9. New Product Development and Product Life-Cycle Strategies

8/10/2019 9. New Product Development and Product Life-Cycle Strategies

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Chapter 9

New-Product Development and

Product Life-Cycle Strategies


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Causes of New Product

Failure (pp. 336-337)~ 80% of new consumer packaged goods fail (mostare line extensions)

Only about 40% of new consumer products & 30%

of new industrial products are around 5 years afterintroduction

Why? Overestimation of market size

Product design problems

Product incorrectly positioned, priced, or promoted

Product may have been pushed despite poor marketingresearch findings

Costs of product development Competitive actions


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Improving New-Product

Success (pp. 336-337, continued)New product success depends upon having a:

Unique superior product(one with higher quality,

and higher value in use as defined by customers) Well-defined product concept(i.e., well-defined

target market, product requirements, and benefits)

To create successful new products, a companymust:

understand its customers, markets, and competitors

develop products that deliver superior value to

customers


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1. IdeaGeneration

2. IdeaScreening

3. Concept Development& Testing

4. MarketingStrategy

5. BusinessAnalysis

6. ProductDevelopment

7. TestMarketing

8. Commercialization

Major Stages in New-ProductDevelopment(Figure 9.1, pp. 337-352)

Many -- employees, customers, suppliers, distributors, competitors

Reduce # quickly

Alternative versions,describe in consumer terms

Physical pr

oduct, $$$

To speed up simultaneous (team-based) vs. sequential(pp. 352-353)


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Advertising

Packaging

ProductBudget levels

Positioning

DistributionPricing

Branding

Elements that

may be testmarketed

Product (& marketing program) are tested in realistic marketsettings

Reduces risk tests customer interest & acceptancecompany can find & correct problems early

New-Product Development

Step 7. Test Marketing (pp. 346-349)


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New-Product DevelopmentStep 7. Test Marketing (pp. 346-349)

But has some risks costly & time consumingexposes to competition copy, sabotage

Sometimes not used - costs low, confident - e.g., Revlon, Rubbermaid

StandardTest Market

Full marketing effortin a small number ofrepresentative cities

SimulatedTest Market

Test in a simulatedshopping environment(e.g., laboratory store)

ControlledTest Market

Test in cooperatingstores with

consumer panel(Nielsen, IRI)+ most realistic+ tests entire strategy- time consuming, costly- exposes to competition

+ faster, less costly- less realistic

(fewer cities, smallsample, no test of

channel acceptance)-exposes to competition

+ fastest, least costly+ no exposure to

competition- least realistic- no test of repeat

purchasing+ good pre-test


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Growth Maturity Decline

Shapes:

Product class (e.g., gas-powered automobile) longest

Product form (e.g., minivan) most likely to be standard shape

Brand any shape, can change rapidly

Other shapes: fad, style, extended maturity / no decline, revival

CAUTION: Strategy is both an effect and a cause

Product Life Cycle(Figure 9.2, pp. 353-361)

Slow growth

Rapid growth,competition

Profits

Sales andprofits ($)(or losses/

investment)

Time

Not inevitable:revive?reposition?

Sales

ProductDevelop-

ment

Introduction

Growth slows,Longest stage,Most marketingmanagement

activity

+$

-$


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Sales

Costs

Profits

Mktg. Objectives

Product

Price

Low sales

High cost per customer

Negative or low

Build product awareness & stimulate trial

Offer a basic product

Usually is high

Distribution High distribution expenses

Promotion Build product awareness among earlyadopters, & secure distribution

Summary of Characteristics, Objectives, & Strategies

Introduction Stage of the PLC(p. 356 & Table 9.2)


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Sales

Costs

Profits

Mktg. Objectives

Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer new product features,extensions, service

Price to penetrate market

Distribution Increase number of distribution outlets

Promotion Build awareness and interest in themass market


Growth Stage of the PLC(pp. 356-357 & Table 9.2)


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Sales

Costs

Profits

Mktg. Objectives

Product

Price

Peak sales (growth slows, levels off)

Low cost per customer

High profits, then lower profits

Maximize profits while defendingmarket share

Diversify brand (many line extensions)

Price to match or best competitors

Distribution Build more intensive distribution

Promotion Stress brand differences and benefits


Maturity Stage of the PLC(p. 357 & Table 9.2)


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Sales

Costs

Profits

Mktg. Objectives

Product

Price

Declining sales

Low cost per customer

Declining profits (or profitable niche)

Reduce expenditure and maintain, harvest,or drop the product; or reposition & revive

Phase out weak items (back to basics)

Cut price

Distribution Selective (phase out unprofitable outlets)

PromotionReduce to level needed to retainloyal customers & distribution


Decline Stage of the PLC(pp. 360-361 & Table 9.2)


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Review of Concept

ConnectionsExplain how companies find and developnew-product ideas

List and define the steps in the new-product development process

Describe test markets, and the 3 types

Describe the stages of the product life-cycle

Describe how marketing strategies changeduring a products life-cycle

Documents

9. New Product Development and Product Life-Cycle Strategies