9-1

New Product Developmentand

Product Life-Cycle Strategies

9-2Causes of New Product Failures

• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or

Advertised• Costs of Product Development• Competitive Actions

• To create successful new products, the company must:– understand it’s customers, markets and

competitors – develop products that deliver superior value to

customers.

9-3

New Product Development Process

• Idea Generation and Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development• Test Marketing• Commercialization

9-4New Product Development ProcessStep 1. Idea Generation

Systematic Search for New Product Ideas

Internal sourcesCustomers CompetitorsDistributorsSuppliers

9-5

• Process to spot good ideas and drop poor ones• Criteria– Market Size– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return

New Product Development ProcessStep 2. Idea Screening

9-6New Product Development ProcessStep 3. Concept Development & Testing

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One

9-7New Product Development ProcessStep 4. Marketing Strategy Development

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

9-8New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If Yes, Move to Product Development

If No, Eliminate Product Concept

9-9New Product Development ProcessStep 7. Test Marketing

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

9-10

Product Life Cycle

Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

9-11Introduction Stage of the PLC

SalesCostsProfits

Marketing Objectives

ProductPrice

Low sales

High cost per customer

NegativeCreate product awareness

and trialOffer a basic product

Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early adopters and dealers

9-12Growth Stage of the PLC

SalesCostsProfits

Marketing Objectives

ProductPrice

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market shareOffer product extensions,

service, warrantyPrice to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the mass market

9-13Maturity Stage of the PLC

SalesCostsProfits

Marketing Objectives

ProductPrice

Peak sales

Low cost per customer

High profitsMaximize profit while defending

market shareDiversify brand and models

Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

9-14Decline Stage of the PLC

SalesCostsProfits

Marketing Objectives

ProductPrice

Declining sales

Low cost per customer

Declining profitsReduce expenditure and milk the

brandPhase out weak items

Cut price

Distribution Go selective: phase out unprofitable outlets

Advertising Reduce to level needed to retain hard-core loyal customers