MKT101 - Chapter 9 - TKR PDF

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Principles of Marketing

(MKT101)

Tanveer Kabir
Lecturer: East West University
MBA, IBA, University of Dhaka
BBA, IBA, University of Dhaka
CHAPTER 9

NEW PRODUCT DEVELOPMENT AND PRODUCT


LIFECYCLE STRATEGIES
Case Study

Samsung: Enriching Customers’ Lives Through


New-Product Innovation

Study this case at home for discussion in the


following class…
New Product Development
• A firm can obtain new products in TWO ways
– Through Acquisition (by buying a whole company, a patent or a
license to produce someone else’s product) OR
– Through NEW PRODUCT DEVELOPMENT
• New Product Development means the development of
original products, product improvements, product
modifications and new brands through he firm’s own
product development efforts.
Why Are New Products Important?
New Products Bring:

NEW SOLUTIONS
&
VARIETY
to customers’ lives
Why Are New Products Important?

New Products are a key source of the company’s

GROWTH
Drawbacks
Innovation can be very expensive and very risky

By one estimate, 67 percent of all new products


introduced by ESTABLISHED companies FAIL

For NEW companies the failure rate is 90 percent


New Product Failures of Established Companies:
https://www.cbinsights.com/blog/corporate-innovation-product-fails/
The New Product Development Process

Concept Marketing
Idea Generation Idea Screening Development Strategy
and Testing Development

Business Product
Test Marketing Commercialization
Analysis Development
Step 1: Idea Generation
• Idea Generation is the
Systematic Search for new
product ideas
• Idea Sources can be classified
into:
– Internal Sources
– External Sources
Step 1: Idea Generation
INTERNAL IDEA SOURCES
– Internal R&D
– Encourage employees to
develop new product ideas
example: Twitter Hack Week

EXTERNAL IDEA SOURCES


– Distributors and Suppliers
– Competitors
– Customers
Step 1: Idea Generation
CROWDSOURCING
– Inviting broad communities of
people – customers, employees,
independent scientists &
researchers and even the
public at large – into the new
product innovation process
– Example: P&G’s Connect +
Develop
(Go Through the Case Study)
Step 2: Idea Screening
• Idea Screening is to go
through all the generated new-
product ideas to spot the good
ideas and drop the poor ones
as soon as possible
• Many companies require
executives to write up new-
product ideas in a standard
format that can be reviewed by
a new-product committee
Step 3: Concept Development and Testing

After the screening is completed, attractive ideas must be


turned into PRODUCT CONCEPTS

You must be able to distinguish between product idea,


product concept & product image
Step 3: Concept Development and Testing

After a product concept is developed the company should move to


CONCEPT TESTING where the new-product concept is presented
to a group of target customers.

The goal of Concept Testing is to find out whether the concepts


have a strong consumer appeal

SEE EXAMPLE : ELECTRIC CAR CONCEPT TEST


Step 4: Marketing Strategy Development
• Design an initial marketing strategy for a new product
based on the product concept
• Then, Design a THREE PART marketing strategy statement:

Part 1: Target Market, Planned Value Proposition and Sales,


Market Share & Profit Goals

Part 2: Product’s Planned Price, Distribution and


Marketing Budget for the First Year

Part 3: Planned long-run sales, profit goals and


marketing mix strategy
Step 5: Business Analysis

Business Analysis is a review


of the sales, costs and profit
projections for a new product
to find out whether these
factors satisfy the company’s
objectives
Step 6: Product Development
• After a product concept passes the business analysis test,
it moves into Product Development
• In the Product Development phase, the product concept is
developed into a physical product to ensure that the
product idea can be turned into a workable market offering
• The R&D department hopes to quickly design a prototype,
that will satisfy and excite customers at a budgeted cost
Step 7: Test Marketing
• Test Marketing is the stage of new-product development in
which the product and its proposed marketing program are
tested in realistic marketing settings
• However, test marketing in the standard test markets can
be expensive
• Two cheaper alternatives to standard test markets can be:
– Controlled Test Markets
– Simulated Test Markets
Step 8: Commercialization
• If a product passes all the previous tests it means that the
product is ready for the market
• Commercialization is the final step where the new product
is launched in the market
• Introducing a new product in the market with respect to the
4 Ps, will be expensive
• One of the most important decisions in this step is the
introduction TIMING
PRODUCT LIFE-CYCLE
Product Life-Cycle

The course of a product’s sales and


profits over its lifetime
Product Life-Cycle

FIGURE 9.2
Product Life-Cycle
Not all products follow all five stages of the PLC

Some products are introduced and die quickly, others stay


in the mature stage for a long time

Some enter the decline stage and are then cycled back into
the growth stage
Product Life-Cycle
A well-managed brand could live FOREVER
Product Life-Cycle

The PLC concept can also be applied to what are known as


STYLES, FASHION and FADS
Product Life-Cycle
STYLE
• A basic and distinctive mode of
expression
• Example:
– Pants
– Shirts
– Saree
– Formal Suit
Product Life-Cycle
FASHION
• A currently accepted or
popular style in a given field
• Examples:
– Business Casual
– Hoodies
– Long Beards
Product Life-Cycle
FAD
• A temporary period of
unusually high sales drive by
consumer enthusiasm and
immediate product or brand
popularity
• Examples:
– Yo yo
– Clash of Clans
– Fidget Spinners
– Bahubali Saree
Product Life-Cycle
INTRODUCTION STAGE
• The PLC stage in which a new product is first distributed
and made available for purchase
• Introduction Stage properties:
– Slow sales growth
– Little or no profit
– High promotion and distribution expense
Product Life-Cycle
GROWTH STAGE
• The PLC stage in which a product’s sales start climbing
quickly
• Growth Stage properties
– Sales increase
– New competitors enter the market
– The early adopters will continue to buy and later buyers wills
start following if they hear positive word of mouth
– Promotion and manufacturing costs gain economies of scale
Product Life-Cycle
MATURITY STAGE
• The PLC stage in which a product’s sales growth slows
down or levels off
• Maturity Stage properties
– Lasts longer than previous stages
– Overcapacity leads to greater competition
– Product managers should consider ‘modifying’: The Product, The
Market or The Marketing Mix
Product Life-Cycle
DECLINE STAGE
• The PLC stage in which a product’s sales fade away
• Possible reasons for declining:
– Technological advancements, shifts in consumer tastes,
increased competition etc
• Decline Stage actions:
– Maintain the Product
– Harvest the Product
– Drop the Product

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