New-Product Development and Product Life-Cycle Strategies

New-Product Development Strategies

Strategies for Obtaining New Product Ideas
Acquired Companies
Acquired Patents Acquired Licenses

Original Products
Product Improvements Product Modifications New Brands

Causes of New Product Failures

One study estimated that as many as 80% of new consumer packaged products failed. Only about 40% of new consumer products are around 5 years after introduction. Why?

Overestimation of market size, Product design problems, Product incorrectly positioned, priced or advertised, Product may have been pushed despite poor marketing research findings, Costs of product development, or Competitive actions 3

Improving New-Product Success

New product success depends on having a:

Unique superior product (one with higher quality, features, and value in use), & Well-defined product concept (a defined target market, product requirements, and benefits).

To create successful new products, the company must:

understand its customers, markets and competitors, & develop products that deliver superior value to customers.
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Major Stages in New-Product Development

Marketing Strategy Concept Development and Testing Business Analysis

Product Development

Idea Screening

Test Marketing

Idea Generation

Commercialization
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New Product Development Process Step 1. Idea Generation

Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:

Customers

Competitors

Distributors

Suppliers

New Product Development Process Step 2. Idea Screening

Process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate:

Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Then, the idea is evaluated against a set of general company criteria.

New Product Development Process Step 3. Concept Development

1. Develop New Product Ideas into Alternative Detailed Product Concepts

Product Image is the Way Consumers Perceive an Actual or Potential Product

2. Concept Testing - Test the New Product Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal to Target Customers
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New Product Development Process Step 4. Marketing Strategy

Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share Products Planned Price Distribution Marketing Budget

Part Two Describes First-Year:

Part Three Describes Long-Term:

Sales & Profit Goals Marketing Mix Strategy
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Step 5. Business Analysis Step 6. Product Development

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business Analysis

If No, Eliminate Product Concept If Yes, Move to Product Development

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New Product Development Process Step 7. Test Marketing

Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Packaging Product Positioning

Branding Pricing

Elements that May be Test Marketed by a Company

Advertising Distribution
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New Product Development Process Step 7. Test Marketing

Standard Test Market
Full marketing campaign in a small number of representative cities.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

Simulated Test Market

Test in a simulated shopping environment to a sample of consumers.
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New Product Development Process Step 8. Commercialization

Commercialization is the Introduction of the New Product into the Marketplace.
When is the Right Time to Introduce Product?
Where to Launch a New Product?

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Speeding Up New Product Development

Sequential
Simultaneous (Team-Based)

Step 1

Step 1 Step 3
Step 4
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Step 2

Step 3

Step 4

Step 2

Product Life Cycle (Fig. 9.2)

Sales and Profits ($) Sales

Profits
Time

Product Development
Losses/ Investments ($)

Introduction

Growth

Maturity

Decline

Sales and Profits Over the Products Life From Inception to Demise 15

Applications of the Product Life Cycle

The PLC concept can describe a:

Product class which has the longest life cycles (i.e. gas-powered cars), Product form which tend to have the standard PLC shape (i.e. minivans), Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus), Style which is a basic and distinctive mode of expression, Fashion which is a popular style in a given field, Fad which is a fashion that enters quickly, is adopted quickly and declines fast. 16

Problems Using the PLC

The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC Strategy is Both a Cause and a Result of the Products Life Cycle
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Egg Beaters had to first convince people that they needed an egg substitute (overcoming a strong negative response to fake eggs) then demonstrate that their product was a perfect solution.

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Low sales

Costs
Profits Marketing Objectives Product Price Distribution Advertising

High cost per customer

Negative or low Create product awareness and trial Offer a basic product Usually is high; use cost-plus formula High distribution expenses Build product awareness among early adopters and dealers

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Growth Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Rapidly rising sales Average cost per customer

Profits
Marketing Objectives Product Price Distribution Advertising

Rising profits
Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Increase number of distribution outlets Build awareness and interest in the mass market

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Maturity Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Peak sales Low cost per customer High profits, then lower profits Maximize profits while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
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Maturity Stage of the PLC

Company tries to increase consumption of the current product.

Changing characteristics such as quality, features, or styles to attract new users.

Company tries to improve sales by changing one or more marketing mix elements.
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Decline Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

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