-Western.

newproductworks. a division of Thomson Learning.Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing http://www. All rights reserved 21 .com LO2 Chapter 10 Online Copyright ©2008 by South-Western.

Commercialization Production Production Inventory Inventory Buildup Buildup Distribution Distribution Shipments Shipments Sales Sales Training Training Trade Trade Announcements Announcements LO2 Chapter 10 Customer Customer Advertising Advertising Copyright ©2008 by South-Western. All rights reserved 22 . a division of Thomson Learning.

a division of Thomson Learning.LO2 REVIEW LEARNING OUTCOME New-Product Development Process Chapter 10 Copyright ©2008 by South-Western. All rights reserved 23 .

All rights reserved 24 . Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning.Beyond the Book Why Some Products Succeed and Others Fail Explain why some products succeed and others fail NOTE: Supplemental content – not in book.

Beyond the Book Why New Products Fail  No discernible benefits  Poor match between features and customer desires  Overestimation of market size  Incorrect positioning  Price too high or too low  Inadequate distribution  Poor promotion  Inferior product NOTE: Supplemental content – not in book. a division of Thomson Learning. Chapter 10 Copyright ©2008 by South-Western. All rights reserved 25 .

Beyond the Book Success Factors Factors in Successful New Products Match between product and market needs Different from substitute products Benefit to large number of people NOTE: Supplemental content – not in book. Chapter 10 Copyright ©2008 by South-Western. All rights reserved 26 . a division of Thomson Learning.

a division of Thomson Learning.Beyond the Book Success Factors Listening to customers Strong leadership Producing the best product Commitment to newproduct development Vision of future market Project-based team approach Getting every aspect right NOTE: Supplemental content – not in book. All rights reserved 27 . Chapter 10 Copyright ©2008 by South-Western.

Chapter 10 Copyright ©2008 by South-Western. All rights reserved 28 .Beyond the Book Why Products Succeed and Others Fail NOTE: Supplemental content – not in book. a division of Thomson Learning.

a division of Thomson Learning.LO 3 Global Issues in New-Product Development Discuss global issues in new-product development Chapter 10 Copyright ©2008 by South-Western. All rights reserved 29 .

a division of Thomson Learning.Global Marketing Questions  Develop product for potential worldwide distribution  Build in unique market requirements  Design products to meet regulations and key market requirements LO3 Chapter 10 Copyright ©2008 by South-Western. All rights reserved 30 .

LO3 REVIEW LEARNING OUTCOME Global Issues in New-Product Development Single Singleproduct productworldwide worldwide Modification Modificationof ofproducts products Multiple Multipleproducts productsin in multiple multiplecountries countries Chapter 10 Copyright ©2008 by South-Western. All rights reserved 31 . a division of Thomson Learning.

All rights reserved 32 .LO4 The Spread of New Products Explain the diffusion process through which new products are adopted Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning.

All rights reserved 33 .Diffusion Diffusion Diffusion The process by which the adoption of an innovation spreads. LO4 Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning.

Categories of Adopters Innovators Innovators Early Early Adopters Adopters Early Early Majority Majority Late Late Majority Majority LO4 Chapter 10 Laggards Laggards Copyright ©2008 by South-Western. All rights reserved 34 . a division of Thomson Learning.

Product Characteristics and the Rate of Adoption Complexity Complexity Compatibility Compatibility Relative Relative Advantage Advantage Observability Observability Trialability Trialability LO4 Chapter 10 http://www.com Online Copyright ©2008 by South-Western. a division of Thomson Learning. All rights reserved 35 .electronicgadgetdepot.

All rights reserved 36 .Sales of New Audio Products LO4 Chapter 10 Copyright ©2008 by South-Western. a division of Thomson Learning.

Marketing Implications of the Adoption Process Word Word of of Mouth Mouth Communication Communication Aids Aidsthe the Diffusion DiffusionProcess Process LO4 Chapter 10 Direct Directfrom from Marketer Marketer Copyright ©2008 by South-Western. All rights reserved 37 . a division of Thomson Learning.

LO4 REVIEW LEARNING OUTCOME Diffusion Process for New Products Chapter 10 Copyright ©2008 by South-Western. All rights reserved 38 . a division of Thomson Learning.

All rights reserved 39 . a division of Thomson Learning.LO5 Product Life Cycles Explain the concept of product life cycles Chapter 10 Copyright ©2008 by South-Western.

from its introduction (birth) to its decline (death). a division of Thomson Learning.Product Life Cycle Product Product Life LifeCycle Cycle A concept that provides a way to trace the stages of a product’s acceptance. All rights reserved 40 . LO5 Chapter 10 Copyright ©2008 by South-Western.

Product Life Cycle Maturity Stage Decline Stage Dollars Introductory Growth Stage Stage Sales Profits 0 LO Chapter 10 5 Time Copyright ©2008 by South-Western. a division of Thomson Learning. All rights reserved 41 .

All rights reserved 42 .Product Life Cycles for Styles. Fashions. a division of Thomson Learning. and Fads LO5 Chapter 10 Copyright ©2008 by South-Western.

U. All rights reserved 43 . a division of Thomson Learning. Sales of Televisions LO5 Chapter 10 Copyright ©2008 by South-Western.S.

a division of Thomson Learning. All rights reserved 44 .Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and information  Communication challenge is to stimulate primary demand        LO5 Chapter 10 Copyright ©2008 by South-Western.

a division of Thomson Learning. All rights reserved 45 .Introductory Stage in Europe LO5 Chapter 10 Copyright ©2008 by South-Western.

a division of Thomson Learning.Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution LO5 Chapter 10 Copyright ©2008 by South-Western. All rights reserved 46 .

a division of Thomson Learning. All rights reserved 47 .Maturity Stage         Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge LO5 Chapter 10 Copyright ©2008 by South-Western.

Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” LO5 Chapter 10 Copyright ©2008 by South-Western. All rights reserved 48 . a division of Thomson Learning.

a division of Thomson Learning.Diffusion Process and PLC Curve Sales Introduction Growth Early majority Decline Maturity Product life cycle curve Late majority Early adopters Innovators Laggards LO5 Chapter 10 Copyright ©2008 by South-Western. All rights reserved Diffusion curve 49 .

Margins drop. Sampling demand Pricing Strategy Chapter 10 High to recoup development costs Fall as result of competition & efficient production. Shelf space Phase out unprofitable outlets Advertise. All rights reserved 50 . Promote heavily Phase out promotion Prices fall (usually).LO5 REVIEW LEARNING OUTCOME Product Life Cycles INTRODUCTION Sales Product Strategy Limited models Frequent changes GROWTH More models Frequent changes. models Extensive. Distributio n Strategy Limited Expanded Wholesale/ dealers. a division of Thomson Learning. Copyright ©2008 by South-Western. Time MATURITY DECLINE Eliminate Large number unprofitable of models. Prices stabilize at low level. Stimulate Stimulate demand. Longretail distributors term relations Promotion Strategy Awareness. Aggressive ads.