Principles of

Marketing Global
Edition
Kotler and Armstrong
Chapter 9:
New Product

Developmen
t
and Product Life-
Cycle Strategies

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New Product
Development

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 New Product
Development
Learning Objectives
• Objective 1: Explain how companies find and develop new product
ideas.
• Objective 2: List and define the steps in the new product
development process and the major considerations in
managing this process.
• Objective 3: Describe the stages of the product life
cycle and how marketing strategies change during a
product’s life cycle.
• Objective 4: Discuss two additional product issues:
socially responsible product decisions and international
product and services marketing.

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 New Product
Development
Learning Objective 1

• Explain how companies find and develop new

product ideas.

New Product Development Strategy

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 New Product Development
Strategy
Ways to Obtain New Products
Acquisition refers to the buying of a whole company,
a
patent, or a license to produce
someone else’s product.

New product development refers to original

products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development.
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 Product Failure?
• Yet innovation can be very expensive and very risky.
• New products face tough odds.
• For example, by one estimate, 60 percent of all new consumer
packaged products introduced by established companies fail; two-
thirds of new product concepts are never even launched.
• Why do so many new products fail?
• There are several reasons.
• Although an idea may be good, the company may overestimate
market size.
• The actual product may be poorly designed.
• It might be incorrectly positioned, launched at the wrong time,
priced too high, or poorly advertised.
• A high-level executive might push a favorite idea despite poor
marketing research findings.
• Sometimes the costs of product development are higher than
expected, and sometimes competitors fight back harder than
expected.
 New Product
Development
Learning Objective 1

• Explain how companies find and develop new

product ideas.

New Product Development Strategy

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 New Product
Development
Learning Objective 2

• List and define the steps in the new product

development process and the major considerations
in managing this process.

New Product Development Process

Managing New Product
Development

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 New Product Development
Process
Major Stages in New Product
Development
Product
Ideas

nt
Developme
FIGURE |
9.1
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 New Product Development
Process
Idea
Generation

Idea generation is
the systematic
search for new
product ideas.

Sources of new
product
ideas
• Internal
• External Copyright © 2016 Pearson Education,
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 New Product Development
Process
Idea Generation

Internal sources refer to the company’s own formal

research and development, management and staff, and
intrapreneurial programs.
• Ford operates an innovation and mobility center in
Silicon Valley
• A company can pick the brains of its own people—
from executives to salespeople to scientists,
engineers, and manufacturing staff.
• Internal social networks and Intrapreneurial programs.
• For example, AT&T has set up an internal online
innovation community called The Innovation Pipeline
(TIP). 28000 ideas, 75 TIP projects .
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 Examples
• Tech companies such as Facebook and Twitter
sponsor periodic “hackathons,” in which employees
take a day or a week away from their day-to-day
work to develop new ideas.

• LinkedIn, the 300 million–member professional

social media network, holds “hackdays,” one Friday
each month when it encourages employees to work
on whatever they want that will benefit the company.
 New Product Development
Process
Idea Generation
External sources refer to sources outside the company
such as customers, competitors, distributors, suppliers,
and outside design firms.
• Other idea sources include trade magazines, shows,
websites, and seminars; government agencies; advertising
agencies; marketing research firms; university and
commercial laboratories; and inventors.
• Perhaps the most important sources of new product ideas
are customers themselves

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 New Product Development
Process
Idea
Generation

Crowdsourcing involves inviting broad communities

of people—customers, employees, independent
scientists and researchers, and even the public at
large—into the new product innovation process.

• Under Armour sponsors an annual crowdsourcing

competition called the Future Show Innovation
Challenge.

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 New Product Development
Process
Idea Screening
• Identify good ideas and drop poor ideas
• R-W-W screening framework:
• Is it real?
• Is there a real need and desire for the product, and will customers
buy it?
• Can we win?
• Does the product offer a sustainable competitive
advantage?
• Is it worth doing?
• Does the product fit the company’s overall growth
strategy?

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 New Product Development
Process
Concept Development and Testing
Product idea is an idea for a possible product that
the company can see itself offering to the
market.

Product concept is a detailed version of the idea

stated in meaningful consumer terms.

Product image is the way consumers perceive an

actual or potential product.

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 Example
It might create the following product concepts for this all-
electric car:
• Concept 1. An affordably priced compact car designed
as a second family car to be used around town for
running errands and visiting friends.
• Concept 2. A mid-priced sporty compact appealing to
young singles and couples.
• Concept 3. A “green” everyday car appealing to
environmentally conscious people who want practical,
no-polluting transportation.
• Concept 4. A compact crossover SUV appealing to
those who love the space SUVs provide but lament the
poor gas mileage.
 New Product Development
Process
Concept Development and
Testing

Concept testing refers

to testing new
product concepts with
groups of target
consumers.

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 New Product Development
Process
Marketing Strategy Development

Marketing strategy development is designing an initial

marketing strategy for a new product based on the
product concept.

• Marketing strategy statement consists of:

• Target market description
• Value proposition planned
• Sales, market-share, and marketing mix

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 New Product Development
Process
Business Analysis

Business analysis is a review of the sales,

costs, and profit projections for a new
product to find out whether these factors
satisfy the company’s objectives.

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 New Product Development
Process
Product
Development

Product development is
developing the product
concept into a physical
product to ensure that
the product idea can
be turned into a
workable market
offering.
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 New Product Development
Process
Test
Marketing

Test marketing is the

stage of new
product
development in
which the product
and its proposed
marketing program
are tested in
realistic market
settings.
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New Product Development
Process
Test Marketing
Marketing Strategy
Development
When test When test
marketing is marketing is
likely unlikely
• New product • Simple
with large line
investment extension
• Uncertainty about • Copy of
product or competito
marketing r
program product
• Low costs
• Manageme
nt
confidence

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 New Product Development
Process
Commercialization

Commercialization involves introducing a new product

into the market.
• When to launch?
• Where to launch?
• Planned market rollout?
• Apple launched its iPhone 6 and iPhone 6 Plus
phones in its fastest-ever global rollout, making
them available in 115 countries within less than
three months of initial introduction.

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 Managing New Product
Development
Successful new product development should
be:
• Customer centered
• Team based
• Systematic

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 Managing New Product
Development
Customer-Centered New Product
Development

Customer-centered new
product development
focuses on finding new
ways to solve customer
problems and creating
more customer-
satisfying experiences.

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 Managing New Product
Development
Team-Based New Product
Development

Team-based new product development involves

various company departments working closely
together, overlapping the steps in the product
development process to save time and
increase effectiveness.

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 Managing New Product
Development
Systematic New Product Development
• Innovation management system
• Creates an innovation-oriented company
culture
• Yields a large number of new product ideas
New Product Development in Turbulent
Times
• Tempted to reduce spending
• May become less competitive

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 New Product
Development
Learning Objective 2

• List and define the steps in the new product

development process and the major considerations
in managing this process.

New Product Development Process

Managing New Product
Development

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 New Product
Development
Learning Objective 3

• Describe the stages of the product life cycle and

how marketing strategies change during a
product’s life cycle.

Product Life-Cycle Strategies

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 Product Life-Cycle
Strategies

FIGURE |
9.2
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 Product Life-Cycle
• ProductStrategies
development
• Zero sales and increasing investment costs
• Introduction
• Slow sales and nonexistent profits
• Growth
• Rapid market acceptance and increasing profits
• Maturity
• Slow sales growth and profits level off or
decline
• Decline
• Sales fall off and profits drop
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 Product Life-Cycle
Strategies
• Not all products follow all five stages of the PLC.
• Some products are introduced and die quickly;
others stay in the mature stage for a long, long time.
• Some enter the decline stage and are then cycled
back into the growth stage through strong promotion
or repositioning.
• It seems that a well-managed brand could live
forever.
• Brands like Coca-Cola, Gillette, American Express,
sauce, for instance, are still going strong after more
than 100 years.
 Product Life-Cycle
Strategies
Introduction Stage

• Slow sales growth-frozen foods and HDTVs

• Little or no profit
• High distribution and promotion expenses
• Market pioneer- launch strategy to make a
“killing,”

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Product Life-Cycle
Strategies
Growth Stage

• Sales increase
• New competitors enter the market
• Profits increase
• Economies of scale
• Consumer education
• Lowering prices to attract more
buyers

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Product Life-Cycle
Strategies
Maturity Stage

• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads
to competition
• Increased promotion and R&D
to support sales and profits

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 Product Life-Cycle
Strategies
Maturity Stage
Modification
Strategies

• Modify the market (Male-female)

• Modify the product (quality, features,
style, packaging, or technology
platforms)
• Modify the
marketing mix (cut-
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 Product Life-Cycle
Strategies
Decline Stage

• Maintain the product (repositioning or reinvigorating)

• Harvest the product (plant and equipment, maintenance,
R&D, advertising, sales force)
• Drop the product

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Product Life-Cycle
Strategies

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Product Life-Cycle
Strategies

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 New Product
Development
Learning Objective 3
• Describe the stages of the product life cycle and
how marketing strategies change during a
product’s life cycle.
Product Life-Cycle Strategies
• Product development
• Introduction
• Growth
• Maturity
• Decline

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 New Product
Development
Learning Objective 4

• Discuss two additional product issues: socially

responsible product decisions and international
product and services marketing.

Additional Product and Service Considerations

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Additional Product and Service
Considerations
Product Decisions and Social
Responsibility

Public policy and regulations regarding

developing and dropping products,
patents, quality, safety, and product
warranties should be considered carefully.

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Additional Product and Service
Considerations
International Product and Service
Marketing

• Determining what
products and
services to
introduce in which
countries
• Standardization
versus
customization
• Packaging
and labeling Copyright
Inc.
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 New Product
Development
Learning Objective 4

• Discuss two additional product issues: socially

responsible product decisions and international
product and services marketing.
Additional Product and Service Considerations
• Product Decisions
• Public policy and regulations
• Social responsibility
• Products and services

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