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c.New Product Development and Product Life-Cycle Strategies
•Chapter 11
•PowerPoint slides
•Express version
•Instructor name
•Course name
•School name
•Date
Principles of Marketing, Sixth Canadian Edition
Principles of Marketing, Sixth Canadian Edition
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Learning Objectives
• After studying this chapter, you should be able to:– Explain how companies find and develop new-product ideas
– List and define the steps in the new-product development process
– Describe the stages of the product life cycle
– Describe how marketing strategies change during the product’s life cycle
Principles of Marketing, Sixth Canadian Edition
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Major Stages in New Product Development
• Idea generation: systematic search for new ideas
– Internal sources: brainstorming
– External sources: customers, competitors, distributors and suppliers
• Idea screening: identify good ideas and drop poor ones
– Usefulness to consumers
– Good for company
– Fit with objectives and strategies
– Have the resources
– Add value
Figure 11.1
Principles of Marketing, Sixth Canadian Edition
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Major Stages in New Product Development
• Concept development: detailed version of the product concept in meaningful consumer terms
• Concept testing: testing new-product concepts for consumer appeal
• Marketing strategy: initial strategy for product concept:
– Target market, positioning, and sales, market share, and profit goals
– Price, distribution, and marketing budget
– Strategy statement, long-run sales, profit goals, and marketing mix
Figure 11.1
Principles of Marketing, Sixth Canadian Edition
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Major Stages in New Product Development
• Business analysis: review of sales, costs, and profit projections to determine if they meet company objectives.
• Product development: developing the product concept into a physical product
– Large investment
– Building a prototype
– Testing for safety, durability, and acceptability
Figure 11.1
Principles of Marketing, Sixth Canadian Edition
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Major Stages in New Product Development
• Test marketing: testing the product in more realistic market settings
– Determine the target market profile– Assess consumer
acceptability, trial, repeat purchase rate
– Evaluate trade reception and distribution penetration
– Design effective media plans
• Standard test markets
• Controlled test markets
• Simulated test market
Figure 11.1
Principles of Marketing, Sixth Canadian Edition
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Major Stages in New Product Development
• Commercialization: introducing a new product into the market
– Introduction timing– Market rollout or full-scale
introduction
• Sequential product development
• Simultaneous (team-based) product development
Figure 11.1
Principles of Marketing, Sixth Canadian Edition
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Product Life-Cycle Strategies
• Product life cycle (PLC): the course of a product’s sales and profits over its life
Figure 11.2
Principles of Marketing, Sixth Canadian Edition
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Styles, Fashions, and Fads
• Style: basic and distinctive mode of expression
• Fashion: currently accepted or popular style in a given field
• Fad: a fashion the enters quickly, adopted with great zeal, peaks early, and decline very fast
Figure 11.3
Principles of Marketing, Sixth Canadian Edition
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Summary of PLC (Table 11.2)
Characteristics: Introduction Growth Maturity DeclineSales Low Rapidly rising sales Peak Declining salesCosts High cost Average cost Low cost Low cost
per customer per customer per customer per customerProfits Negative Rising profits High profits Declining profitsCustomers Innovators Early adopters Middle majority LaggardsCompetitors Few Growing number Stable number Declining number
Marketing objectives:Create product Maximize market Maximize profit & Reduce expenditureawareness and trial share defend market share & milk brand
Strategies:Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models itemsPrice Use cost-plus Price to penetrate Price to match or Cut price
market best competitorsDistribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outletsAdvertising Build awareness Build awareness & Stress brand differences Reduce to level needed
early adopters/dealers interest mass market and benefits to retain hard-core loyalsSales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal
to entice trial to heavy demand brand switching level
Source: Philip Kotler and Peggy Cunningham, Marketing Management: Analysis, Planning, Implementation,and Control, Canadian 11th Edition, Pearson Education Canada, Toronto, Ontario, 2004, p. 347
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In Conclusion…
• The learning objectives for this chapter were:– Explain how companies find and develop new-product ideas
– List and define the steps in the new-product development process
– Describe the stages of the product life cycle
– Describe how marketing strategies change during the product’s life cycle
