7[1].new product development & product life cycle stages (e)

8/7/2019 7[1].New Product Development & Product Life cycle Stages (E)

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New Product DevelopmentNew Product Development

&&

Product LifeProduct Life--CycleCycleStrategiesStrategies

Chapter 7

References:

Marketing by Michael J. Walker, Bruce J. Walker & William J. Stanton ( 13th Edition)

Marketing Management by Philip Kotler (Millennium Edition)

Internet


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Why do new products fail?

Ahigh-level executive pus

hes a favorite ideathrough in spite of negative research findings.

The idea is good, but the market size is

overestimated.

The product is not well designed. The product is incorrectly positioned in the market,

not advertised effectively, or overpriced.

The product fails to gain sufficient distribution

coverage or support.

Development costs are higher than expected.

Competitors fight back harder than expected.


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ProductProduct-- Any offering that can satisfy aneed or want

(Mainly 10 entities which are being marketed)

A firmcanobtainnew productintwoA firmcanobtainnew productintwowaysways

I. Acquisition- By buying a whole company, apatent or a license( franchise) to producesome one elses product.

II. New Product Development- Thedevelopment of original products, productimprovement, product modification, andnew brands through the firms own R&D

efforts.


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Sixcategoriesofnew products

1. New-to-the-world products- New products that createan entirely new market.

2. Imitative products- Products new to particularcompany but not new to market. Allow company to

enter in established market for the 1st time3. Additionstoexisting productlines- in terms of

package size, flavors, colors etc.

4. Improvements/revisionsofexistingproducts/replacingexisting products

5. Repositioning- Targeting new markets or segments

6. Costreductions- new products with similar

performance with lower cost


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MajorStagesinNew Product DevelopmentMajorStagesinNew Product Development

(New Product Development Process)


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1. Idea generation: systematic search for new ideas

Internal sources: brainstorming, Research, Scientists,

engineers, employees, sales force etc.

External sources: customers, competitors, distributors,

suppliers, institutions & environments

2.

Idea screening: identify good ideas and drop poor ones Usefulness to consumers/company

Execution feasibilities

Resources/cost

Market/profit potential

DROP-erroroccurs when company drops good idea

& selects poor idea

GO-erroroccurs when company permits poor idea.


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3. Concept Development and Testing

Product concepts provide detailed versions of new

product ideas stated in meaningful consumer terms. Find

out how attractive each is to customers, and choose the

best one.

Testing new-product concepts with a group of target

consumers to find out if the concept have strong consumer

appeal.

Concept may be presented symbolically or physically.


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4. 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

5. Business analysis: evaluating the business

attractiveness of the proposal, review of sales, costs,

and profit projections to determine if they meetcompany objectives.

Sales history of similar products & survey of market

opinion.


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6. Product development: developing the productconcept into a physical product

Large investment

Building a prototype

Testing for safety, durability, and acceptability

7. Test marketing: testing the product in morerealistic market settings

Assess consumer acceptability, trial, repeatpurchase rate

Design effective media plans Standard test markets

Controlled test markets

Simulated test market


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StandardTest Market

Full marketing campaignin a small number ofrepresentative cities.

StandardTest Market

Full marketing campaignin a small number ofrepresentative cities.

SimulatedTest Market

Test in a simulatedshopping environment

to a sample ofconsumers.

Controlled

Test MarketA few stores that have

agreed to carry newproducts for a fee.

Controlled

Test MarketA few stores that have

agreed to carry newproducts for a fee.

Alpha testingAlpha testing

Beta testingBeta testing


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Commercialization: introducing a new product intothe market.

An organization may commercialize its product threechoices.

11ststentryentry-- launching new to the world product or serviceor at least new to the market as 1st mover. (Pioneer. (Pioneeradvantage)advantage)

Parallel entryParallel entry-- Two or more firms simultaneously enterin market.

Late entryLate entry-- The firm may delay its launch unstill after theThe firm may delay its launch unstill after thecompetitor has enteredcompetitor has entered


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New Product Adopters Groups

1. Innovators- Venturesome, they try new ideas at some risks

2. Earlyadopters- they adopt new ideas early but carefully

3. Earlymajority- Adopt new ideas before average person

4. Latemajority- Adopt new idea after a majority of people tried it.

5. Laggards- people suspicious to changes and adopt new product

when it becomes some thing of a tradition itself (essential part of

life)


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Not all products follow this cycle

Product Life Cycle (PLC)


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Product Life-Cycle Product life cycle (PLC): the course of a products sales and

profits over its life time, involves five distinct stages.

1. Productdevelopment- Begins when company finds anddevelops a new-product idea. During product development sales

are zero

2. Introduction- period of slow sales growth as the product is

introduced in the market.N

egative or minimal profit because ofheavy expenditures.

3. Growth- rapid market acceptance and increasing profit.

Competitor may also enter in this stage

4.M

aturity-

Period of slowing down sales growth because theproduct has achieved acceptance by most potential buyers. Profit

level touches top & then declines because of increased marketing

outlays to defend the product against competition. Although

many products remain unchanged for longer periods by

modifying marketing mix & product


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1. Increase frequency of use bypresent customers

2.Add new users

3.Find new uses4.Enter new markets

5.Win Competitor's customers

6.Change product quality or

packaging, introduce variety

Market Modification

Product

Modification

5. Decline- is the period when sales fall off and profit

drops.


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WINDOWS 95

1991 1995 1996 1997

WINDOWS 3.1

Overlap of Life Cycle forProducts A andBOverlap of Life Cycle forProducts A andB


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Summary ofPLCC ara r I roductio Gro th aturity D cline

Sales Low Rapidly rising sales Peak Declining sales

Costs High cost Average cost Low cost Low costper customer per customer per customer per customer

Profits Negative Rising profits High profits Declining profits

Customers nnovators Early adopters Middle majority Laggards

Com etitors Few Growing number Stable number Declining number

areting o jectives:

Create product Maximize market Maximize profit & Reduce expenditure

awareness and trial share defend market share & milk brand

Strategies:

Product Offer basic product Offer product Diversify brand and Phase out weak

extensions, service models items

Price se cost-plus Price to penetrate Price to match or Cut price

market best competitors

Distribution Build selective Build intensive Build more Selective; phase out

distribution distribution intensive distribution unprofitable outlets

Advertising Build awareness Build awareness & Stress brand differences Reduce to level needed

early adopters/dealers interest mass market and benefits to retain hard-core loyals

Sales romotion Heavy sales promotion Reduce promotion due ncrease to encourage Reduce to minimal

to entice trial to heavy demand brand switching level


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SomeothershapesofPLCSomeothershapesofPLC

Styles, Fashions, and Fads

Not all products follow product life cycle Style: basic and distinctive mode of expression

Fashion: currently accepted or popular style in a given field

Fad: a fash

ion th

at enters quickly, adopted with

great zeal,peaks early, and decline very fast


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a) Grow rapidly after introduction then falls to petrified

level. The petrified level is sustained by late adopters &

early adopters replacing the product.

b) Aggressively new product promotion & when productsstarts declining company gives another promotional push

(usually of smaller magnitude and duration)

c) Here sales passes through a succession of life cycles based

on discovery of new-product characteristics, uses or users.

SomeothershapesofPLCSomeothershapesofPLC

7[1].new product development & product life cycle stages (e)

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