armstrong exp ch09

8/3/2019 Armstrong Exp Ch09

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2010 Pearson Education Canada9-1

Marketing: An IntroductionThird Canadian Edition

Armstrong, Kotler, Cunningham, Buchwitz

Chapter Nine

Developing and Marketing NewProducts


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Looking Ahead Explain how companies find and develop

new-product ideas.

List and define the steps in the new-product development process.

Describe the stages of the product life

cycle. Describe how marketing strategies

change during the products life cycle.


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Why Develop New Products? Follow changing market demands.

Remain competitive.

Keep up to changing technology.

Replace dying products.

Refresh and evolve existing products.

Diversify product offering to reduce risk.

in-class notes


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Obtaining New Products Acquire.

Patents.

Licenses.

Companies.

Develop.

New products.

Modifications to existing products.

Improvements to existing products.


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Successful new products Offer a unique superior product.

Higher quality in products.

Features and higher value in use. Have a well-defined product concept.

Senior management commitment .

Relentless innovation. Smoothly functioning new product

development process.

Clear understanding of its target market.


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New Product Failures Target market not appropriately defined or

evaluated.

Failure to conduct market research to understand

the potential. Market size may have been overestimated.

Poor quality or design.

Incorrect positioning, pricing or promotion.

Does not deliver superior value.

Product is developed as a pet project of an

executive.

Unexpected competitor reaction


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New Product Development Process

Idea Generation

Idea Screening

Product Concept

Marketing Strategy

Business Analysis

Product Development

Test Marketing

Commercialization


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Initial Stages Sources of new ideas.

Employees, customers, suppliers, partners,

competitors. Idea screening.

Narrow down to those worth more time and

money.

Concept development.

Develop prototypes and test consumer

interest.

in-class notes


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Idea Generation Systematic search for new ideas

Sources

Own staff, executives, scientist, engineers,manufacturing and sales personnel

Customers, distributors, suppliers

Marketers could get valuable insights from customers

by watching and listening to them. E.g. Heinz

launching green ketchup targeting kids.

Out side new product consultants and design firms

could also provide valuable insights.


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Idea Screening Sorting through new product ideas to identify

good ideas, and separate them from the not-

so-good ideas.

In screening for ideas, estimations of market

size, product price, development time,

manufacturing and marketing costs and rate of

return would be useful. Evaluate these findings against a set of

company criteria for new products.


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Concept Development and Testing A product concept is a detailed version of the new

product idea that can be shown to potential customers.

It involves developing the new product idea into

various alternative forms and testing the concept with a

group of potential customers.

Picture description, more physical presentation of the

concept will increase reliability of the test.

Today virtual really through computer stimulations are

increasing being used for concept tests.


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Business Case Stages Marketing strategy

Target market

Product positioning Sales, market share and profit objectives

Business analysis

Review of sales, costs and profitprojections

Will product meet corporate objectives?

in-class notes


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Marketing Strategy

Involves designing an initial marketing strategy

for a new product based on the product

concept.

Phase One describes target market. Value proposition, sales, market share and profit

goals.

Phase Two strategy statement

Products planned price, distribution, marketingbudget.

Phase Three planned long run return Sales and profit goals, marketing mix strategy.


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Business Analysis Involves a review of the sales, costs and

profit projections to assess fit with

company objectives. If yes, then move to the product

development phase.


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Product Development Developing the product concept into a

real working version of the product

Subjecting it to a variety of tests Calls for large jump in investment

Prototypes are developed

Prototype must have correct physicalfeatures and convey psychological

characteristics


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Stages of New Product Development Idea generationfrom internal and external sources

Idea screeningchoose the best ideas to develop

Concept development and testingdefine marketing

goals Business analysisfigure out return on investment

Product development and testingusing the actualproduct

Test marketingfind out how customers respond tothe new product

Commercializationproduct is rolled out to the market

in-class notes


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Commercialization Stage Test Marketing

Test product in selected markets

Can include virtual testing

Launch the product

Full market distribution at once or in stages

Often heavy and costly promotion Measure market acceptance

Adjust to meet launch sales objectives


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Test Marketing Testing the product and marketing

program in real, but limited, market

conditions. Can be expensive and time consuming,

but better than making a major marketing

mistake. If the response to the test marketing is

favourable, then the new product will be

rolled out to the larger market


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Commercialization Relates to the full scale introduction of

the new product into the market.

Must decide on timing(i.e. when tointroduce the product).

Must decide on where to introduce the

product (e.g. single location, state,region, nationally, internationally).

Must develop a market rolloutplan.


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Approaches to Managing New

Product Development Customer-centered new product development

Truly begins and ends by solving customer problems

Team based new product development Departments work closely together in cross

functional teams overlapping the steps of the

process

in-class notes


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Product Life Cycle (PLC) The lifespan of a new product, from its

development to its eventual decline.

The product typically runs through fivestages


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Product Life Cycle Development no customers, no profits,

heavy spending.

Introduction early adopter customers, noprofits, high launch costs.

Growth early majority customers, rapidsales growth and revenues.

Maturity late majority customers, flat sales,declining profits.

Decline laggard customers, declining sales,replaced by new products.

in-class notes


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Introduction Phase

The product life cycle stage in which the new

product is first launched into the market.

This stage is characterized by

Sales low.

Costs high cost per customer.

Profits negative.

Marketing objectives create product awareness

and trial. Product offer a basic product.

Price use cost-plus. formula

Distribution build selection distribution.

Promotion heavy to entice product trial.


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Growth Phase The product life cycle stage in which a

products sales start climbing quickly.

This stage is characterized by Sales rapidly rising.

Costs average cost per customer.

Profits rising.

Marketing objectives maximize market share.

Product offer extension, service, warranty. Price penetration strategy.

Distribution build intense distribution.

Promotion reduce to take advantage of demand.


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Maturity Phase The stage in the product life cycle in which

sales growth slows, then levels off.

This stage is characterized by Sales peak. Costs low cost per customer.

Profits high.

Marketing objectives maximize profits while

defending market share. Product diversify brand and models.

Price match or best competitors.

Distribution build more intensive distribution.

Promotion increase to encourage brand switching.


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Maturity Stage Strategy Modifying the market.

Increase the consumption of the current

product. How?

Look for new users and market segments.

Reposition the brand to appeal to larger or

faster-growing segment.

Look for ways to increase usage among

present customers.


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Maturity Stage Strategy Modifying the product.

Changing characteristics such as quality,

features or style to attract new users and toinspire more usage.

How?

Improve durability, reliability, speed, taste.

Improve styling and attractiveness.

Add new features.

Expand usefulness, safety, convenience.


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Maturity Stage Strategy Modifying the marketing mix.

Improving sales by changing one or moremarketing mix elements.

How?

Cut prices.

Launch a better ad campaign.

Move into larger market channels. Offer new or improved services to buyers.


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Decline Phase The product life cycle stage in which a

products sales begin to decrease.

This stage is characterized by Sales declining. Costs low cost per customer. Profits declining. Marketing objectives reduce expenditures and milk the

brand.

Product phase out weak items. Price cut price. Distribution selective and phase out unprofitable

outlets. Promotion reduce to minimum level.


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Style, Fashion and Fads Style is a basic and distinctive mode of

expression (e.g. styles appear in homes,

clothing, art). Fashion is a popular style in a given field

(e.g. prime time game shows).

Fad is a fashion that enters quickly, isadopted quickly and declines fast (e.g.

pet rocks).


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Looking Back

Explain how companies find and develop

new-product ideas.

List and define the steps in the new-product development process.

Describe the stages of the product life

cycle.

Describe how marketing strategies

change during the products life cycle.

armstrong exp ch09

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