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New Product Development and Product Life-Cycle Strategies

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New Product Development New product development (NPD): the development of:

Original products (“new-to-the world”), Product modifications Product category extensions Product line extensionsthrough the firm’s own R&D efforts

New products can also come from acquisition of other companies, patents, or licenses

NPD is important to: Follow changing market

demands Remain competitive Keep up to changing technology Replace dying products Diversify product offering to

reduce risk

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Consumers’ perspectives on Newness (Exhibit 10-1, page 255)

DiscontinuousInnovation

DiscontinuousInnovation

Breakthrough

DynamicallyContinuousInnovation

DynamicallyContinuousInnovation

Major change

ContinuousInnovation

ContinuousInnovation

Ongoing alteration

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Did your mother make you drink milk when you were young? Do you still drink it today? If you do not, what happened to make you stop? For many, a sign of maturity was when you could order something to drink other than milk at a restaurant. Sodas, water, juices, and just about any other liquid has had greater appeal for children for several decades. This may, however, be about to change if Mac Farms of Burlington, Vermont has anything to say about it. Responding to research efforts on what kids like to drink, Mac Farms has developed E-Moo. E-Moo is a carbonated, milk-based product that is designed to give a healthy alternative to sodas. E-Moo may just make it “cool” to drink milk. E-Moo is loaded with vitamins, low in cholesterol and sodium, and comes in three flavors—Orange Creamsicle, Bubble Gum, and Raspberry.

Is this a drink for the children born to the Internet age?.

What about P.B. Slices?

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Stages inNew Product Development

Idea generation

Idea screening

Commercialization

Business analysis

Product development

Figure 9-1

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New Product Development at Gillette

Investment in NPD is large, $1.5 billion on the Mach3 razor system, with 35 patents

Company employees shave at work as part of new product testing

Same attitude towards innovation applies to promotional efforts

Founded in 1901, its success has been driven by new product innovation, to remain competitive

Dominates razor and blade markets, but also competes in batteries, toiletries, cosmetics, stationery products, dental care, and electrical appliances

Company-wide culture that supports innovation

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Characteristics of Success

Relative Advantage Compatibility with Existing Consumption

Patterns Trialability – The Opportunity for Buyer Testing Observability – The Chance to See the

Newness Simplicity of Usage

Blu-RayBlu-Ray

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Question #3.

Yoplait’s recent entry in the highly competitive $2 billion a year yogurt market—a tubular yogurt called Go-Gurt—seems to be a hit with the lunchbox set. Why tubular yogurt? Children like yogurt but are not impressed with it. Some believe yogurt is “old people food.” Not so with Go-Gurt. With flavors like Chill-Out Cherry and Rad Raspberry, Go-Gurt can be eaten like regular yogurt, frozen like a frozen pop, or carried in a shirt pocket.

see http://www.yoplait.com/products_gogurt.aspx

Can this product be expanded to an adult market? Devise a plan for testing the product concept for 25 to 45 year-old adults.

What factors would be critical to your test? What types of test subjects would you want for your test?

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Why do new products fail?

Insufficient superiority or uniqueness Inadequate/inferior planning Poor execution Technical problems Poor timing

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New Product Adoption Processes Awareness Interest Evaluation Trial Adoption

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The diffusion process (EXHIBIT 10-7, PAGE 272)

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Product Life-Cycle Strategies

Profits

Sales

Development Introduction Growth Maturity Decline

SalesProfit($)

Loss($)

Figure 9-2

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Alternative PLC CurvesExamples of fads?

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Summary of PLC/Marketing Mix

R & D Introduction Growth Maturity DeclineSales Low Increasing Peaking Declining

Costs High R&D High Average Low Low

Profits Negative Negative Rising High Declining

Customers Innovators Early adopters Middle majority Laggards

Competitors Few Growing Stable number Declining

Marketing Product Maximize Market share Reduce costs

Objectives trial market share and profit milk brand

Product In development Basic Extensions Diversify brand Phase out weak

Price tbd Skimming or Penetrate Be price Cut

penetration market competitive price

Distribution tbd Selective Intensive Increase Reduce outlets

Advertising tbd Educate Awareness Brand Reduce

awareness interest differences and remind

Promotion tbd Heavy to Reduce Increase for Reduce costs

encourage trial heavy consumer brand switching minimum level

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Maturity Stage Strategy

Modify the market. Increase the consumption of the current product

(eg. Baking soda, Bounce) Modify the product

Changing characteristics such as quality, features or style to attract new users and to inspire more usage (eg. Tide, Crayola)

Modify the marketing mix Improving sales by changing one or more

marketing mix elements.