KOTCHA09.ppt 180KB Jul 21 2010 09:23:12 PM

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Chapter 9 New Product Development

and

Product Life-Cycle Strategies

PRINCIPLES OF MARKETING

Eighth Edition

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9-2

New-Product Development

Strategies

New-Product Development

Strategies

Original Products Original Products

Product Improvements

Product Modifications

New Brands

New Brands Acquired

Companies Acquired Companies

Acquired Patents Acquired

Patents

Acquired Licenses Acquired Licenses

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• 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

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9-4

New Product Development

Process

New Product Development

Process

Idea Generation Idea

Screening Concept Development

and Testing

Marketing

Strategy BusinessAnalysis

Product Development

Test Marketing

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C U S T O M E R S C U S T O M E R S C O M P E T I T O R C O M P E T I T O R S D I S T R I B U T O R D I S T R I B U T O R S U P P L I E R S S U P P L I E R S

Step 1. Idea Generation

Idea Generation is the Systematic

Search for New Product Ideas

Obtained Internally and From:

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9-6

• _{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 2. Idea Screening

New Product Development Process

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Step 3. Concept Development & Testing

1. Develop Product Ideas into Alternative

Product Concepts

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test the Product Concepts with Groups

of Target Customers

2. Concept Testing - Test the Product Concepts with Groups

of Target Customers

3. Choose the Best One

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9-8

New Product Development Process

Step 4. Marketing Strategy Development

New Product Development Process

Step 4. Marketing Strategy Development

Part Two Describes Short-Term:

Product’s Planned Price Distribution

Marketing Budget

Part Two Describes Short-Term:

Product’s Planned Price Distribution

Marketing Budget

Part Three Describes Long-Term:

Sales & Profit Goals Marketing Mix Strategy

Part Three Describes Long-Term:

Sales & Profit Goals Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One Describes Overall:

Target Market

Planned Product Positioning Sales & Profit Goals

Market Share

Part One Describes Overall:

Target Market

Planned Product Positioning Sales & Profit Goals

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Step 5. Business Analysis

Step 6. Product Development

Step 5. Business Analysis

Step 6. Product Development

Business Analysis

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

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

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9-10

New Product Development Process

Step 7. Test Marketing

New Product Development Process

Step 7. Test Marketing

Standard

Test Market

Full marketing campaign in a small number of representative cities.

Standard

Test Market

Full marketing campaign in a small number of representative cities.

Simulated

Test Market

Test in a simulated shopping environment

to a sample of consumers.

Simulated

Test Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled

Test Market

A few stores that have agreed to carry new

products for a fee.

Controlled

Test Market

A few stores that have agreed to carry new

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Step 8. Commercialization

When?

Where?

_Where?

_Whom?

To

How?

_How?

Commercialization is the

Introduction of the New Product

into the Marketplace.

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9-12

Speeding Up Development

Step 1

Step 2

Step 3

Step 4

S

te

p

1 S

te

p

2 Step 3

Step 4

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Time Product

Develop ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/

Investments ($) Sales and

Profits ($)

Sales and Profits Over the Product’s Life From

Introduction to Decline

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9-14

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Low sales

High cost per customer

Negative

Create product awareness and trial

Offer a basic product

Use cost-plus

Distribution

Build selective distributionBuild selective distribution

Advertising

Build product awareness among early adopters and dealers

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Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer product extensions, service, warranty

Price to penetrate market

Distribution

Build intensive distributionBuild intensive distribution

Advertising

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9-16

Maturity Stage of the PLC

Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Peak sales

Low cost per customer

High profits

Maximize profit while defending market share

Diversify brand and models

Price to match or best competitors

Distribution

Build more intensive distributionBuild more intensive distribution

Advertising

Stress brand differences and benefits

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Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Declining sales

Low cost per customer

Declining profits

Reduce expenditure and milk the brand

Phase out weak items

Cut price

Distribution

Go selective: phase out unprofitable outlets

Advertising

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9-12

Speeding Up Development

Step 1

Step 2

Step 3

Step 4

S

te

p

1 S

te

p

2 Step 3

Step 4

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9-13

Product Life Cycle

Time Product

Develop ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/

Investments ($) Sales and

Profits ($)

Sales and Profits Over the Product’s Life From

Introduction to Decline

(3)

9-14

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Low sales

High cost per customer

Negative

Create product awareness and trial

Offer a basic product

Use cost-plus

Distribution

Build selective distributionBuild selective distribution

Advertising

Build product awareness among early adopters and dealers

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9-15

Growth Stage of the PLC

Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer product extensions, service, warranty

Price to penetrate market

Distribution

Build intensive distributionBuild intensive distribution

Advertising

Build awareness and interest in the mass market

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9-16

Maturity Stage of the PLC

Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Peak sales

Low cost per customer

High profits

Maximize profit while defending market share

Diversify brand and models

Price to match or best competitors

Distribution

Build more intensive distributionBuild more intensive distribution

Advertising

Stress brand differences and benefits

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9-17

Decline Stage of the PLC

Summary of Characteristics, Objectives, &

Strategies

Sales

Costs

Profits

Marketing Objectives

Product

Price

Declining sales

Low cost per customer

Declining profits

Reduce expenditure and milk the brand

Phase out weak items

Cut price

Distribution

Go selective: phase out

unprofitable outlets

Go selective: phase out unprofitable outlets

Advertising

_{Reduce to level needed to retain}

hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers