New-Product Development and Life-Cycle Strategies
Chapter 9
Definition
l New Product Development
– Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.
Idea Generation
l Internal Sources
– “intrapreneurial approach
– innovation incubators
– Need for flatter organization structure
l External Sources
– Customers
– Competitors
– Distributors and Suppliers
Idea Screening
l Filtering out the best ideas in terms of
– Feasibility
– Profitability
Concept Development and Testing
l Product Idea: Basic Idea
l Product Concept: Detailed Version of the Idea
l Product Image: Way consumer’s perceive the actual or potential product
l Concept Testing: test new product concepts with a group of target consumers
Marketing Strategy Development
l Target Market
l Positioning Statement
l Sales, Market Share and Profit Goals
Business Analysis Product Development
l Business Analysis: Do a business review to check the feasibility of the new product
l Product Development:
– R&D and Engineering moves the concept into product
– Products undergo rigorous tests
Test Marketing & Commercialization
l Test Marketing
l Standard Test Markets
l Controlled Test Markets
l Simulated Test Markets
l Commercialization
– Introduce the new product into the market
Product Life-Cycle Strategies
l The Product Life Cycle (PLC) has Five Stages
– Product Development, Introduction, Growth, Maturity, Decline
– Not all products follow this cycle:
l Fads
l Styles
l Fashions
Stages in Product life cycle
Stages in Product life cycle
Product Life-Cycle Strategies
l The product life cycle concept can be applied to a:
– Product class (soft drinks)
– Product form (diet colas)
– Brand (Diet Dr. Pepper)
l Using the PLC to forecast brand performance or to develop marketing strategies is problematic
Product Life-Cycle Strategies
l Product development
l Introduction
l Growth
l Maturity
l Decline
l Begins when the company develops a new-product idea
l Sales are zero
l Investment costs are high
l Profits are negative
Product Life-Cycle Strategies
l Product development
l Introduction
l Growth
l Maturity
l Decline
l Low sales
l High cost per customer acquired
l Negative profits
l Innovators are targeted
l Little competition
Marketing Strategies: Introduction Stage
l Product – Offer a basic product
l Price – Use cost-plus basis to set
l Distribution – Build selective distribution
l Advertising – Build awareness among early adopters and dealers/resellers
l Sales Promotion – Heavy expenditures to create trial
Product Life-Cycle Strategies
l Product development
l Introduction
l Growth
l Maturity
l Decline
l Rapidly rising sales
l Average cost per customer
l Rising profits
l Early adopters are targeted
l Growing competition
Marketing Strategies:
Growth Stage
l Product – Offer product extensions, service, warranty
l Price – Penetration pricing
l Distribution – Build intensive distribution
l Advertising – Build awareness and interest in the mass market
l Sales Promotion – Reduce expenditures to take advantage of consumer demand
Product Life-Cycle Strategies
l Product development
l Introduction
l Growth
l Maturity
l Decline
l Sales peak
l Low cost per customer
l High profits
l Middle majority are targeted
l Competition begins to decline
Marketing Strategies:
Maturity Stage
l Product – Diversify brand and models
l Price – Set to match or beat competition
l Distribution – Build more intensive distribution
l Advertising – Stress brand differences and benefits
l Sales Promotion – Increase to encourage brand switching
Product Life-Cycle Strategies
l Product development
l Introduction
l Growth
l Maturity
l Decline
l Declining sales
l Low cost per customer
l Declining profits
l Laggards are targeted
l Declining competition
Marketing Strategies: Decline Stage
l Product – Phase out weak items
l Price – Cut price
l Distribution – Use selective distribution: phase out unprofitable outlets
l Advertising – Reduce to level needed to retain hard-core loyalists
l Sales Promotion – Reduce to minimal level
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