Ch._8 - 8 NewProduct Development and Product LifeCycle...

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Unformatted text preview: 8 NewProduct Development and Product LifeCycle Strategies New-Product Development Strategy Strategies for Obtaining NewProduct Ideas Acquisition of: Companies Patents Licenses New Products: Original Products Improvements Modifications 8-2 New-Product Failures Only 10% of new products are still on the market and profitable after 3 years. Failure rate for industrial products is as high as 30%. Why? Overestimation of market size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Development costs Competition 8-3 Major Stages in New-Product Development 8-4 Idea Generation Company Employees Customers Competitors Distributors Suppliers 8-5 Idea Screening Process to spot good ideas and drop poor ones. Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return. Evaluate these findings against set of company criteria for new products. 8-6 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. 8-7 Marketing Strategy Development Part One Describes: Part Two Outlines the FirstYear's: Product's Planned Price Distribution Marketing Budget The Target Market Planned Product Positioning Sales, Market Share, & Profit Goals Part Three Describes LongRun: Sales & Profit Goals Marketing Mix Strategy 8-8 Business Analysis Involves a review of the sales, costs, and profit projections to assess fit with company objectives. If yes, move to the product development phase. 8-9 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 8-10 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. 8-11 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. 8-12 Organizing New-Product Development Sequential Approach: each stage completed before moving to next phase of the project. Simultaneous Approach: Crossfunctional teams work through overlapping steps to save time and increase effectiveness. 8-13 Product Life Cycle Sales and Profits ($) Profits Time Decline Sales Product Develop ment Losses/ Investments ($) Introduction Growth Maturity Sales and Profits Over the Product's Lifetime 8-14 Product Life Cycle Applications Product class has the longest life cycle (e.g., gas powered cars) Product form tends to have the standard PLC shape (e.g., dial telephone) Brand can change quickly because of changing competitive attacks and responses (e.g., Tide, Cheer) 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) Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., pet rocks) 8-15 Alternative PLC Shapes 8-16 Practical Problems of PLC Hard to identify which stage of the PLC the product is in Hard to pinpoint when the product moves to next stage Hard to identify factors that affect product's 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 8-17 Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Low High cost per customer Negative Create product awareness and trial Offer a basic product Use costplus formula Build selective distribution Heavy to entice product trial 8-18 Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Rapidly rising Average cost per customer Rising Maximize market share Offer extension, service, warranty Penetration strategy Build intensive distribution Reduce to take advantage of demand 8-19 Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Peak Low cost per customer High Maximize profits while defending market share Diversify brand and models Match or best competitors Build more intensive distribution Increase to encourage brand switching 8-20 Maturity Stage of the PLC 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 fastergrowing segment Look for ways to increase usage among present customers 8-21 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 8-22 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 Offer new or improved services to buyers 8-23 Modifying the Marketing Mix New ads and promotions to reposition and revitalize mature product. 8-24 Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Declining Low cost per customer Declining Reduce expenditures and milk the brand Phase out weak items Cut price Selective: phase out unprofitable outlets Reduce to minimum level 8-25 ...
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