9-1
New Product Developmentand
Product Life-Cycle Strategies
9-2Causes of New Product Failures
• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or
Advertised• Costs of Product Development• Competitive Actions
• To create successful new products, the company must:– understand it’s customers, markets and
competitors – develop products that deliver superior value to
customers.
9-3
New Product Development Process
• Idea Generation and Screening• Concept Development and Testing• Marketing Strategy• Business Analysis• Product Development• Test Marketing• Commercialization
9-4New Product Development ProcessStep 1. Idea Generation
Systematic Search for New Product Ideas
Internal sourcesCustomers CompetitorsDistributorsSuppliers
9-5
• Process to spot good ideas and drop poor ones• Criteria– Market Size– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return
New Product Development ProcessStep 2. Idea Screening
9-6New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas into Alternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One
9-7New Product Development ProcessStep 4. Marketing Strategy Development
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
9-8New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If No, Eliminate Product Concept
9-9New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
9-10
Product Life Cycle
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
9-11Introduction Stage of the PLC
SalesCostsProfits
Marketing Objectives
ProductPrice
Low sales
High cost per customer
NegativeCreate product awareness
and trialOffer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising Build product awareness among early adopters and dealers
9-12Growth Stage of the PLC
SalesCostsProfits
Marketing Objectives
ProductPrice
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market shareOffer product extensions,
service, warrantyPrice to penetrate market
Distribution Build intensive distribution
Advertising Build awareness and interest in the mass market
9-13Maturity Stage of the PLC
SalesCostsProfits
Marketing Objectives
ProductPrice
Peak sales
Low cost per customer
High profitsMaximize profit while defending
market shareDiversify brand and models
Price to match or best competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
9-14Decline Stage of the PLC
SalesCostsProfits
Marketing Objectives
ProductPrice
Declining sales
Low cost per customer
Declining profitsReduce expenditure and milk the
brandPhase out weak items
Cut price
Distribution Go selective: phase out unprofitable outlets
Advertising Reduce to level needed to retain hard-core loyal customers