Download - 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.