Chapter 11 Developing and Managing Products. “When you innovate, you’ve got to be prepared for...
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Chapter 11 Developing and Managing Products. “When you innovate, you’ve got to be prepared for everyone telling you you’re nuts.” Larry Ellison, Founder
When you innovate, youve got to be prepared for everyone
telling you youre nuts. Larry Ellison, Founder Oracle Corporation 2
http://www.achievement.org/autodoc/page/ell0bio-1
Slide 3
First flight! Dec. 17th 1903, Orville at the controls, 12
seconds, 120 feet. 3
Slide 4
How do we create value through innovation? Over half of all
growth in the United States comes from new products and services
The greatest rewards go to companies that create new business
models First mover advantage And we are happy-..er
Slide 5
Types of innovations innovations - normal upgrading, no change
in user behaviors. New to the market New to seller New to producer
..innovations/Destructive creation require users to change
behaviors. New-to-the-world products.
Slide 6
3. Business Analysis New Product Development Process 1. Idea
Generation 2............ Screening 4.................... 5.
.marketing 6. Commercialization By many -- employees, customers,
suppliers, distributors, competitors Reduce # quickly Alternative
versions, describe in consumer terms Physical product, $$$
Slide 7
New Product Development Process 2. Idea Screening (what do we
have? +/-) In pharmacy, 1 of 5,000 new drug ideas is common In
autos, 1 of 20 new car concepts is made to prototype Point?
Brainstorm, then cut via research Short and long run $ performance
Social issues: Consumer welfare (Ben and Jerrys) Safety ( Marlboro
cigarettes) liability (McDonalds hot coffee)
Slide 8
New Product Development Process 3. Business Analysis Examine
consumer perceptions Consider view of retailers and wholesaler 4.
Development (can go hand-in-hand with analysis) Product tests (New
Coke, movies) Risky: (leaks, skewed results) Virtual product
development: examine without construction Prototype product and
marketing strategy Longest process (Minute Rice took 18
years!)
Slide 9
Concept Test A test to evaluate a new-product idea, usually
before any prototype has been created.
Slide 10
Test Marketing Standard Test Market +Costs +Brand Equity
-Jamming -Duplication Limited introduction in a small market
supported by a full-fledged marketing campaign to gauge customer
reactions
Slide 11
Product Life Cycle:PLC A concept that provides a way to trace
the stages of a products acceptance, from its introduction (birth)
to its decline (death).
Slide 12
Product Life Cycles Time Dollars Introduction .. Decline
Industry .. .. Industry . . 0
Slide 13
Product Life Cycles Strategies Time
INTRODUCTIONGROWTHMATURITYDECLINE Product Strategy Distribution
Strategy Promotion Strategy Pricing Strategy Limited models
Frequent changes More models Frequent changes. Large number of
models. Eliminate unprofitable models Limited Wholesale/ retail
distributors Expanded dealers. Long- term relations Extensive.
Margins drop. Shelf space Phase out unprofitable outlets Awareness.
Stimulate demand.Sampling Aggressive ads. Stimulate demand
Advertise. Promote heavily Phase out promotion High to recoup
development costs Fall as result of competition & efficient
produc- tion. Prices fall (usually). Prices stabilize at low level.
Sales
Slide 14
Examples INTRODUCTIONGROWTHMATURITYDECLINE Third generation
mobile phones Transition lenses Personal Computers Typewriters
E-conferencingEmailFaxes Handwritten letters All-in-one racing
skin-suits Breathable synthetic fabrics Beer, AutosVCR iris-based
personal identity cards Smart cardsCredit cardsCheque books
Slide 15
Some misconceptions about PLC At the level of the category and
not the brand Cell phones not CINGULAR wireless. However, in
practice is used both ways.. Different products go through the
stages differently. Timing of stages may vary substantially. What
other advantages do you see for a M. Manager?
Slide 16
Slide 17
Product Life Cycles Time INTRODUCTIONGROWTHMATURITYDECLINE
Product Strategy Distribution Strategy Promotion Strategy Pricing
Strategy Limited models Frequent changes More models Frequent
changes. Large number of models. Eliminate unprofitable models
Limited Wholesale/ retail distributors Expanded dealers. Long- term
relations Extensive. Margins drop. Shelf space Phase out
unprofitable outlets Awareness. Stimulate demand.Sampling
Aggressive ads. Stimulate demand Advertise. Promote heavily Phase
out promotion High to recoup development costs Fall as result of
competition & efficient produc- tion. Prices fall (usually).
Prices stabilize at low level. Sales
Slide 18
Slide 19
Extending the PLC Change product Change product use Change
product image Change product positioning What already presented
tool can help us out here?
Slide 20
Product Life Cycle Factors that may speed products through PLC:
1. Ease of trial 2. Ease of use 3. Easy to communicate advantages
4. Compatible with customer experience
Slide 21
The Consumer Adoption Process Adoption process: series of
stages for which consumers decide whether or not to become a
regular user of a new product, including: Awareness Interest
Evaluation Trial Adoption or rejection
Slide 22
Diffusion The process by which the .of an innovation
spreads.
Slide 23
Adopter Categories .
Slide 24
Diffusion Process and PLC Curve Innovators Early adopters Early
majority Late majority Laggards Product life cycle curve
Diffusioncurve Introduction Growth Maturity Decline Sales
Slide 25
How do we use the Diffusion of innovation theory? - MM can
predict which types of customers will buy their products
immediately after introduction or later Can develop effective
MMix
Slide 26
Product Characteristics and the Rate of Adoption Trialability
Observability Relative Advantage Compatibility Complexity