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POM

Lecture 7-b

BBA 2K10-A

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Managing New-Product Development

Product Life Cycle Strategies

Other Product Considerations

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Successful new-product development

should be:

Customer centered

Team centered

Systematic

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New-Product Development Strategies

Customer-centered new product

developmentfocuses on finding newways to solve customer problems and

create more customer satisfying

experiences

Begins and ends with solving customer

problems

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Sequential new-product developmentis adevelopment approach where company

departments work closely togetherindividually to complete each stage of theprocess before passing along to the nextdepartment or stage

Increased control in risky or complex projects

Slow

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Team-based new-product developmentisa development approach where

company departments work closelytogether in cross-functional teams,

overlapping in the product-development

process to save time and increase

effectiveness

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New-Product Development Strategies

Team-based versus sequential new-product

development

Team based can increase tension and

confusion

Team based is faster and more flexible

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Systematic new-product developmentisan innovative development approach

that collects, reviews, evaluates, andmanages new-product ideas

Creates an innovation-oriented culture Yields a large number of new-product

ideas

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Product life cycle(PLC)isthe course that aproducts sales and

profits take over itslifetime

Product development

Introduction

Growth Maturity

Decline

http://www.tabasco.com/

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Product Life Cycle

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Product life cycle (PLC) describes:

Product class

Product form

Brand

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Product classhas the longest life cycle (e.g., gas-powered cars).

Product formtends to have the standard PLC shape(e.g., sports cars).

Brandcan change quickly because of changingcompetitive attacks and responses.

Styleis a basic and distinctive mode of expression (e.g.,formal clothing, Danish modern furniture)

Fashionis a popular style in a given field (e.g., businesscasual).

Fadsresult in a temporary period of unusually high salesdriven by consumer enthusiasm. Fads decline quickly.

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In practice, it is difficult to: Identify which stage of the PLC the product is

in.

Pinpoint when the product moves to the nextstage.

Identify factors that affect products movementthrough stages.

Forecast sales level, length of each stage, andshape of PLC.

Develop marketing strategy because strategy isboth a cause and result of the PLC.

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Introduction stage is when the new product isfirst launched

Sales:Low

Costs:High cost per customer

Profits:Negative or lowMarketing objective:Create product

awareness and trial

Product:Offer a basic product

Price:Use cost-plus formulaDistribution:Build selective distribution

Promotion:Heavy to entice product trial

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Growth stage is when the new product satisfies themarket and sales increase

Sales:Rapidly risingCosts:Average cost per customerProfits:RisingMarketing objective:Maximize market shareProduct:Offer extension, service, warrantyPrice:Penetration strategyDistribution:Build intensive distributionPromotion:Reduce to take advantage of

demand

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Maturity stage is a long-lasting stage of a productthat has gained consumer acceptance

Sales:Peak but slowing down sales

Costs:Low cost per customer

Profits:High

Marketing objective:Maximize profits whiledefending market share

Product:Diversify brand and models Price:Match or best competitors

Distribution:Build more intensive distribution Promotion:Increase to encourage brand

switching Competition:Many substitute products

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Strategies used to manage the PLC dur ing

matur ity include

Modifying Strategies

Market modifying

Product modifying

Marketing mix modifying

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Strategies used to manage the PLC dur ing

matur ity include

Market modifying strategy is when a

company tries to increase consumption ofthe current product

New users

Increased usage of existing users New market segments

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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 presentcustomers.

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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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Modifying the marketing mix:

Improving sales by changing one or more

marketing mix elements.

How? Cut prices

Launch a better ad campaign

Move into larger market channels

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Decline stage is when sales decline or level offfor an extended time, creating a weakproduct

Sales:Declining

Costs:Low cost per customerProfits:DecliningMarketing objective:Reduce expenditures and

take maximum out of the brandProduct:Phase out weak items.Price:Cut priceDistribution:selectivephase out

unprofitable outletsPromotion:Reduce to minimal level

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Innovators

Early adopters

Early majorityLate majority

Laggards

Product

life cycle

curve

Diffusion

curve

Introduction Growth Maturity Decline

Sale

s

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Product Decisions and Social Responsibil i ty

Public policy and regulations regarding

developing and dropping products,patents, quality, and safety

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International product and service marketing

Must determine which products and services to

introduce in which countries, and how much to

standardize or adapt the offering.

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