8
New-Product Chapter Development and Life-Cycle Strategies
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Chapter 1
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Rest Stop: Previewing the Concepts
Explain how companies find and develop new
product ideas. List and define the steps in the new-product development process and the major considerations in managing this process. Describe the stages of the product life cycle. Describe how marketing strategies change during the products life cycle. Discuss two additional product and services issues: socially responsible product decisions and international product and services marketing.
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Case Study
Apple Computer Innovation at Work
Steve Jobss creativity
Firm History
led to innovation in the user friendliness of Apple computers. LazerWriters and the Macintosh established Apple firmly in desktop publishing market. Firm status as market share leader and innovator was lost in the late 1980s after Jobs left the company.
Steve Jobs returned in 1997
Firm Recovery
and revitalized Apple by first launching the iMac. The Mac OS X next broke ground and acted as a launching pad for a new generation of computers and software products. iPod and iTunes changed the face of music and were the hit of the decade. Innovation continues with new products iHome and iPod on Wheels.
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New-Product Development Strategy
New product development:
The
development of original products, product improvements, product modifications, and new brands through the firms own product development efforts.
New product innovation is very
expensive and very risky.
70%
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to 90% of new consumer products fail within 12 months.
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New-Product Failures
Why do new products fail?
Overestimation
of market size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Excessive development costs Competitive reaction
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New-Product Development Process
Idea generation Idea screening Concept development and testing Marketing strategy development Business analysis Product development Test marketing Commercialization
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New-Product Development Process
Idea generation:
Internal External
sources: sources:
Company employees at all levels Customers Competitors Distributors Suppliers Outsourcing
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New-Product Development Process
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.
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New-Product Development Process
Concept development and testing:
Product
idea: concept: testing:
Idea for a possible product that the company can see
itself offering to the market.
Product
Detailed version of the new-product idea stated in
meaningful consumer terms.
Concept
Testing new-product concepts with groups of target
consumers to find out if the concepts have strong consumer appeal.
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New-Product Development Process
Marketing strategy development:
Part
One: Two: Three:
Describes the target market, planned value
Part
proposition, sales, market share, and profit goals.
Outlines the products planned price, distribution,
and marketing budget.
Part
Describes the planned long-run sales and profit
goals, marketing mix strategy.
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New-Product Development Process
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.
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New-Product Development Process
Product development:
Develops
concept into a physical product Calls for a large jump in investment Prototypes are made Prototypes must have correct physical features and convey psychological characteristics Prototypes are subjected to physical tests
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New-Product Development Process
Testing marketing:
Product
and program are introduced in a more realistic market setting Not needed for all products Can be expensive and time consuming, but better than making a major marketing mistake
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New-Product Development Process
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
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Managing New-Product Development
Customer centered new-product development:
Focuses on finding new ways to solve customer problems and create more customer-satisfying experiences. Various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness. Innovation management collect, systems review, evaluate, and manage new-product ideas.
Team-based new-product development:
Systematic new-product development:
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The Product Life Cycle
Product development Introduction Growth Maturity Decline
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Applying the Product Life-Cycle
Product class has the longest life cycle (e.g., gas-powered
cars). Product form tends to have the standard PLC shape (e.g., sports cars). Brand can change quickly because of changing competitive attacks and responses (e.g., Camaro). Style is a basic and distinctive mode of expression (e.g., formal clothing, Danish modern furniture) Fashion is a popular style in a given field (e.g., business casual). Fads result in a temporary period of unusually high sales driven by consumer enthusiasm. Fads decline quickly.
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Practical Problems of PLC
In practice, it is difficult to:
Identify
which stage of the PLC the product is in. Pinpoint when the product moves to the next stage. Identify factors that affect products movement through stages. Forecast sales level, length of each stage, and shape of PLC. Develop marketing strategy because strategy is both a cause and result of the PLC.
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Introduction Stage of PLC
Sales: Low Costs: High cost per customer Profits: Negative or low Marketing objective: Create product
awareness and trial Product: Offer a basic product Price: Use cost-plus formula 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 Profits: Rising Marketing objective: Maximize market
share Product: Offer extension, service, warranty Price: Penetration strategy Distribution: Build intensive distribution Promotion: Reduce to take advantage of demand
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Maturity Stage of PLC
Sales: Peak Costs: Low cost per customer Profits: High 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
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Maturity Stage of the PLC
Strategies used to manage the PLC
during maturity include:
Modifying
the market Modifying the product Modifying the marketing mix
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Maturity Stage of the PLC
Modifying the market:
Increase
product.
the consumption of the current
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 of the PLC
Modifying the product:
Changing
characteristics such as quality, features, or style to attract new users and to inspire 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 of the PLC
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 of PLC
Sales: Declining Costs: Low cost per customer Profits: Declining Marketing objective: Reduce expenditures and milk the brand Product: Phase out weak items. Price: Cut price Distribution: selectivephase out unprofitable outlets Promotion: Reduce to minimal level
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Additional Considerations
Product decisions and social
responsibility
Consider
public policy issues, regulations regarding acquiring or dropping products, patent protection, product quality and safety, and warranties.
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Additional Considerations
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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Rest Stop: Reviewing the Concepts
Explain how companies find and develop new
product ideas. List and define the steps in the new-product development process and the major considerations in managing this process. Describe the stages of the product life cycle. Describe how marketing strategies change during the products life cycle. Discuss two additional product and services issues: socially responsible product decisions and international product and services marketing.
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