Decisions Product & Branding BA320
Summer 2006
Agenda for Today
Explain how companies find and develop newproduct 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.
BA320- Summer 2006
9-2
New-Product Development Strategy
Strategies for obtaining new-product ideas:
Acquisition of companies, patents, licenses New product development, product improvements and modifications
BA320- Summer 2006
9-3
Figure 8-1
Major Stages in New-Product Development Process
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9-4
Idea Generation
Internal sources:
Company employees at all levels
External sources:
Customers Competitors Distributors Suppliers Outsourcing
BA320- Summer 2006 9-5
Marketing in Action
Generating New Product Ideas
The Industrial Scientific Corporation uses its Web site to solicit new product ideas from customers or other visitors. Visit the Web site to see what information is solicited.
http:// www.indsci.com/sup_NewProd.asp
BA320- Summer 2006
9-6
Idea Screening
Process used to spot good ideas and drop poor ones.
Executives provide a description of the product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return. Evaluated against a set of company criteria for new products.
BA320- Summer 2006 9-7
Concept Development and Testing
Product Idea:
idea for a possible product that the company can see itself offering.
Product Concept:
detailed version of the idea stated in meaningful consumer terms.
Product Image:
the way consumers perceive an actual or potential product.
BA320- Summer 2006 9-8
Lets Talk!
BA320- Summer 2006
9-9
Marketing Strategy Development
Part One:
Describes the target market, planned product positions, sales, market share, and profit goals.
Part Two:
Outlines the products planned price, distribution, and marketing budget.
Part Three:
Describes the long-run sales and profit goals, marketing mix strategy.
BA320- Summer 2006 9-10
Business Analysis
Involves a review of the sales, costs, and profit projections to assess fit with company objectives. If results are positive, project moves to the product development phase.
BA320- Summer 2006
9-11
Product Development
Develop concept into physical product. Calls for large jump in investment. Prototypes are made. Prototype must have correct physical features and convey psychological characteristics.
BA320- Summer 2006
9-12
Test Marketing
Product and program introduced in more realistic market setting. Not needed for all products. Can be expensive and time consuming, but better than making major marketing mistake.
BA320- Summer 2006
9-13
Test Marketing
Product / marketing program introduced in more realistic market setting. Not for all products. Can be expensive and time consuming, but better than making a major marketing mistake.
9-14
After test marketing the Go Active meal (an adult happy meal) in markets 150 in Indiana, McDonalds decided to sell it across the U.S.
BA320- Summer 2006
Commercialization
Must decide on timing (i.e., when to introduce the product). Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally). Must develop a market rollout plan.
BA320- Summer 2006
9-15
Figure 8-2 Product Life Cycle
Sales and Profit over the Products Life from Inception to Decline
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9-16
Figure 8-3
Styles, Fashions, Fads
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9-17
Practical Problems of PLC
Hard to identify which stage of the PLC the product is in. Hard to pinpoint when the product moves to the next stage. Hard to identify factors that affect products movement through stages. Hard to forecast sales level, length of each stage, and shape of PLC. Strategy is both a cause and result of the PLC.
BA320- Summer 2006 9-18
Introduction Stage of PLC
Sales: low Costs: high cost per customer Marketing Objective: create product awareness and trial Product: offer a basic product Distribution: build selective distribution Promotion: heavy to entice product trial
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Growth Stage of PLC
Sales: rapidly rising Costs: average cost per customer Marketing Objective: maximize market share Product: offer extension, service, warranty Price: penetration strategy Distribution: build intensive distribution Promotion: reduce to take advantage of demand
9-20
BA320- Summer 2006
Growth
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Maturity Stage of PLC
Sales: peak Costs: low cost per customer Marketing Objective: 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
BA320- Summer 2006 9-22
Marketing in Action
Modifying the Market
WD-40 invites visitors to its Web site to join the fan club. Fan club members can access a list of 2,000 uses for WD-40, and are invited to share their own stories.
http://fanclub.wd40.com/login_home.cf
BA320- Summer 2006 9-23
Marketing in Action
Modifying the Product
Gillettes Fusion razor combines a precision trimmer blade (on back) with a five blade shaving surface (on front). The flexible comfort guard and Enhanced Indicator Lubrastrip (containing vitamin E and aloe) enhance shaving comfort.
http:// www.gillette.com/homepage.asp
BA320- Summer 2006 9-24
Decline Stage of PLC
Sales: declining Costs: low cost per customer Marketing Objective: reduce expenditures and milk the brand Product: phase out weak items Price: cut price Distribution: selective--phase out unprofitable outlets Promotion: reduce to minimal level
BA320- Summer 2006 9-25
Rest Stop: Reviewing the Concepts
1. Explain how companies find and develop new-product ideas. 2. List and define the steps in the newproduct development process. 3. Describe the stages of the product life cycle. 4. Describe how marketing strategies change during the products life cycle.
BA320- Summer 2006 9-26