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© J
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© 2013 by Cengage Learning Inc. All Rights Reserved.1
Lamb, Hair, McDaniel
Chapter 11
Developing Developing and Managing and Managing
ProductsProducts
2013-2014
Explain the importance of developing new products and describe the six categories of new products
Explain the steps in the new-product development process
Discuss global issues in new-product development
Explain the diffusion process through which new products are adopted
Explain the concept of product life cycles
© 2013 by Cengage Learning Inc. All Rights Reserved.
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4
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5
Explain the importance of developing new products
and describe the six categories of new
products
The Importance of New ProductsThe Importance of New Products
© 2013 by Cengage Learning Inc. All Rights Reserved.31
© 2013 by Cengage Learning Inc. All Rights Reserved. 4
Categories of New ProductsCategories of New Products
New-to-the-WorldNew-to-the-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements or RevisionsImprovements or Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced Products1
Explain the steps in the new-product
development process
The New-Product The New-Product Development ProcessDevelopment Process
© 2013 by Cengage Learning Inc. All Rights Reserved.52
© 2013 by Cengage Learning Inc. All Rights Reserved. 6
New Product Success FactorsNew Product Success Factors
Long-term commitmentLong-term commitment
Company-specific approachCompany-specific approach
Capitalize on experienceCapitalize on experience
Establish an environmentEstablish an environment
2
Exhibit 11.1Exhibit 11.1New-Product Development ProcessNew-Product Development Process
© 2013 by Cengage Learning Inc. All Rights Reserved.
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a plan that links the new-product development process with the
objectives of the marketing department, the business unit, and
the corporation.
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New-Product StrategyNew-Product Strategy
2
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Idea GenerationIdea Generation
Customers
Employees
Distributors
Vendors
Competitors
R & D
Consultants
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 10
Approaches for New Product Approaches for New Product DevelopmentDevelopment
BrainstormingBrainstorming
Focus GroupFocus Group
The process of getting a group to think of unlimited ways to vary a product or solve a problem.
The process of getting a group to think of unlimited ways to vary a product or solve a problem.
The objective of focus group interviews is to stimulate insightful comments through group interaction.
The objective of focus group interviews is to stimulate insightful comments through group interaction.
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The first filter in the product development process, which eliminates ideas that are inconsistent with
the organization’s new-product strategy or are inappropriate for some other reason.
a test to evaluate a new-product idea, usually before any prototype has been
created. Often successful for line extensions.
ScreeningScreening
A Concept Test
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 12
Business Analysis
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Demand
Cost
Sales
Profitability2
© 2013 by Cengage Learning Inc. All Rights Reserved. 13
DevelopmentDevelopment
Creation of prototype
Sketch marketing strategy
Packaging, branding, labeling
Promotion, price, and distribution strategy
Manufacturing feasibility
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 14
Simultaneous Product Simultaneous Product DevelopmentDevelopment
A new team-oriented approach to
new-product development where
all relevant functional areas and
outside suppliers participate in the
development process.
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 15
Test MarketingTest Marketing
The limited introduction of a
product and a marketing program
to determine the reactions of
potential customers in a market
situation.
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 16
Costs of Test MarketingCosts of Test Marketing
• Often take 1 year or more• Can cost over $1 million• Exposes new product to
competitors• Competitors can “jam” testing
programs with their own promotions
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 17
Alternatives toAlternatives toTest MarketingTest Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
Online test marketing
2
© 2013 by Cengage Learning Inc. All Rights Reserved. 18
CommercializationCommercialization
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales Force TrainingSales Force Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
Ordering MaterialsOrdering Materials
2
New-ProductNew-ProductSuccess FactorsSuccess Factors
Listening to customers
Producing the best product
Vision of future market
Strong leadership
Commitment to new-product development
Project-based team approach
Getting every aspect right
© 2013 by Cengage Learning Inc. All Rights Reserved. 19
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Why New Products FailWhy New Products Fail
NOTE: Supplemental content – not in book.
© 2013 by Cengage Learning Inc. All Rights Reserved.20
• No discernible benefits• Poor match between features and customer desires• Overestimation of market size• Incorrect positioning• Price too high or too low• Inadequate distribution• Poor promotion• Inferior product
Discuss global issues in new-product development
Global Issues in Global Issues in New-Product DevelopmentNew-Product Development
© 2013 by Cengage Learning Inc. All Rights Reserved.213
Global Marketing QuestionsGlobal Marketing Questions
• Develop product for potential worldwide distribution
• Modify for unique market requirements
• Design products to meet regulations and key market requirements
© 2013 by Cengage Learning Inc. All Rights Reserved. 22
3
Explain the diffusion process through
which new products are adopted
© 2013 by Cengage Learning Inc. All Rights Reserved.23
The Spread of New ProductsThe Spread of New Products
4
The process by which the
adoption of an innovation spreads.
DiffusionDiffusion
© 2013 by Cengage Learning Inc. All Rights Reserved. 24
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LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
Categories of AdoptersCategories of AdoptersCategories of Adopters
© 2013 by Cengage Learning Inc. All Rights Reserved. 25
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TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
Product Characteristics and Product Characteristics and the Rate of Adoptionthe Rate of Adoption
© 2013 by Cengage Learning Inc. All Rights Reserved. 26
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Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
Marketing Implications of the Marketing Implications of the Adoption ProcessAdoption Process
© 2013 by Cengage Learning Inc. All Rights Reserved. 27
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Explain the concept of product life cycles
Product Life CyclesProduct Life Cycles
© 2013 by Cengage Learning Inc. All Rights Reserved.285
A concept that provides a way to trace the
stages of a product’s acceptance, from its
introduction (birth) to its decline (death).
Product Life CycleProduct Life Cycle
© 2013 by Cengage Learning Inc. All Rights Reserved. 29
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© 2013 by Cengage Learning Inc. All Rights Reserved. 30
Exhibit 11.2Exhibit 11.2Four Stages of the Product Life CycleFour Stages of the Product Life Cycle
© 2013 by Cengage Learning Inc. All Rights Reserved. 31
Exhibit 11.3Exhibit 11.3Product Life Cycles for Styles, Fashion, and FadsProduct Life Cycles for Styles, Fashion, and Fads
5
Introductory StageIntroductory Stage
© 2013 by Cengage Learning Inc. All Rights Reserved. 32
High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and
information Communication challenge is to stimulate
primary demand
5
Growth StageGrowth Stage
© 2013 by Cengage Learning Inc. All Rights Reserved. 33
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the
differences between brands Wider distribution
5
Maturity StageMaturity Stage
© 2013 by Cengage Learning Inc. All Rights Reserved. 34
Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and
dealers Marginal competitors drop out Niche marketers emerge
5
Decline Stage
© 2013 by Cengage Learning Inc. All Rights Reserved. 35
Long-run drop in sales Large inventories of
unsold items Elimination of all nonessential
marketing expenses “Organized abandonment”
5
© 2013 by Cengage Learning Inc. All Rights Reserved. 36
Exhibit 11.4Exhibit 11.4Relationships between the Diffusion Process and the Product Relationships between the Diffusion Process and the Product Life Cycle Life Cycle
Productlife cyclecurve
Diffusioncurve
Chapter 11 VideoChapter 11 Video
GaGa’s Inc.Jim King and his wife discuss how they decided to create the company GaGa’s Inc. using the product Sherbetter.
The line expanded from just Lemon to several other flavors as well as Sherbetter bars, the struggles of
branding, line extension, and other aspects of the frozen dessert market.
CLICK TO PLAY VIDEO
© 2013 by Cengage Learning Inc. All Rights Reserved.37