CHAPTER 11

Developing and Managing

Products

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 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

Lower-Priced
Lower-Priced Products
Products
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2
 Quiz
B. About ____ of new product actually
A. Completely new-to-the- succeed.
market products represent
about ______ of all new • 5 percent
product introduction each year. • 10 percent
• 5 percent • 15 percent
• 10 percent • 20 percent
• 15 percent
• 20 percent

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 New Product Success Factors

Long-term
Long-term commitment
commitment

Company-specific
Company-specific approach
approach

Capitalize
Capitalize on
on experience
experience

Establish
Establish an
an environment
environment

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 New-Product Development Process

2
5
 New-Product Strategy

A plan that links the new-product

development process with the
objectives of the marketing department,
the business unit, and the corporation.

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 Idea Generation

Customers
Employees
Distributors
Competitors
Sources of R&D
New-Product
Ideas Consultants
Other Experts
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 Approaches for New Product
Development

The
Theprocess
processofofgetting
gettingaagroup
groupto
to
Brainstorming
Brainstorming think
think of
ofunlimited
unlimitedways
waystotovary
varyaa
product
product or
orsolve
solveaaproblem.
problem.

The
Theobjective
objective of
of focus
focusgroup
group
interviews
interviewsisisto
tostimulate
stimulate
Focus Group
Focus Group insightful
insightfulcomments
commentsthrough
through
group
groupinteraction.
interaction.

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 Screening
The first filter in the product development process,
which eliminates ideas that are inconsistent with
the organization’s new-product strategy or are
inappropriate for some other reason.

A Concept Test
A test to evaluate a new-product idea,
usually before any prototype has been
created. Often successful for line
extensions.
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 Business Analysis

Demand

Considerations
Considerations Cost
in
in
Business
Business
Analysis
Analysis Stage
Stage Sales

Profitability

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 Development
 Create of a prototype
 Sketch a marketing strategy
 Decide on packaging, branding, and
labeling
 Map out promotion, price, and
distribution strategy
 Examine manufacturing feasibility

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 Simultaneous Product
Development

A team-oriented approach to new-

product development where all
relevant functional areas and
outside suppliers participate in the
development process.

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 Test Marketing
The limited introduction of a product and a
marketing program to determine the reactions
of potential customers in a market situation.

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 Costs of Test Marketing
• Often takes one year or more
• Can cost over $1 million
• Exposes new product to competitors
• Competitors can “jam” testing
programs with their own promotions

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 Alternatives to
Test Marketing
 Single-source research using
scanner data

 Simulated (laboratory) market

testing

 Online test marketing

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 Commercialization
Ordering
Ordering Materials
Materials

Production
Production

Inventory
Inventory Buildup
Buildup

Distribution
Distribution Shipments
Shipments

Sales
Sales Force
Force Training
Training

Trade
Trade Announcements
Announcements

Customer
Customer Advertising
Advertising
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 Product Failure

 Despite the amount of time and money

spent on developing and testing new
products, a large proportion of new
product introductions fail.
 The most important factor in successful
new-product introduction is a good
match between the product and market
needs.

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 New-Product
Success Factors
Listening to
customers
Strong leadership
Producing the best
product
Commitment to new-
product development
Vision of future
market
Project-based team
approach
Getting every aspect
right

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 Diffusion
The process by which the adoption of
an innovation spreads.

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 Product Characteristics and
the Rate of Adoption

Complexity
Complexity

Compatibility
Compatibility

Relative
Relative Advantage
Advantage

Observability
Observability

Trialability
Trialability

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 Marketing Implications of the
Adoption Process

Word
Wordof
ofMouth
Mouth

Communication
Communication
Aids
Aidsthe
the
Diffusion
DiffusionProcess
Process

Direct
Direct from
from
Marketer
Marketer

5
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 Product Life Cycle
A concept that provides a way to trace the
stages of a product’s acceptance, from its
introduction (birth) to its decline (death).

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 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

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 Growth Stage
 Increasing rate of sales
 Entrance of competitors
 Market consolidation
 Initial healthy profits
 Aggressive advertising of the
differences between brands
 Wider distribution

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 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

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 Decline Stage

 Long-run drop in sales

 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
 “Organized abandonment”

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 Product Life Cycles for Styles,
Fashion, and Fads

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Relationships between the Diffusion Process and
the Product Life Cycle

Product
life cycle
curve

Diffusion
curve

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 Chapter 11 Video
GaGa’s Inc.
Jim King and his wife discuss how they decided to create
the company GaGa’s Inc. using the product Sherbetter.
The line expanded from just Lemon to several other
flavors as well as Sherbetter bars, the struggles of
branding, line extension, and other aspects of the frozen
dessert market.
CLICK TO PLAY VIDEO

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