basic08_ppt.ppt 229KB Apr 07 2011 01:15:58 AM

Chapter Eight

Roadmap:

Previewing the Concepts

1. Explain how companies find and

develop new-product ideas.

2. List and define the steps in the new-product development process.

3. Describe the stages of the product life cycle.

4. Describe how marketing strategies change during the product’s life

Firm History

 _{Steve Jobs’s creativity led}

to innovation in user

friendliness of computers.

 _{LazerWriters and the}

Macintosh established Apple firmly in desktop publishing market.

 _{Status as market share}

leader and innovator was lost in the late 1980s after Jobs left the company.

Apple Computer – Innovation at

Apple Computer – Innovation at

Work

Work

Case Study

Case Study

Firm Recovery

 _{Steve Jobs returns in 1997}

and revitalizes Apple by first launching the iMac.

 _{The Mac OS X next breaks}

ground and acts as a launching pad for a new generation of computers and software products.

 _{iPod and iTunes change}

New-Product Development

Strategy

 _{Strategies for obtaining new-product}

ideas:

– Acquisition of companies, patents, licenses

– _{New product development, product}

New-Product Failures

 _{Only 10% of new consumer products are still} on the market and profitable after 3 years.

 _{Industrial products failure rate as high as 30%.}  _{Why do products fail?}

– Overestimation of market size – Design problems

– Incorrectly positioned, priced, or advertised

– Pushed despite poor marketing research findings – Development costs

Major Stages in New-Product

Development

 _{Idea generation}  _{Idea screening}

 _{Concept development and testing}

 _{Marketing strategy development}  _{Business analysis}

 _{Product development}

 _{Test marketing}

Idea Generation

 _{Internal sources:}

– Company employees at all levels  _{External sources:}

– Customers

– Competitors

– Distributors

– Suppliers

Idea Screening

 _{Process used to spot good ideas and}

drop poor ones.

– Executives provide a description of the product along with estimates of market

size, product price, development time and costs, manufacturing costs, and rate of

return.

Concept Development and

Testing

 _{Product Idea:}

– idea for a possible product that the company can see itself offering.

 _{Product Concept:}

– detailed version of the idea stated in meaningful consumer terms.

 _{Product Image:}

Marketing Strategy

Development

 _{Part One:}

– Describes the target market, planned product positions, sales, market share, and profit goals.

 _{Part Two:}

– Outlines the product’s planned price, distribution, and marketing budget.  _{Part Three:}

Business Analysis

 _{Involves a review of the sales, costs,}

and profit projections to assess fit with company objectives.

 _{If results are positive, project moves to}

Product Development

 _{Develop concept into physical product.}  _{Calls for large jump in investment.}

 _{Prototypes are made.}

 _{Prototype must have correct physical}

Test Marketing

 _{Product and program introduced in}

more realistic market setting.

 _{Not needed for all products.}

 _{Can be expensive and time consuming,}

Commercialization

 _{Must decide on timing (i.e., when to}

introduce the product).

 _{Must decide on where to introduce the}

product (e.g., single location, state, region, nationally, internationally).

Organizing New-Product

Development

 _{Sequential Approach:}

– Each stage completed before moving to next phase of the project.

 _{Simultaneous Approach:}

The Product Life Cycle

 _{Product development}

 _Introduction

 _Growth

Product Life-Cycle

Applications

 _{Product class has the longest life cycle (e.g.,} gas-powered cars)

 _{Product form tends to have the standard PLC shape} (e.g., dial telephone)

 _{Brand can change quickly because of changing}

competitive attacks and responses (e.g., Tide, Cheer)  _{Style is a basic and distinctive mode of expression}

(e.g., formal clothing, Danish modern furniture)  _{Fashion is a popular style in a given field (e.g.,}

business casual)

Practical Problems of PLC

 _{Hard to identify which stage of the PLC the} product is in.

 _{Hard to pinpoint when the product moves to} the next stage.

 _{Hard to identify factors that affect product’s} movement through stages.

 _{Hard to forecast sales level, length of each} stage, and shape of PLC.

Introduction Stage of PLC

 _{Sales: low}

 _{Costs: high cost per customer}  _{Profits: negative}

 _{Marketing Objective: create product} awareness and trial

 _{Product: offer a basic product}  _{Price: use cost-plus formula}

Growth Stage of PLC

 _{Sales: rapidly rising}

 _{Costs: average cost per customer}  _{Profits: rising}

 _{Marketing Objective: maximize market share}  _{Product: offer extension, service, warranty}  _{Price: penetration strategy}

 _{Distribution: build intensive distribution}  _{Promotion: reduce to take advantage of}

Maturity Stage of PLC

 _{Sales: peak}

 _{Costs: low cost per customer}  _{Profits: high}

 _{Marketing Objective: maximize profits while}

defending market share

 _{Product: diversify brand and models}  _{Price: match or best competitors}

 _{Distribution: build more intensive distribution}  _{Promotion: increase to encourage brand}

Maturity Stage of the PLC

 _{Modifying the Market:}

– _{Increase the consumption of the current}

product.

 _How?

– _{Look for new users and market segments.} – _{Reposition the brand to appeal to larger or}

faster-growing segment.

Maturity Stage of the PLC

 _{Modifying the Product:}

– Changing characteristics such as quality, features, or style to attract new users and to inspire more usage.

 _How?

– Improve durability, reliability, speed, taste.

– Improve styling and attractiveness.

– Add new features.

Maturity Stage of the PLC

 _{Modifying the Marketing Mix:}

– Improving sales by changing one or more marketing mix elements.

 _How?

– Cut prices.

– Launch a better ad campaign.

Decline Stage of PLC

 _{Sales: declining}

 _{Costs: low cost per customer}  _{Profits: declining}

 _{Marketing Objective: reduce expenditures} and milk the brand

 _{Product: phase out weak items}  _{Price: cut price}

 _{Distribution: selective--phase out} unprofitable outlets

Rest Stop:

Reviewing the Concepts

1. Explain how companies find and

develop new-product ideas.

2. List and define the steps in the new-product development process.

3. Describe the stages of the product life cycle.

4. Describe how marketing strategies change during the product’s life