New-Product Development and Product Life-Cycle Strategies

New-Product Development and Product Life-Cycle Strategies
Prof. Rushen Chahal

Page 1
New-Product Development Strategies

Strategies for Obtaining New Product Ideas
Acquired Companies Acquired Patents Acquired Licenses Original Products Product Improvements Product Modifications
New Brands
Page 2
Causes of New Product Failures

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 its customers, markets and competitors, develop products that deliver superior value to customers.
Page 3
New-Product Development Process

Marketing Strategy Concept Development and Testing Idea Screening Idea Generation
Business Analysis Product Development
Test Marketing
Commercialization
Page 4
New Product Development Process

Step 1. Idea Generation Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:
Customers
Competitors
Distributors
Suppliers
Page 5

Step 2. Idea Screening 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.

Page 6

Step 3. Concept Development & Testing
1. Develop New Product Ideas into Alternative Detailed Product Concepts
2. Concept Testing - Test the New Product Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal to Target Customers
Page 7

Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two Describes Short-Term:

Products Planned Price Distribution Marketing Budget
Part Three Describes Long-Term:

Sales & Profit Goals Marketing Mix Strategy
Page 8

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
If No, Eliminate Product Concept If Yes, Move to Product Development Page 9

Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Product
Packaging
Branding
Elements that May be Test Marketed by a Company
Positioning Strategy
Advertising
Pricing
Distribution Page 10

Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When?
Where?
Page 11
Speeding Up Sequential Development

Step 1
Simultaneous (Team-Based)
Step 1 Step 3 Step 4 Page 12 Step 2
Step 2
Step 3
Step 4
Speed Bump: Linking the Concepts

Suppose that youre on a panel to nominate the best new products of the year.
>What products would you nominate and why? >See what you can learn about the new-product development process for one of these products.
Applying the new-product development process youve just studied, develop an idea for an innovative new snack food product and sketch out a brief plan for bringing it to market.
Page 13
Product Life Cycle Sales and Profits Over the Products Life From
Introduction to Decline
Sales and Profits ($) Sales
Profits Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline
Page 14
Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies

Sales Costs Profits Marketing Objectives Product Price Distribution Advertising
Low sales High cost per customer Negative or low Create product awareness and trial Offer a basic product Usually is high; use cost-plus formula High distribution expenses Build product awareness among early adopters and dealers
Page 15
Growth Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Increase number of distribution outlets Build awareness and interest in the mass market
Page 16
Maturity Stage of the PLC

Peak sales Low cost per customer High profits, then lower profits Maximize profits while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
Page 17
Maturity Stage of the PLC Maturity Stage Product Defense

Strategies
Market Modification
Product Modification
Marketing Mix Modification
Page 18
Speed Bump: Linking the Concepts

Ask a grandparent or someone else who shaved back then to compare a 1940s or 1950s Gillette razor to the most current model.
>Is Gillettes latest razor really a new product or just a retread of the previous version? >What do you conclude about product life cycles?
Mattels Barbie dolls have been around for decades.

>How has Mattel protected Barbie from old age and decline?
Page 19
Decline Stage of the PLC

Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers
Page 20
Rest Stop: Reviewing the Concepts

Explain how companies find and develop newproduct ideas. List and define the steps in the new-product development process. Describe the stages of the product life cycle. Explain how marketing strategies change during the products life cycle.
Page 21

New-Product Development and Product Life-Cycle Strategies

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New-Product Development and Product Life-Cycle Strategies

Prof. Rushen Chahal

New-Product Development Strategies

Causes of New Product Failures

To create successful new products, the company must:

New-Product Development Process

Business Analysis Product Development

New Product Development Process

New Product Development Process

Then, the idea is evaluated against a set of general company criteria.

New Product Development Process

New Product Development Process

Part Two Describes Short-Term:

Part Three Describes Long-Term:

New Product Development Process

If No, Eliminate Product Concept If Yes, Move to Product Development Page 9

New Product Development Process

Elements that May be Test Marketed by a Company

New Product Development Process

Commercialization is the Introduction of the New Product into the Marketplace.

Speeding Up Sequential Development

Step 1 Step 3 Step 4 Page 12 Step 2

Speed Bump: Linking the Concepts

Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies

Growth Stage of the PLC

Maturity Stage of the PLC

Maturity Stage of the PLC Maturity Stage Product Defense

Marketing Mix Modification

Speed Bump: Linking the Concepts

Mattels Barbie dolls have been around for decades.

Decline Stage of the PLC

Rest Stop: Reviewing the Concepts

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