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Chapter 10 Version 6e 1©2002 South-Western
Developing and Managing Developing and Managing ProductsProducts
Prepared byPrepared byDeborah BakerDeborah Baker
Texas Christian UniversityTexas Christian Universitychapter
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Chapter 10 Version 6e 2©2002 South-Western
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Learning ObjectivesLearning Objectives
1.1. Explain the importance of developing new Explain the importance of developing new products and describe the six categories products and describe the six categories of new products.of new products.
2. Explain the steps in the new-product 2. Explain the steps in the new-product development process.development process.
3. Explain why some products succeed and 3. Explain why some products succeed and others fail.others fail.
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Chapter 10 Version 6e 3©2002 South-Western
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Learning Objectives (continued)Learning Objectives (continued)
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4. Discuss global issues in new-product 4. Discuss global issues in new-product development.development.
5. Explain the diffusion process through 5. Explain the diffusion process through which new products are adopted.which new products are adopted.
6. Explain the concept of product life cycles.6. Explain the concept of product life cycles.
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Learning Objective Learning Objective 11
Explain the importance of Explain the importance of developing new products and developing new products and
describe the six categories describe the six categories of new products.of new products.
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New ProductNew Product
A product new to the world,
the market, the producer,
the seller, or some
combination of these.
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Categories of New ProductsCategories of New ProductsNew-To-The-WorldNew-To-The-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements/RevisionsImprovements/Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced Products
SixCategories
ofNew
Products
SixCategories
ofNew
Products
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Learning Objective Learning Objective 22
Explain the steps in the Explain the steps in the new-product development process.new-product development process.
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Successful New-Product Successful New-Product Development ProcessDevelopment Process
New ProductNew ProductSuccessSuccessFactorsFactors
New ProductNew ProductSuccessSuccessFactorsFactors
Long-Term CommitmentLong-Term Commitment
New Product StrategyNew Product Strategy
Capitalize on ExperienceCapitalize on Experience
Establish an EnvironmentEstablish an Environment
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New-Product StrategyNew-Product Strategy
Idea GenerationIdea Generation
Idea ScreeningIdea Screening
Business AnalysisBusiness Analysis
DevelopmentDevelopment
Test MarketingTest Marketing
CommercializationCommercialization
New ProductNew Product
New-Product New-Product Development ProcessDevelopment Process
Chapter 10 Version 6e 10©2002 South-Western
Idea GenerationIdea Generation
CustomersCustomers
EmployeesEmployees
DistributorsDistributors
CompetitorsCompetitors
R & DR & D
ConsultantsConsultants
Creative ThinkingCreative Thinking
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
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BrainstormingBrainstorming
The process of getting a
group to think of unlimited
ways to vary a product or
solve a problem.
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Chapter 10 Version 6e 12©2002 South-Western
Idea ScreeningIdea Screening
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.
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Concept TestConcept Test
A test to evaluate a
new-product idea,
usually before any prototype has
been created.
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Business AnalysisBusiness Analysis
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Preliminary Demand
Cost
Sales
Profitability
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DevelopmentDevelopment
Creation of prototype
Marketing strategy
Technical production feasibility
Final government approvals if needed
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Simultaneous Simultaneous Product DevelopmentProduct Development
A new team-oriented
approach to new-product
development.
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Test MarketingTest Marketing
The limited introduction of a
product and a marketing
program to determine the
reactions of potential
customers in a market situation.
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Choosing a Test MarketChoosing a Test Market Similar to planned distribution Relative isolation and free of influences Advertising availability; multiple media Diversified cross section No atypical purchase habits Representative population/income Not overly used or easily “jammed” Year-round sales stability Available research/audit and retailers
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Alternatives to Test MarketingAlternatives to Test Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
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CommercializationCommercialization22
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales TrainingSales Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
Steps in Steps in Marketing a Marketing a New Product New Product
Steps in Steps in Marketing a Marketing a New Product New Product
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Learning Objective Learning Objective
Explain why some products Explain why some products succeed and others fail.succeed and others fail.
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Why New Products FailWhy New Products Fail 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
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Success FactorsSuccess Factors
Match between product and
market needs
Match between product and
market needs
Unique but superior product
Unique but superior product
Benefit to large number of peopleBenefit to large
number of people
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
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Success FactorsSuccess Factors33
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Learning Objective Learning Objective
Discuss global issues in Discuss global issues in new-product development.new-product development.
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Global IssuesGlobal Issues44
Develop product for potential worldwide distribution
Build in unique market requirements
Design products to meet regulations and key market requirements
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Learning Objective Learning Objective
Explain the diffusion process throughExplain the diffusion process through which new products are adopted.which new products are adopted.
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DiffusionDiffusion
The process by which the
adoption of an innovation
spreads.
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Categories of AdoptersCategories of Adopters
LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
Categories of Categories of AdoptersAdopters
in thein theDiffusion ProcessDiffusion Process
Categories of Categories of AdoptersAdopters
in thein theDiffusion ProcessDiffusion Process
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Chapter 10 Version 6e 30©2002 South-Western
Categories of AdoptersCategories of Adopters
Pe
rce
nta
ge
of
Ad
op
ters
Time
Innovators2.5%
EarlyAdopters
13.5%
LateMajority
34%
EarlyMajority
34%Laggards
16%
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Product Characteristics and Product Characteristics and the Rate of Adoptionthe Rate of Adoption
TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
ProductProductCharacteristics Characteristics Predict Rate of Predict Rate of
AdoptionAdoption
ProductProductCharacteristics Characteristics Predict Rate of Predict Rate of
AdoptionAdoption
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Marketing Implications Marketing Implications of the Adoption Processof the Adoption Process
Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
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Learning Objective Learning Objective 66
Explain the concept of Explain the concept of product life cycles.product life cycles.
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Product Life CycleProduct Life Cycle66
A concept that provides a
way to trace the stages of a
product’s acceptance, from
its introduction (birth)
to its decline (death).
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Product Life CycleProduct Life Cycle66
Time
Do
llar
s
ProductCategory Profits
ProductCategory Sales
IntroductoryIntroductoryStageStage
GrowthGrowthStageStage
MaturityMaturityStageStage
DeclineDeclineStageStage
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Extending the PLCExtending the PLC
Change product
Change product use
Change product image
Change product positioning
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Introductory StageIntroductory Stage
High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and
information Intensive personal selling to channels
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Full-Scale Launch of New Products
Full-Scale Launch of New Products
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Growth StageGrowth Stage
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered
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Offered in more sizes, flavors, options
Offered in more sizes, flavors, options
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Maturity StageMaturity Stage
Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge
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Many consumer products are in Maturity
Many consumer products are in Maturity
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Decline StageDecline Stage
Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing
expenses
Rate of decline depends on change in tastes or
adoption of substitute products
Rate of decline depends on change in tastes or
adoption of substitute products
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Chapter 10 Version 6e 41©2002 South-Western
Marketing Strategies for PLCMarketing Strategies for PLCINTRODUCTION GROWTH MATURITY DECLINE
ProductStrategy
DistributionStrategy
PromotionStrategy
PricingStrategy
Limited modelsFrequent changes
More modelsFrequent changes.
Large number of models.
Eliminate unprofitable
models
LimitedWholesale/
retail distributors
Expanded dealers. Long-term relations
Extensive.Margins drop.Shelf space
Phase out unprofitable
outlets
Awareness. Stimulate
demand.Sampling
Aggressive ads.Stimulatedemand
Advertise. Promote heavily
Phase outpromotion
Higher/recoupdevelopment
costs
Fall as result ofcompetition &
efficient produc-tion.
Prices fall (usually).
Prices stabilize at low level.
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Chapter 10 Version 6e 42©2002 South-Western
Diffusion Process and PLC CurveDiffusion Process and PLC Curve66
Innovators
Early adopters
Early majorityLate majority
Laggards
ProductProductlife cyclelife cyclecurvecurve
DiffusionDiffusioncurvecurve
Introduction Growth Maturity Decline
Sal
es
