Chapter Nine: New-Product Development and Product Life-Cycle Strategies

Chapter Nine
New-Product Development and

Product Life-Cycle Strategies
Copyright © 2009 Pearson Education, Inc.

Chapter 9- slide 1
Publishing as Prentice Hall
New-Product Development and
Topic Outline
• New-Product Development Strategy
• The New-Product Development
Process
• Managing New-Product Development
• Product Life-Cycle Strategies
• Additional Product and Service
Considerations
Chapter 9- slide 2
Challenges
• This product life cycle presents two

major challenges: First, because all
products eventually decline, a firm must
be good at developing new products to
replace aging ones (the challenge of
new product development).

Chapter 9- slide 3
Challenges
• Second, a firm must be good at

adapting its marketing strategies in the
face of changing tastes, technologies,
and competition as products pass
through stages (the challenge of
product life-cycle strategies).

Chapter 9- slide 4
New Product Development
Strategy
• A firm can obtain new products in two

ways. One is through acquisition—by
buying a whole company, a patent, or a
license to produce someone else’s
product.
• The other is through the firm’s own new
product development efforts.

Chapter 9- slide 5
New product development
• By new products we mean original

products, product improvements,
product modifications, and new brands
that the firm develops through its own
product development.

Chapter 9- slide 6
New-Product Development
Reasons for new product failure
Overestimation of market size

Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
Chapter 9- slide 7
The New Product Development
Process
• Rather than leaving new products to
chance, a company must carry out
strong new product planning and set up
a systematic, customer-driven new
product development process for
• finding and growing new products.

Chapter 9- slide 8
Major Stages in New Product
Development

Chapter 9- slide 9
The New-Product Development
Process
Idea Generation
1) Idea generation is the systematic

search for new-product ideas
Sources of new-product ideas

• Internal
• External

Chapter 9- slide 10
New-Product Development Process
Idea Generation
Internal sources refer to the company’s own

formal research and development,
management and staff, and intrapreneurial
programs
External sources refer to sources outside the
company such as customers, competitors,
distributors, suppliers, and outside design
firms
Chapter 9- slide 11
Process
2) Idea Screening
• Identify good ideas and drop poor ideas
• R-W-W Screening Framework:
– Is it real?
– Can we win?
– Is it worth doing?

Chapter 9- slide 12
Crowdsourcing
• Inviting broad communities of people—
customers, employees, independent
scientists and researchers, and even
the public at large—into the new
product innovation process.

Chapter 9- slide 13
Process
3) Concept Development and Testing
1. Product idea is an idea for a possible
product that the company can see itself
offering to the market (Company Perspective)
2. Product concept is a detailed version of the
idea stated in meaningful consumer terms
(Customer Perspective)
3. Product image is the way consumers

perceive an actual or potential product
(Customer Perspective)

Chapter 9- slide 14
Process
Concept Development and Testing
Concept testing refers to testing new-

product concepts with groups of target
consumers

Chapter 9- slide 15
Process
4) Marketing Strategy Development
• Marketing strategy development refers
to the initial marketing strategy for
introducing the product to the market
• Marketing strategy statement includes:
– Description of the target market
– Value proposition
– Sales and profit goals

Chapter 9- slide 16
Process
5) Business analysis
• Business analysis involves a review of

the sales, costs, and profit projections
to find out whether they satisfy the
company’s objectives

Chapter 9- slide 17
Process
6) Product development
• Product development involves the

creation and testing of one or more
physical versions by the R&D or
engineering departments
• Requires an increase in investment

Chapter 9- slide 18
Process
7) Test marketing
Test marketing is the stage at which the

product and marketing program are
introduced into more realistic marketing
settings
• Provides the marketer with experience in
testing the product and entire marketing
program before full introduction

Chapter 9- slide 19
Process
Types of Test Markets
Standard test markets

Controlled test markets
Simulated test markets

Chapter 9- slide 20
Process
Simulated test markets
Using simulated test markets, researchers
measure consumer responses to new
products and marketing tactics in
laboratory stores or simulated online
shopping environments. Both controlled
test markets and simulated test markets
reduce the costs of test marketing and
speed up the process.

Chapter 9- slide 21
Process
Marketing Strategy Development
• Advantages of simulated test markets
• Less expensive than other test methods
• Faster
• Restricts access by competitors
• Disadvantages
• Not considered as reliable and accurate
due to the controlled setting
Chapter 9- slide 22
Process
8) Commercialization
Commercialization is the introduction

of the new product
• When to launch
• Where to launch
• Planned market rollout

Chapter 9- slide 23
Fads are temporary periods of unusually

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

Chapter 9- slide 24
Introduction Stage
• Slow sales growth

• Little or no profit
• High distribution and promotion
expense

Chapter 9- slide 25
Sales and Profits over the Product’s
Life from Inception to Decline

Chapter 9- slide 26
Product development
• Product development begins when the
company finds and develops a new
product idea.
• During product development, sales are
zero, and the company’s investment
costs mount.

Chapter 9- slide 27
Introduction Stage
• 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.

Chapter 9- slide 28
Growth Stage
• Sales increase
• New competitors enter the market
• Price stability or decline to increase
volume
• Consumer education
• Profits increase
• Promotion and manufacturing costs
gain economies of scale
Chapter 9- slide 29
Maturity Stage
• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to
support sales and profits

Chapter 9- slide 30
Maturity Stage Modifying Strategies
• Market modifying
• Product modifying
• Marketing mix modifying

Chapter 9- slide 31
Decline Stage
• Maintain the product

• Harvest the product
• Drop the product

Chapter 9- slide 32
How does BCG matrix relate to
product life cycle?

Chapter 9- slide 33
Chapter 9- slide 34
Lecture 8
Marketing Research

Chapter 9- slide 35
Research and Development
• https://www.youtube.com/watch?v=d5e
nAGG51PQ&t=5s
• https://www.youtube.com/watch?v=q0vv
djxfsF8
• https://www.youtube.com/watch?v=m-5
8eOTlodQ

Chapter 9- slide 36
• https://www.youtube.com/watch?v=Nrm
Mk1Myrxc&t=2s
• https://www.youtube.com/watch?v=KG8
u8UtwgYg
• https://www.youtube.com/watch?v=nOU
D-k4tElY
• https://www.youtube.com/watch?v=aQz
uUW3MTio&t=4s

Chapter 9- slide 37
• https://www.youtube.com/watch?v=X0V
K3U5NKJ8
• https://www.youtube.com/watch?v=wjRi
0a19Dd0

Chapter 9- slide 38
The Scope of
marketing research
• Importance of marketing insights
– Generating insights (how and why we observe
certain effects in the marketplace)

Chapter 9- slide 39
The Marketing Research Process

Chapter 9- slide 40
sections of research paper And
research Plan
• Data sources
– Secondary
• Cover Page – Primary
• Abstract • Research approaches
– Observational research
• Introduction – Focus group research
• Background –
–
Survey research
Behavioral research
• Literature Review – Experimental research
• Research instruments
• Methodology – Questionnaires
• Results – Qualitative Measures
– Technological Devices
• Conclusion • Sampling plan
• Contact methods
• Appendices (mail, telephone, personal interviews
and online)
Chapter 9- slide 41
Step 1
• Define the problem
• Define the decision alternatives
• Define the research objectives

Chapter 9- slide 42
Types of Research
Exploratory
Descriptive
Causal

Chapter 9- slide 43
Exploratory Research
• its goal is to shed light on the real

nature of the problem and to suggest
possible solutions or new ideas
• The preliminary research to clarify the
exact nature of the problem to be
solved.
• Qualitative or Quantitative?
Chapter 9- slide 44
Descriptive Research
• it seeks to quantify demand, such as

how many first-class passengers would
purchase in-flight Internet service at $25
• Used to describe characteristics of a
population or phenomenon being
studied. It does not answer questions
about how/when/why the characteristics
occurred. Rather it addresses the
"what" question
Chapter 9- slide 45
Causal or explanatory Research
• its purpose is to test a cause-and-effect

relationship.
• answers “why” questions
• Qualitative or Quantitative?

Chapter 9- slide 46
Descriptive vs Casual
• Descriptive research is designed primarily

to describe what is going on or what exists.
• Causal research, which is also known as

“experimental research” is designed to
determine whether one or more variables
causes or affects the value of other
variables.
• © Example
Copyright (X and
2010 Pearson Education, Inc. Y axis)
Chapter 9- slide 47
Step 2: Develop the Research Plan
• To design a research plan, we need to make

decisions about the 1) data sources, 2)
research approaches, 3) research
instruments, 4) sampling plan, and 5)
contact methods.

Chapter 9- slide 48
Data Sources
How secondary data is different from

primary data?
Researchers usually start their investigation

by examining some of the rich variety of
low-cost and readily available …… data to
see whether they can partly or wholly solve
the problem without collecting costly …….
data.
Chapter 9- slide 49
• Research approaches for collecting ….. data
a) Observational research
a) Focus group research
b) Survey research
c) Behavioral research
d) Experiments.

Chapter 9- slide 50
a) Observational research
• Observational research is a qualitative

research method where the target
respondent/subject is observed and
analyzed in their natural/real-world setting.
• Observational research is used when other
data collection procedures, such as surveys,
questionnaires, etc. are not effective or
adequate.
Chapter 9- slide 51
B) Focus Groups
Copyright
Copyright © 2011 Pearson Education, Inc.© Publishing
2016 Pearson Education,
as Prentice Hall Inc. 4-52 4-52
C) Survey Research
• Companies undertake surveys to assess people’s

knowledge, beliefs, preferences, and satisfaction
and to measure these magnitudes in the general
population
• There are three main survey research methods
• Online/ Email
• Phone
• Face-to-face

Chapter 9- slide 53
D) Behavioral Research
• Customers leave traces of their purchasing

behavior in store scanning data, catalog
• purchases, and customer databases.
Marketers can learn much by analyzing
these data
• Walmart, scanner, income, purchase pattern

Chapter 9- slide 54
What's the difference between
observational and experimental
studies?
• Observational study is where nothing

changes and just record what you see,
but an experimental study is where you
have a control group and a testable
group
• The most scientifical research is ….

Copyright © research.
2010 Pearson Education, Inc.
Chapter 9- slide 55
• Research instruments
Questionnaires
Qualitative measures
Technological devices

Chapter 9- slide 56
Questionnaire

Chapter 9- slide 57
Questionnaire

Chapter 9- slide 58
• Sampling plan
– Sampling unit: Whom should we survey?
– Sample size: How many people should we

survey?
– Sampling procedure: How should we

choose the respondents?
Chapter 9- slide 59
• Contact methods
 Mail
 Telephone
 Personal
 Online

Chapter 9- slide 60
Online Research
• Advantages • Disadvantages
– Inexpensive – Skewed (biased,
– Fast inaccurate or
– Flexible misleading)
– Thoughtful – Excessive turnover
– Versatile – Technological
problems

Chapter 9- slide 61
Step 3 to Step 6
Step 3: Collect the Information
Step 4: Analyze the Information
Step 5: Present the Findings
Step 6: Make the Decision

Chapter 9- slide 62

Chapter Nine: New-Product Development and Product Life-Cycle Strategies

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter Nine: New-Product Development and Product Life-Cycle Strategies

Uploaded by

Copyright:

Available Formats

Chapter Nine

New-Product Development and

Copyright © 2009 Pearson Education, Inc.

• This product life cycle presents two

Copyright © 2010 Pearson Education, Inc.

• Second, a firm must be good at

Copyright © 2010 Pearson Education, Inc.

• A firm can obtain new products in two

Copyright © 2010 Pearson Education, Inc.

• By new products we mean original

Copyright © 2010 Pearson Education, Inc.

Overestimation of market size

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

1) Idea generation is the systematic

Sources of new-product ideas

Copyright © 2010 Pearson Education, Inc.

Internal sources refer to the company’s own

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

3. Product image is the way consumers

Copyright © 2010 Pearson Education, Inc.

Concept testing refers to testing new-

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

• Business analysis involves a review of

Copyright © 2010 Pearson Education, Inc.

• Product development involves the

Copyright © 2010 Pearson Education, Inc.

Test marketing is the stage at which the

Copyright © 2010 Pearson Education, Inc.

Standard test markets

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Commercialization is the introduction

Copyright © 2010 Pearson Education, Inc.

Fads are temporary periods of unusually

Copyright © 2010 Pearson Education, Inc.

• Slow sales growth

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

• Maintain the product

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2009 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

• Define the decision alternatives

• Define the research objectives

Copyright © 2010 Pearson Education, Inc.

Copyright © 2010 Pearson Education, Inc.

• its goal is to shed light on the real

• it seeks to quantify demand, such as

• its purpose is to test a cause-and-effect

Copyright © 2010 Pearson Education, Inc.

• Descriptive research is designed primarily