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9-1

9-1

Chapter
Chapter 99

New-Product Development
and Product
Life-Cycle Strategies
New-Product
New-Product Development
Development 9-2
9-2

Strategies
Strategies

Strategies for Obtaining New Product Ideas

Acquired
Acquired Original
Original
Companies
Companies Products
Products

Acquired
Acquired Product
Product
Patents
Patents Improvements
Improvements

Acquired
Acquired Product
Product
Licenses
Licenses Modifications
Modifications

New
New
Brands
Brands
Causes
Causes of
of New
New Product
Product Failures
Failures 9-3
9-3

• Overestimation of Market Size


• Product Design Problems
• Product Incorrectly Positioned, Priced or
Advertised
• Costs of Product Development
• Competitive Actions

• To create successful new products, the company


must:
– understand its customers, markets and competitors,
– develop products that deliver superior value to
customers.
New-Product
New-Product Development
Development 9-4
9-4

Process
Process

Marketing Business
Strategy Analysis

Concept Product
Development Development
and Testing

Idea Test
Screening Marketing

Idea Commercialization
Generation
New
New Product
Product Development
Development Process
Process
9-5
9-5

Step
Step 1.
1. Idea
Idea Generation
Generation

Idea Generation is the Systematic Search for


New Product Ideas Obtained Internally From
Employees and Also From:

Customers
Customers Competitors
Competitors Distributors
Distributors Suppliers
Suppliers
New
New Product
Product Development
Development Process
Process
9-6
9-6

Step
Step 2.
2. Idea
Idea Screening
Screening

• Process to spot good ideas and drop poor


ones as soon as possible.
• Many companies have systems for rating
and screening ideas which estimate:
– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
• Then, the idea is evaluated against a set of
general company criteria.
New
New Product
Product Development
Development Process
Process
9-7
9-7

Step
Step 3.
3. Concept
Concept Development
Development &
& Testing
Testing

1.
1. Develop
DevelopNewNewProduct
ProductIdeas
Ideas
into
intoAlternative
AlternativeDetailed
Detailed
Product
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
New
NewProduct
ProductConcepts
Conceptswith
with
Groups
Groupsof
ofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theOne
OneThat
ThatHas
Hasthe
the
Strongest
StrongestAppeal
Appealto
toTarget
Target
Customers
Customers
New
New Product
Product Development
Development Process
Process
9-8
9-8

Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
Marketing Strategy Statement Formulation

Part
Part One
One Describes
Describes Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share
Part
Part Two
Two Describes
Describes Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three Describes
Describes Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
New
New Product
Product Development
Development Process
Process
9-9
9-9

Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development

Business
Business Analysis
Analysis
Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
They Meet
Meet Company
Company Objectives
Objectives

IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

IfIf Yes,
Yes, Move
Move to
to
Product
Product Development
Development
New
New Product
Product Development
Development Process
Process 9-10
9-10

Step
Step 7.
7. Test
Test Marketing
Marketing
Test Marketing is the Stage Where the Product and
Marketing Program are Introduced into More Realistic
Market Settings.

Budget
Budget Levels
Levels Product
Product

Positioning
Positioning
Packaging
Packaging Elements that Strategy
Strategy
May be Test
Marketed by a
Company
Branding
Branding Advertising
Advertising

Pricing
Pricing Distribution
Distribution
New
New Product
Product Development
Development Process
Process 9-11
9-11

Step
Step 8.
8. Commercialization
Commercialization

Commercialization is the Introduction of the


New Product into the Marketplace.

When?
When? Where?
Where?
Speeding
Speeding Up
Up Development
Development 9-12
9-12

Sequential Simultaneous (Team-Based)

Step 1
Step
Step 11

Step 2
Step
Step 22

Step 3
Step
Step 33

Step 4
Step
Step 44
Product
Product Life
Life Cycle
Cycle
9-13
9-13

Sales and Profits Over the Product’s Life From


Introduction to Decline
Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments ($)
Introduction
Introduction Stage
Stage of
of the
the PLC
PLC 9-14
9-14

Summary of Characteristics, Objectives, & Strategies

Sales
Sales Low
Low sales
sales

Costs
Costs High
High cost
cost per
per customer
customer

Profits
Profits Negative
Negative or
or low
low

Marketing
Marketing Objectives
Objectives Create
Create product
product awareness
awareness and
and trial
trial

Product
Product Offer
Offer aa basic
basic product
product

Price
Price Usually
Usually is
is high;
high; use
use cost-plus
cost-plus formula
formula

Distribution
Distribution High
High distribution
distribution expenses
expenses

Advertising Build
Build product
product awareness
awareness among
among early
early
Advertising adopters
adopters and
and dealers
dealers
Growth
Growth Stage
Stage of
of the
the PLC
PLC 9-15
9-15

Summary of Characteristics, Objectives, & Strategies

Sales
Sales Rapidly
Rapidly rising
rising sales
sales

Costs
Costs Average
Average cost
cost per
per customer
customer

Profits
Profits Rising
Rising profits
profits

Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share

Offer
Offer new
new product
product features,
features, extensions,
extensions,
Product
Product service,
service, and
and warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market

Distribution
Distribution Increase
Increase number
number of
of distribution
distribution outlets
outlets

Advertising Build
Build awareness
awareness and
and interest
interest in
in the
the mass
mass
Advertising market
market
Maturity
Maturity Stage
Stage of
of the
the PLC
PLC 9-16
9-16

Summary of Characteristics, Objectives, & Strategies

Sales
Sales Peak
Peak sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits
Profits High
High profits,
profits, then
then lower
lower profits
profits
Maximize
Maximize profits
profits while
while defending
defending market
market
Marketing
Marketing Objectives
Objectives share
share
Product
Product Diversify
Diversify brand
brand and
and models
models

Price
Price Price
Price to
to match
match or
or best
best competitors
competitors

Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution

Advertising
Advertising Stress
Stress brand
brand differences
differences and
and benefits
benefits
Maturity
Maturity Stage
Stage of
of the
the PLC
PLC 9-17
9-17

Maturity Stage Product Defense


Strategies

Market
Market Product
Product
Modification
Modification Modification
Modification

Marketing
Marketing
Mix
Mix
Modification
Modification
Decline
Decline Stage
Stage of
of the
the PLC
PLC 9-18
9-18

Summary of Characteristics, Objectives, & Strategies

Sales
Sales Declining
Declining sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits
Profits Declining
Declining profits
profits

Reduce
Reduce expenditure
expenditure and
and maintain,
maintain,
Marketing
Marketing Objectives
Objectives reposition,
reposition, harvest
harvest or
or drop
drop the
the product
product
Product
Product Phase
Phase out
out weak
weak items
items

Price
Price Cut
Cut price
price

Distribution
Distribution Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable outlets
outlets

Advertising Reduce
Reduce to
to level
level needed
needed to
to retain
retain
Advertising hard-core loyal customers
hard-core loyal customers