Chapter 10:

Product Management and New-Product Development

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Chapter 10 Objectives
When you finish this chapter, you should
1. Understand how product life cycles affect strategy planning. 2. Understand what is involved in designing new products and what new products really are. 3. Understand the new-product development process. 4. See why product liability must be considered in screening new products. 5. Understand the need for product or brand managers. 6. Understand the important new terms.

10-2

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Product Life Cycle

Market Introduction Market Growth Market Maturity Sales Decline

Total Industry Sales

+ Total Industry Profit Time
Exhibit 10-1
10-3
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

$0

Planning for Life Cycle Stages

Introducing New Products
Managing Mature Products
Focus:

Budget / Rate of Growth

Focus:

Persuasion / Less Profit

Focus:

Future Adaptation

New or Improve?
Focus:

New Markets

New Strategies
Focus:

Dying Products
10-4

Phase Out
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

New-Product Development Process

Idea Generation
Ideas from: Customers and users Marketing research Competitors Other markets Company people Middlemen

Screening
Strengths and Weaknesses Fit with objectives Market trends Rough ROI estimate

Idea Evaluation
Concept testing Customer reactions Rough estimates of cost, sales, profits

Development
R&D Develop model or service prototype Test marketing mix Revise plans as needed ROI estimate

Commercial -ization
Finalize product and marketing plan Start production and marketing Roll out in select markets Final ROI estimate

Exhibit 10-4
10-5
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Types of New Product Opportunities

Immediate Satisfaction
High
Low

High

Desirable Products

Salutary Products

Long-Run Consumer Welfare

Low

Pleasing Products

Deficient Products

10-6

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

New-Product Development Management

Top Level Support

Authority

Key Issues
Market-Guided R&D

Integration & Coordination

10-7
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Key Terms
Product Life Cycle Market Introduction Market Growth Market Maturity Sales Decline Fashion Fad New Product FTC Consumer Product Safety Act Product Liability Concept Testing Product Managers Brand Managers

10-8

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill