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Chapter Outline

A. New-Product Development Strategy


B. The New-Product Development Process
C. Product Life-Cycle Strategies

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New-Product Development Strategy

New-product development
The development of original products, product
improvements, product modifications and new
brands through the firm’s own product
development efforts.

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B. The New-product Development Process

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1. Idea Generation

Idea generation is the systematic search for


new-product ideas.
Internal idea sources – Through formal R&D or
companies can pick the brains of it employees

External idea sources – Through distributors


suppliers, competitors and customers.

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Idea Generation

Crowdsourcing – Inviting broad communities of


people (customers, employees, independent
scientists and researchers and even the public at
large) into the new-product innovation process.

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2. Idea screening

Screening new-product ideas in order to spot


good ideas and drop poor ones as soon as
possible.

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3. Concept Development and Testing

 Product concept is a detailed version of the


new-product idea stated in meaningful
consumer terms.

Concept development – The marketer’s task is


to develop the new product into alternative
product concepts, find out how attractive each
concept is to customers and choose the best
one.
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Concept Development and Testing

Concept testing – calls for testing new-product


concepts with groups of target consumers.

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4. Marketing Strategy Development

Marketing strategy development is designing


an initial marketing strategy for introducing
the product to the market.

The marketing strategy statement consists


of 3 parts:
1. The first part describes the target market; the
planned value proposition; and the sales,
market share and profit goals for the first few
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Marketing Strategy Development

• The 2 part outlines the product’s planned


price, distribution and marketing budget for
the first year.
• The 3 part describes the planned long-run
sales, profit goals and marketing mix
strategy.

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5. Business Analysis

Business analysis is a review of the sales, costs,


and profit projections for a new product to find
out whether
they satisfy the
company’s
objectives.

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6. Product development

Product development is
developing the product
concept into a physical
product in order to ensure
that the product idea can be
turned into a workable
market offering, call of
Investment is required.

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(Armstrong, Kotler & Opresnik)
7. Test marketing

Test marketing is the stage of new-product


development in which the product
and marketing program are tested in realistic
market settings.

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8. Commercialization

Commercialization involves introducing a new


product into
the market.

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Commercialization

Decisions must be made concerning:


• Timing
• Where to launch the new product
• Market rollouts

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(Armstrong, Kotler & Opresnik)
C. Product Life-cycle Strategies

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Product Life-cycle Strategies

The PLC has 5 distinct stages:


1. Product development – begins when the
company finds and develops a new-product
idea. Sales are zero and the company’s
investment costs mount.
2. Introduction – is a period of slow sales
growth as the product is introduced in the
market. Profits are nonexistent in this stage
because of the heavy expenses of product
introduction. Copyright 2017 Pearson Education, Ltd
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Product Life-cycle Strategies

3. Growth – is a period of rapid market


acceptance and increasing profits.
4. Maturity – is a period of slowdown in sales
growth because the product has achieved
acceptance by most potential buyers. Profits
level off or decline because of increased
marketing outlays to defend the product
against competition.

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(Armstrong, Kotler & Opresnik)
Product Life-cycle Strategies

5. Decline – is the period when sales fall off and


profits drop.

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Style, Fashion, and Fads

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Product Life-cycle Strategies

The PLC concept can be applied to styles,


fashions and fads.

A style is a basic and distinctive mode of


expression.

A fashion is a currently accepted or popular style


in a given field.

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Product Life-cycle Strategies

Fads are temporary periods of unusually high


sales driven by consumer enthusiasm and
immediate product or brand popularity.

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Strategies for each of the other life-
cycle stages: Introduction Stage
• The introduction stage starts when a new
product is first launched.
• Profits are negative or low because of the low
sales and high distribution and promotion
expenses.
• A company, especially the market pioneer,
must choose a launch strategy that is
consistent with the intended product
positioning.
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Strategies for each of the other life-
cycle stages: Growth Stage
• Sales start climbing quickly.
• New competitors will enter the market. They
will introduce new product features and the
market will expand.
• The increase in competitors leads to an
increase in the number of distribution outlets.
• Prices remain stable.
• Profits increase.

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Strategies for each of the other life-
cycle stages: Maturity Stage
• A product’s sales growth will slow down.
• This results in many producers with many
products to sell.
• Competitors begin marking down prices,
increasing their advertising and sales
promotions and upping their product
development budgets to find better versions
of the product.
• These steps lead to a drop in profit.
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Strategies for each of the other life-
cycle stages: Maturity Stage
• Some of the weaker competitors start
dropping out and the industry eventually
contains only well-established competitors.
• Product managers should consider modifying
the market, product offering and marketing
mix.
• In modifying the market, the company tries to
increase consumption by finding new users
and new market segments for its brand.
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Strategies for each of the other life-
cycle stages: Maturity Stage
• In modifying the product, the company tries
to change the characteristics of the product
such as quality, features, style or packaging to
attract new users and inspire more usage.
• In modifying the marketing mix, the company
improves sales by changing one or more
marketing mix elements.

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(Armstrong, Kotler & Opresnik)
Strategies for each of the other life-
cycle stages: Decline Stage
• The sales of most product forms and brands
eventually dip.
• Management may decide to maintain its
brand in the hope of moving it back into the
growth stage of the PLC.
• Management may decide to harvest the
product by reducing various costs, hoping that
sales hold up.
• Management may decide to drop the product
from its line.Copyright 2017 Pearson Education, Ltd
(Armstrong, Kotler & Opresnik)
Summary of Product Life-Cycle Characteristics,
Objectives, and Strategies

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(Armstrong, Kotler & Opresnik)
Summary of Product Life-Cycle Characteristics,
Objectives, and Strategies

Copyright 2017 Pearson Education, Ltd


(Armstrong, Kotler & Opresnik)
Looking Ahead to Chapter 9
Pricing
Understanding and
Capturing Customer Value