* Chapter 9New-Product Development and Product Life-Cycle Strategies

*New Products and Important IssuesNew Products: WiFi, NECAR5 and other hybrid fuel cell cars, Hybrid SUVs/SUTs, PVRs/DVD variations, Video on demand/digital cable, 3rd generation cell phones, Flat-panel computer displaysProduct: a need-satisfying offering of a firm.Most important aspect of a product? The core benefit(s) sought

*Why Do We Develop New Products?Increase sales and profitsFirst brand in market has twice the sales of 2ndProduct life cycle and having products in every stage/shorter cycles (85 new items/day)Correlation between R&D and profitsConsumers & change/product obsolescence

*Causes of New Product FailuresOnly about 40% of new consumer products are around 5 years after introduction (60% failure) (p. 337). Failure rates for industrial products average 30%.Why?Overestimation of market size,Product design problems,Product incorrectly positioned, priced or advertised,Product may have been pushed despite poor marketing research findings,Costs of product development, orCompetitive actions

*Improving New-Product SuccessNew product success depends on having a:Unique superior product (one with higher quality, features, and value in use), &Well-defined product concept (a defined target market, product requirements, and benefits).To create successful new products, the company must:understand its customers, markets and competitors, &develop products that deliver superior value to customers.

*Major Stages in New-Product Development (Fig. 9.1, p. 340)

*CustomersCompetitorsDistributorsSuppliersIdea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:New Product Development Process

New Product Development Process Step 1. Idea Generation

*Original ProductsProductImprovementsProductModificationsNewBrandsAcquiredCompaniesAcquired PatentsAcquiredLicensesStep 1: Idea Generation/ New-Product Strategies

*New Product Development Process Step 2. Idea ScreeningProcess to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of ReturnThen, the idea is evaluated against a set of general company criteria.

*1. Develop New Product Ideas into Alternative DetailedProduct Concepts2. Concept Testing - Test theNew Product Concepts with Groups of Target Customers3. Choose the One That Has theStrongest Appeal to Target CustomersNew Product Development Process Step 3. Concept Development

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Part Three Describes Long-Term:Sales & Profit GoalsMarketing Mix Strategy

Part Two Describes First-Year:Products Planned PriceDistributionMarketing Budget

Part One Describes Overall:Target MarketPlanned Product PositioningSales & Profit Goals Market Share

New Product Development Process Step 4. Marketing Strategy

*If No, Eliminate Product Concept

Business AnalysisDo Projected Sales, Costs, & Profits Meet Company Objectives?Methods: payback, ROI, BE, NPV, IRR, project numbers Step 5. Business AnalysisStep 6. Product Development

*AdvertisingPackagingProductBudget Levels

Positioning

DistributionPricingBrandingElements that May be Test Marketed by a CompanyTest Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.

New Product Development ProcessStep 7. Test Marketing

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StandardTest Market

Full marketing campaignin a small number of representative cities.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

SimulatedTest Market

Test in a simulated shopping environmentto a sample of consumers.

New Product Development Process Step 7. Test Market Types

Electronic Test Market

Use split-cabletechnology and scanner data

*Step 7: Test MarketingCharacteristics of Good Test Markets.2 to 1.5% of the populationGood media coverageAppropriate demographics* Isolated media and distribution *Length of the test = repurchase cycleLimitations of Test MarketsExpensiveDelays to marketSabotageArtificialIndustrial products

*When is the Right Time toIntroduceProduct?Where to Launch aNew Product?Commercialization is the Introduction of the New Product into the Marketplace. New Product Development Process Step 8. Commercialization

*Sales and Profits Over the Products Life From Inception to DemiseProduct Life Cycle (Fig. 9.2, p. 354)

*Applications of the Product Life CycleThe PLC concept can describe a:Product class which has the longest life cycles (i.e. gas-powered cars), Product form which tend to have the standard PLC shape (i.e. minivans),Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus),Style which is a basic and distinctive mode of expression,Fashion which is a popular style in a given field,Fad which is a fashion that enters quickly, is adopted quickly and declines fast.

StyleModifying the Product; Meeting the competition.

Toyotas RAV4 is more compact and more modern-looking than most other SUVs.

What do other SUVs, considered new products in the nineties, look like?

Click or press spacebar to return.

*Problems Using the PLC as Suggested in Forget the PLC!The PLC Concept Can Help in Developing Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:

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