New-Product Development

and Product Life-Cycle

Strategies

1
 New-Product
Development
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 2
 Causes of New Product
Failures
One study estimated that as many as 80% of
new consumer packaged products failed.
Only about 40% of new consumer products are
around 5 years after introduction.
Why?
 Overestimation of market size,
 Product design problems,
 Product incorrectly positioned, priced or advertised,
 Product may have been pushed despite poor
marketing research findings,
 Costs of product development, or
 Competitive actions
3
 Improving New-Product
Success
New product success depends on having a:
 Unique superior product (one with higher quality,
features, and value in use), &
 Well-defined product concept (a defined target market,
product requirements, and benefits).
To create successful new products, the company
must:
 understand its customers, markets and competitors, &
 develop products that deliver superior value to
customers.

4
 Major Stages in New-
Product Development
Marketing Business
Strategy Analysis

Concept
Product
Development
Development
and Testing

Idea Test
Screening Marketing

Idea Commercializatio
Generation n
5
 New Product Development
Process Step 1. Idea
Generation
Idea Generation is the Systematic Search for
New Product Ideas Obtained Internally From
Employees and Also From:

Customers Competitors Distributors Suppliers

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 New Product Development
Process Step 2. Idea
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.
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 New Product Development
Process Step 3. Concept
Development
1. Develop New Product Ideas Product Image is
into Alternative Detailed the Way
Product Concepts Consumers
Perceive an
Actual or
2. Concept Testing - Test thePotential Product
New Product Concepts with
Groups of Target Customers

3. Choose the One That Has the

Strongest Appeal to Target
Customers
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New Product Development
Process Step 4. Marketing
Strategy

Part One Describes Overall:

Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget

Part Three Describes Long-Term:

Sales & Profit Goals 9
 Step 5. Business Analysis
Step 6. Product
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

If No, Eliminate
Product Concept

If Yes, Move to
Product Development
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 New Product Development
Process
Step 7. Test 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

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

Pricing
Pricing Distribution
Distribution
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 New Product Development
Process
Step 7. Test Marketing
Standard Controlled
Test Market Test Market

Full marketing campaign A few stores that have

in a small number of agreed to carry new
representative cities. products for a fee.
Simulated
Test Market

Test in a simulated
shopping environment
to a sample of
consumers.
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 New Product Development
Process
Step 8. Commercialization
Commercialization is the Introduction of
the New Product into the Marketplace.

When
When is is the
the Where
Where to
to
Right
Right Time
Time toto Launch
Launch aa
Introduce
Introduce New
New
Product?
Product? Product?
Product?

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Speeding Up New Product
Development
Sequential Simultaneous (Team-Based)

Step 1
Step
Step 11

Step 2
Step
Step 22

Step Step 3
Step 33

Step Step 4
Step 44
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 Product Life Cycle
Sales and
Profits ($) Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment
Losses/
Investments ($)

Sales and Profits Over the Product’s Life From Inception

to Demise 15
 Applications of the
Product Life Cycle
The PLC concept can describe a:
 Product class which has the longest life cycles (i.e.
gas-powered cars),
 Product form which tend to have the standard PLC
shape (i.e. minivans),
 Brand which can change quickly because of changing
competitive attaches and responses (i.e. Ford
Taurus),
 Style which is a basic and distinctive mode of
expression,
 Fashion which is a popular style in a given field,
 Fad which is a fashion that enters quickly, is adopted
quickly and declines fast.

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 Problems Using the PLC
The PLC Concept Can Trouble
Help in Developing identifying Which
Good Marketing Stage of the PLC
Strategies for the Product Is In
Different Stages of Difficult to Forecast
the Product Life- the Sales Level, the
Length of Each
Cycle, However Some Stage, and Shape
Problems Can Arise: of the
Strategy is Both a PLC
Cause and a
Result of the
Product’s Life
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Cycle
 Introduction Stage of the
PLC
Summary of Characteristics, Objectives, &
Sales
Sales
Strategies
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
Advertising Build
Build product
product awareness
awareness among
among
early
early adopters
adopters and
and dealers
dealers 18
 Growth Stage of the PLC
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
Product
Product Offer
Offer new
new product
product features,
features,
extensions,
extensions, 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
Advertising Build
Build awareness
awareness and
and interest
interest in
in
the
the mass
mass market
market 19
 Maturity Stage of the PLC
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
Marketing Maximize profits while defending
Maximize profits while defending
Marketing Objectives
Objectives
market
market 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 20
Maturity Stage of the PLC

Company tries to increase

consumption of the current product.

Changing characteristics such as

quality, features, or styles to attract
new users.

Company tries to improve sales by

changing one or more marketing mix
elements.
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 Decline Stage of the PLC
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
Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and maintain,
maintain,
reposition,
reposition, harvest
harvest or
or drop
drop the
the
Product
Product Phase
Phase out weak
weak items
product
out
product items
Price
Price Cut
Cut price
price
Distribution
Distribution Go
Go selective:
selective: phase
phase out
out
unprofitable
unprofitable outlets
outlets
Advertising
Advertising Reduce
Reduce to level needed to
to level needed to retain
retain
hard-core
hard-core loyal
loyal customers
customers 22