Q2.

THE NEW PRODUCT DEVELOPMENT PROCESS

In order to stay successful in the face of maturing products, companies have to obtain new ones by a carefully
executed new product development process. But they face a problem: although they must develop new
products, the odds weigh heavily against success. Of thousands of products entering the process, only a
handful reaches the market. Therefore, it is of crucial importance to understand consumers, markets, and
competitors in order to develop products that deliver superior value to customers. In other words, there is no
way around a systematic, customer-driven new product development process for finding and growing new
products. We will go into the eight major steps in the new product development process.

Now a day it is very difficult for any company to carry on with the existing product so
they are spending a lot of expenditure on development of new products. For developing
a new product, a product passes through eight stages and they are discussed below:

Stage 1. Idea generation:- the first stage of product development process is to

generate the idea regarding new product development as the existing product becomes
obsolete with the time and technology. Idea generation can be done through research of
the market sources like consumer liking, disliking, competitor policy etc.

Stage 2. Idea screening: at the second stage of product development process, in

case the company having number of ideas then there is the need to accept the good idea
and reject the bad one. As if the company accepts the wrong idea then it results into lot
of loss of money, technology, time and energy. So it is necessary to reject the bad idea as
soon as possible.

Stage 3.Concept development: after idea screening the next stage is of concept
development. For e.g. in case the company is producing a soup which has high

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nutritional value then the question arises either to introduce it as a tasty soup or as a
rich nutritional soup. Then the most suitable concept is selected.

Stage 4.Market strategy development: this is the stage where the marketer
decide what kind of marketing strategy to be used for the product either to use mass
marketing or to launch the product in a particular area.

Stage 5.Business analysis:- at this stage the marketer decide whether they will be
able to achieve expected sale or profit? If the answer to the question is yes then the
concept of product move to product development stage.

Stage 6.Product development: if the concept of product move to product

development stage then product development starts. Here the research and
development department develop a physical product which is put under functional and
consumer test. Functional tests are done in the laboratory and consumer tests are done
by bringing consumers in the laboratory.

Stage 7.Test marketing:- after the above stage the product is ready to be launched in
the market with a proper brand name and packaging. Test marketing is done to find out
how big the market is.

Stage 8. Commercialization:- the last stage of product development process is the

Commercialization of the product. While launching the product the marketer must have
answers to the following questions:
i) Why to launch the product?
ii) When to launch the product?
iii) Where to launch the product?
iv) For whom the product to be launched?

Q3 Name and Description of the Five Stages of the Product Life

Cycle
What is the Product Life Cycle?
A product's life cycle is the stages of development and sales figures a product goes through over its time on the
market. For anyone thinking of developing a new product for the general market this is an extremely important
factor to consider when determining whether the product is worth putting on the market at all and also in
determining the work involved at different stages in the products life.

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 Development
The development stage is the period from idea until the product is released to the market. This can last years,
depending on the product, and there are no sales during this period. The experts at Net MBA describe this as
the "incubation" phase.
Introduction
Introduction is the phase during which a product is launched into the market. The company tries to build brand
awareness and a market for the product. Pricing during this time might be low to build market share rapidly or
high to recover development costs, according to Quick MBA. Promotion is aimed at early adapters and
distribution is selective, according to Net MBA.
Growth
In the growth stage, the firm continues to grow market share and brand awareness. According to Quick MBA,
quality is maintained, and additional features might be added. Distribution channels are increased and
promotion is aimed at a wider audience. Price may be maintained if demand is high or lowered if necessary to
capture additional market share. When competitors enter the market, often during the later part of the growth
stage, price competition or increased promotional costs may be required to convince consumers that the firm's
product is better than that of the competition, according to Net MBA.
Maturity
The maturity stage is usually the most profitable, says Net MBA. Sales continue to increase but at a slower
rate. Promotion costs are less, because brand awareness is already strong. Price reductions may be needed to
retain share against competition, and incentives may be required to retain shelf space. Product features may be
enhanced to differentiate it from competitors, and advertising will emphasize this differentiation, Net MBA
says.
Decline
Eventually, sales decline as consumer tastes change or the product becomes obsolete. As sales decline, the firm
has several options, according to Net MBA. It can maintain the product, possibly rejuvenating it by adding
new features and finding new uses; it can harvest the product, reducing costs and continuing to offer it,
possibly to a loyal niche segment; or it can discontinue the product, liquidating remaining inventory or selling
it to another firm that is willing to continue the product.
OR
1) Introduction stage During this stage the product is introduced in the market. The organization has to
invest in lot of marketing expenditure in order to make people aware about the new product highlighting its
features and characteristics. This stage is marked by low profits as the earnings mostly cover the research and
development, and marketing costs of the new product. Depending on the product promotion there are activities
such as reaching retailers and wholesalers, TV advertising, billboards and transit signs (signs on buses, cabs,
etc.). For products like tooth pastes, candies, soaps, etc., firms often give high profit margins to retailers to

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ensure these products occupy visible and high shelf space. For technical and expensive products like laptops,
plasma televisions firms adopt personal selling, demonstrations, etc. at popular retail stores or malls.
Advertisements

This stage is characterized by the following

Organizations need to be prepared to meet demand
High investment in promotion activities
Focus on creating awareness in the market
Enough distribution outlets for easy product availability
Strategies to seek cooperation from sellers, wholesalers, and retailers.
Pricing should justify the product value the consumers will get apart from covering the costs
2) Growth stage If a product is accepted by consumers in the market, it enters the growth stage. Here the
competitors too launch products of similar kind. For example, Diet Coke and Diet Pepsi launch in the market.
The organization needs to ensure that at this stage product remains available to customers else consumers will
switch to the competitor product. The organization must promote the product features as well as emphasize
brand name to counter competition. Distribution outlets also increase to cover more market and increase
profits. Increasing distribution and production results in costs, but companies usually keep the same price or
even reduce it slightly to increase sales and counter competition.
This stage is characterized by the following
Increase in sales
Increase in competition
Increase in production
Higher profits because of high sales
Distribution networks expand
Reduction in promotion expenditure with major focus on highlighting the features and quality of the product
to differentiate it from competition
Product offered at discount, price reduced to gain new customers
Advertisements

3) Maturity stage when the sale of the product stabilizes with reduction in potential new customers and
increased competition, it indicates that the product has entered the maturity stage of its life cycle. This stage
lasts longer that the other life stages. All efforts should be made to prolong this stage. Organizations at this
stage have exhausted all its distribution channels, there is saturation of demand, and promotion is done to
communicate customer value, brand value and quality to take competitive advantage. Price is often reduced to
gain customer loyalty so that existing customers dont switch to competitor product. Organizations get into
promotional war to retain market shares and maximize sales as much as possible. Competition is severe and
weak players leave the market. Organizations invest in modifying the product. For example, price wars can be
easily seen during holiday season among different Airlines. Large organizations are able to absorb costs at this
stage but small organizations often get hit. Car manufacturers often add additional features to their existing
models by changing design and offering new styles to prolong the maturity stage. Similarly, Coca-Cola and
Pepsi changed the design and packaging of their soft drinks.

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It becomes easy for organizations to enter new geographic regions or new target market with the product at
maturity stage as the organizations rely on their experience in existing markets. Organizations highlight their
success in promotion activities in new markets. Few adaptations to the marketing strategy are needed to align
with the marketing environment like culture, etc. of the new region. For example, In India, McDonalds had to
introduce vegetarian offerings as majority of the population in India is vegetarian.
This stage is characterized by the following
Severe competition
Cost reduction
Product modification additional features, increase in quality, change in style, packaging
Entry into new markets (different geographic, international markets)
Change in marketing mix
Reaching out to existing customers to retain customer loyalty
Advertisements

4) Decline Stage At this stage the sale of the product starts falling to lower levels. This is caused by many
reasons like entry of a substitute product, change is customer preferences, or changes in the marketing
environment like technology, demographic changes, etc. For example, computers replaced typewriter, mobile
phones with cameras sounded the death bell for easy to use cameras. To save money, organizations reduce the
promotional expenditure and distribution channels.
Via Harvesting, price cuts are done to sell the existing products in shops or stores, or till the inventory gets
exhausted to minimize losses. The product is eventually withdrawn from the marketing by Divesting. Working
on marketing strategies on an aging product incurs costs as well as managements time and efforts.
Organizations adopt to Harvest or Divest basis the organizations objectives.
This stage is marked by following characteristics
Declining sales
Declining profits
Less spending on promotion
Withdrawal from weaker markets and distribution channels
Harvesting or Divesting basis the organizations objectives
Organizations may opt to serve the hard-core loyal customers.

Q.4 Describe how marketing strategies changes during the product life
cycle.

Introduction:

Product passes through four stages of its life cycle. Every stage poses different opportunities and

challenges to the marketer. Each of stages demands the unique or distinguished set of marketing

strategies. A marketer should watch on its sales and market situations to identify the stage in which the

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product is passing through, and accordingly, he should design appropriate marketing strategies. Here,

strategy basically involves four elements product, price, promotion, and distribution.

By appropriate combination of these four elements, the strategy can be formulated for each stage of the

PLC. Every stage gives varying importance to these elements of marketing mix. Let us analyze basic

strategies used in each of the stages of the PLC, as described by Philip Kotler.

Marketing Strategies for Introduction Stage:

Introduction stage is marked with slow growth in sales and a very little or no profit. Note that product has

been newly introduced, and a sales volume is limited; product and distribution are not given more

emphasis. Basic constituents of marketing strategies for the stage include price and promotion. Price,

promotion or both may be kept high or low depending upon market situation and management approach.

Observe Figure 3.

Following are the possible strategies during the first stage:

1. Rapid Skimming Strategy:

This strategy consists of introducing a new product at high price and high promotional expenses. The

purpose of high price is to recover profit per unit as much as possible. The high promotional expenses are

aimed at convincing the market the product merits even at a high price. High promotion accelerates the

rate of market penetration, in all; the strategy is preferred to skim the cream (high profits) from market.

This strategy makes a sense in following assumptions:

(a) Major part of market is not aware of the product.

(b) Customers are ready to pay the asking price.

(c) There possibility of competition and the firm wants to build up the brand preference.

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(d) Market is limited in size.

2. Slow Skimming Strategy:

This strategy involves launching a product at a high price and low promotion. The purpose of high price

is to recover as much as gross profit as possible. And, low promotion keeps marketing expenses low. This

combination enables to skim the maximum profit from the market.

This strategy can be used under following assumptions:

(a) Market is limited in size.

(b) Most of consumers are aware of product.

(c) Consumers are ready to pay high price.

(d) There is less possibility of competition.

3. Rapid Penetration:

The strategy consists of launching the product at a low price and high promotion. The purpose is the

faster market penetration to get larger market share. Marketer tries to expand market by increasing the

number of buyers.

It is based on following assumptions:

(a) Market is large.

(b) Most buyers are price-sensitive. They prefer the low-priced products.

(c) There is strong potential for competition.

(d) Market is not much aware of the product. They need to be informed and convinced.

4. Slow Penetration:

The strategy consists of introducing a product with low price and low-level promotion. Low price will

encourage product acceptance, and low promotion can help realization of more profits, even at a low

price.
Marketing Strategies for Growth Stage:
This is the stage of rapid market acceptance. The strategies are aimed at sustaining market growth as long

as possible. Here, the aim is not to increases awareness, but to get trial of the product. Company tries to

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enter the new segments. Competitors have entered the market. The company tries to strengthen

competitive position in the market. It may forgo maximum current profits to earn still greater profits in

the future.

Several possible strategies for the stage are as under:

1. Product qualities and features improvement

2. Adding new models and improving styling

3. Entering new market segments

4. Designing, improving and widening distribution network

5. Shifting advertising and other promotional efforts from increasing product awareness to product

conviction

6. Reducing price at the right time to attract price-sensitive consumers

7. Preventing competitors to enter the market by low price and high promotional efforts
Marketing Strategies for Maturity Stage:
In this stage, competitors have entered the market. There is severe fight among them for more market

share. The company adopts offensive/aggressive marketing strategies to defeat the competitors.

Following possible strategies are followed:

1. To Do Nothing:

To do nothing can be an effective marketing strategy in the maturity stage. New strategies are not

formulated. Company believes it is advisable to do nothing. Earlier or later, the decline in the sales is

certain. Marketer tries to conserve money, which can be later on invested in new profitable products. It

continues only routine efforts, and starts planning for new products.

2. Market Modification:

This strategy is aimed at increasing sales by raising the number of brand users and the usage rate per user.

Sales volume is the product (or outcome) of number of users and usage rate per users. So, sales can be

increased either by increasing the number of users or by increasing the usage rate per user or by both.

Number of users can be increased by variety of ways.

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There are three ways to expand the number of users:

i. Convert non-users into users by convincing them regarding uses of products

ii. Entering new market segments

iii. Winning competitors consumers

Sales volume can also be increased by increasing the usage rate per user.

3. Product Modification:

Product modification involves improving product qualities and modifying product characteristics to

attract new users and/or more usage rate per user.

Product modification can take several forms:

i. Strategy for Quality Improvement:

Quality improvement includes improving safety, efficiency, reliability, durability, speed, taste, and other

qualities. Quality improvement can offer more satisfaction.

ii. Strategy for Feature Improvement:

This includes improving features, such as size, color, weight, accessories, form, get-up, materials, and so

forth. Feature improvement leads to convenience, versatility, and attractiveness. Many firms opt for

product improvement to sustain maturity stage.

4. Marketing Mix Modification:

This is the last optional strategy for the maturity stage. Modification of marketing mix involves changing

the elements of marketing mix. This may stimulate sales. Company should reasonably modify one or

more elements of marketing mix (4Ps) to attract buyers and to fight with competitors. Marketing mix

modification should be made carefully as it is easily imitated.

Marketing Strategies for Decline Stage:

Company formulates various strategies to manage the decline stage. The first important task is to detect

the poor products. After detecting the poor products, a company should decide whether poor products

should be dropped. Some companies formulate a special committee for the task known as Product Review

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Committee. The committee collects data from internal and external sources and evaluates products. On

the basis the report submitted by the committee, suitable decisions are taken.

Company may follow any of the following strategies:

1. Continue with the Original Products:

This strategy is followed with the expectations that competitors will leave the market. Selling and

promotional costs are reduced. Many times, a company continues its products only in effective segments

and from remaining segments they are dropped. Such products are continued as long as they are

profitable.

2. Continue Products with Improvements:

Qualities and features are improved to accelerate sales. Products undergo minor changes to attract buyers.

3. Drop the Product:

When it is not possible to continue the products either in original form or with improvement, the company

finally decides to drop the products.

Product may be dropped in following ways:

i. Sell the production and sales to other companies

ii. Stop production gradually to divert resources to other products

iii. Drop product immediately.

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