lhm 12e ch11_ppt_ie

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Chapter 11: Developing and Managing Products

Prepared & Designed by Laura Rush, B-Books Ltd.

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Learning OutcomesExplain the importance of developing new products and describe the six categories of new products

Explain the steps in the new-product development process

Explain why some products succeed and others fail

Discuss global issues in new-product development

Explain the diffusion process through which new products are adopted

Explain the concept of product life cycles

LO1

LO2

LO3

LO4

LO5

LO6

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The Importance of New Products

Explain the importance of developing new products

and describe the six categories of new products.

LO1

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New Product Advantages

Being first on the market has numerous advantages:

• Increased sales through longer sales life• Increased margins• Increased product loyalty• More resale opportunities• Greater market responsiveness• A sustained leadership position

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Categories of New Products

New-to-the-WorldNew-to-the-World

New Product LinesNew Product Lines

Product Line AdditionsProduct Line Additions

Improvements or RevisionsImprovements or Revisions

Repositioned ProductsRepositioned Products

Lower-Priced ProductsLower-Priced Products

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Review Learning OutcomeDeveloping New Products

LO1

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The New Product Development Process

Explain the steps

in the new-product

development process.

LO2

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The New-Product Development Process

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

New Product Success FactorsNew Product Success Factors

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New-Product Development Process

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product

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Idea Generation

Customers

Employees

Distributors

Vendors

Competitors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

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Brainstorming

The process of getting a group

to think of unlimited ways to

vary a product or

solve a problem.

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Idea Screening

The first filter in the product

development process, which

eliminates ideas that are

inconsistent with the organization’s

new product strategy or are

inappropriate for some other reason.

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Concept Test

A test to evaluate a

new-product idea,

usually before any prototype

has been created.

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Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability

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Development

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

Final government approvals if needed

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Simultaneous Product Development

A team-oriented approach

to new-product development.

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Test Marketing

The limited introduction of a product and a marketing

program to determine the reactions of

potential customers in a market situation.

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Alternatives to Test Marketing

• Single-source research using supermarket scanner data

• Simulated (laboratory) market testing

• Online test marketing

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Commercialization

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

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Review Learning OutcomeNew-Product Development Process

LO2

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Why Some Products Succeed and Others Fail

Explain why some products succeed and others fail.

LO3

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Why New Products Fail

• No discernible benefits

• Poor match between features and customer desires

• Overestimation of market size

• Incorrect positioning

• Price too high or too low

• Inadequate distribution

• Poor promotion

• Inferior product

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Success Factors

Match between product and market needs

Different from substitute products

Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products

Benefit to large number of people

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Success Factors

Listening to customers

Producing the best product

Vision of future market

Strong leadership

Commitment to new-product development

Project-based team approach

Getting every aspect right Willingness to fail occasionally

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Review Learning OutcomeWhy Products Succeed or Fail

LO3

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Global Issues in New-Product Development

Discuss global issues in

new-product development.

LO4

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Global Issues

Develop product for potential worldwide distribution

Build in unique market requirements

Design products to meet regulations and key market requirements

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Review Learning OutcomeGlobal Issues in New-Product Development

LO4

Single product worldwideSingle product worldwide

Modification of productsModification of products

Multiple products in multiple countriesMultiple products in multiple countries

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The Spread of New Products

Explain the diffusion process through which

new products are adopted.

LO5

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Diffusion

The process bywhich the adoption of an

innovation spreads.

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Categories of Adopters

LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators

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Product Characteristics and the Rate of Adoption

TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

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Sales of New Audio Products

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Marketing Implications of the Adoption Process

Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process

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Review Learning OutcomeDiffusion Process for New Products

LO5

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Product Life Cycles

Explain the concept of

product life cycle.

LO6

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Product Life Cycle

A biological metaphor that

traces the stages of a product’s

acceptance, from its

introduction (birth) to

its decline (death).

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Product Life Cycle

Time

Do

llar

s

ProfitsProfits

SalesSales

IntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0

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Product Life Cycles for Styles, Fashions, and Fads

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U.S. Sales of Widgets

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Introductory Stage

• High failure rates

• Little competition

• Frequent product modification

• Limited distribution

• High marketing and production costs

• Negative profits with slow sales increases

• Promotion focuses on awareness and information

• Communication challenge is to stimulate primary demand

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Growth Stage

• Increasing rate of sales

• Entrance of competitors

• Market consolidation

• Initial healthy profits

• Aggressive advertising of the differences between brands

• Wider distribution

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Maturity Stage

• Sales increase at a decreasing rate

• Saturated markets

• Annual models appear

• Lengthened product lines

• Service and repair assume important roles

• Heavy promotions to consumers and dealers

• Marginal competitors drop out

• Niche marketers emerge

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Decline Stage

• Long-run drop in sales

• Large inventories of unsold items

• Elimination of all nonessential marketing expenses

• “Organized abandonment”

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Diffusion Process and PLC Curve

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

DiffusionDiffusioncurvecurve

Introduction Growth Maturity Decline

Sal

es

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Review Learning OutcomeProduct Life Cycles

Time

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

DistributionStrategy

PromotionStrategy

PricingStrategy

Limited models;Frequent changes

More models;Frequent changes

Large number of models

Eliminate unprofitable

models

LimitedWholesale/

retail distributors

Expanded dealers; Long-term relations

Extensive;Margins drop;Shelf space

Phase out unprofitable

outlets

Awareness; Stimulate demand;

Sampling

Aggressive ads.Stimulatedemand

Advertise; Promote heavily

Phase outpromotion

High to recoupdevelopment

costs

Fall as result ofcompetition &

efficient production

Prices fall (usually)

Prices stabilize at

low level

Sal

es

Chapter 11 Company Clip

Kodak invented the digital camera, and it has implemented a sophisticated design process to keep new innovations on store shelves.

http://www.cengage.com/marketing/book_content/9781111821647_lamb/videos/ch11.html

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