Chapter 9
Chapter 9
New Product Development
and
Product Life-Cycle Strategies
PRINCIPLES OF MARKETING
Eighth Edition
Copyright 1999 Prentice Hall
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9-2
New-Product Development
Strategies
New-Product Development
Strategies
Original Products Original Products
Product Improvements
Product Improvements
Product Modifications
Product Modifications
New Brands
New Brands Acquired
Companies Acquired Companies
Acquired Patents Acquired
Patents
Acquired Licenses Acquired Licenses
•
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
Copyright 1999 Prentice Hall
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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
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
Step 1. Idea Generation
Copyright 1999 Prentice Hall
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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
Step 3. Concept Development & Testing
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
Copyright 1999 Prentice Hall
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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
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
If Yes, Move to
Product Development
If No, Eliminate Product Concept
Copyright 1999 Prentice Hall
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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
Step 8. Commercialization
Step 8. Commercialization
When?
When?
Where?
Where?
Whom?
Whom?
To
To
How?
How?
Commercialization is the
Copyright 1999 Prentice Hall
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9-12
Speeding Up Development
Speeding Up Development
Step 1
Step 1
Step 2
Step 2
Step 3
Step 3
Step 4
Step 4
S
te
p
1
S
te
p
2
Step 3
Step 4
Time Product
Develop ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/
Investments ($) Sales and
Profits ($)
Copyright 1999 Prentice Hall
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9-14
Introduction Stage of the PLC
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales
Costs
Costs
Profits
Profits
Marketing Objectives
Marketing Objectives
Product
Product
Price
Price
Low sales
Low sales
High cost per customer
High cost per customer
Negative
Negative
Create product awareness and trial
Create product awareness and trial
Offer a basic product
Offer a basic product
Use cost-plus
Use cost-plus
Distribution
Distribution
Build selective distributionBuild selective distributionAdvertising
Advertising
Build product awareness among early adopters and dealersSummary of Characteristics, Objectives, &
Strategies
Sales
Sales
Costs
Costs
Profits
Profits
Marketing Objectives
Marketing Objectives
Product
Product
Price
Price
Rapidly rising sales
Rapidly rising sales
Average cost per customer
Average cost per customer
Rising profits
Rising profits
Maximize market share
Maximize market share
Offer product extensions, service, warranty
Offer product extensions, service, warranty
Price to penetrate market
Price to penetrate market
Distribution
Distribution
Build intensive distributionBuild intensive distributionAdvertising
Copyright 1999 Prentice Hall
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9-16
Maturity Stage of the PLC
Maturity Stage of the PLC
Summary of Characteristics, Objectives, &
Strategies
Sales
Sales
Costs
Costs
Profits
Profits
Marketing Objectives
Marketing Objectives
Product
Product
Price
Price
Peak sales
Peak sales
Low cost per customer
Low cost per customer
High profits
High profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and models
Diversify brand and models
Price to match or best competitors
Price to match or best competitors
Distribution
Distribution
Build more intensive distributionBuild more intensive distributionAdvertising
Advertising
Stress brand differences and benefitsSummary of Characteristics, Objectives, &
Strategies
Sales
Sales
Costs
Costs
Profits
Profits
Marketing Objectives
Marketing Objectives
Product
Product
Price
Price
Declining sales
Declining sales
Low cost per customer
Low cost per customer
Declining profits
Declining profits
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Phase out weak items
Phase out weak items
Cut price
Cut price
Distribution
Distribution
Go selective: phase out unprofitable outlets