chapter 10copyright ©2010 cengage learning inc. all rights reserved 1 mktg designed by amy mcguire,...

Chapter 10 Copyright ©2010 Cengage Learning Inc. All rights reserved 1

MKTG

Designed byAmy McGuire, B-books, Ltd.

Prepared byDana Freeman, B-books, Ltd.

Lamb, Hair, McDaniel 2009-2010

10

CHAPTERDeveloping

and Managing Products


Learning Outcomes

Explain the importance of developing new products and describe the six categories of new products

Explain the steps in the new-product development process

Discuss global issues in new-product development

LO1

LO2

LO3


Learning Outcomes

Explain the diffusion process through which new products are adopted

Explain the concept of product life cycles

LO4

LO5


Explain the importance of developing new

products and describe the six categories of

new products

The Importance of New ProductsThe Importance of New ProductsLO1


LO1

New Product

A product new to the

world, the market, the

producer, the seller,

or some combination

of these.

New ProductNew Product


LO1

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


REVIEW LEARNING OUTCOMELO1

Developing New Products


Explain the steps in the new-product

development process

The New Product The New Product Development ProcessDevelopment ProcessLO2


The New-Product Development Process

LO2

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

New Product Success Factors


New-Product Development Process

LO2

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product


LO2

Idea Generation

Customers

Employees

Distributors

Competitors

Vendors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

Online

http://www.ideo.com


LO2

Tips for New Product Development

Disperse R & D around the globe

Keep teams small and empower employees

Flatten hierarchy

Encourage generation of crazy new ideas

Welcome mistakes


LO2

Brainstorming

BrainstormingBrainstorming The process of getting a

group to think of unlimited

ways to vary a product or

solve a problem.


LO2

Idea Screening

Idea ScreeningIdea 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.


LO2

Concept Testing

Concept TestingConcept Testing A test to evaluate a

new-product idea, usually

before any prototype has

been created.


LO2

Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability


LO2

Development

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

Final government approvals if needed


LO2

Simultaneous Product Development

SimultaneousProduct

Development

SimultaneousProduct

Development

A new team-oriented

approach to new-product

development where all

relevant functional areas

and outside suppliers

participate in the

development process.


LO2

Test Marketing

TestMarketing

TestMarketing

Online

foodcom.com/signup.com

The limited introduction of

a product and a marketing

program to determine the

reactions of potential

customers in a market

situation.


LO2

Alternatives to Test Marketing

Single-source research using supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

Online

http://www.newproductworks.com


LO2

Commercialization

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising



New-Product Development ProcessIdeageneration

Ideascreening

Businessanalysis

Development

Test marketing

CommercializationNu

mb

er

of n

ew

pro

duct

ide

as

Time0


Beyond

the

Book

Why Some Products Succeed and Others Fail

NOTE: Supplemental content – not in book.

Explain why some products succeed and

others fail


Beyond

the

Book

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


Beyond

the

Book

Success Factors


Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products

Match between product and market needs

Different from substitute products

Benefit to large number of people


Beyond

the

Book

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


Beyond

the

Book

Why Products Succeed and Others Fail



Discuss global issues in new-

product development

Global Issues in Global Issues in New-Product DevelopmentNew-Product DevelopmentLO3


Global Marketing Questions

Develop product for potential worldwide distribution

Build in unique market requirements

Design products to meet regulations and key market requirements

LO3



Global Issues in New-Product Development

Single product worldwideSingle product worldwide

Modification of productsModification of products

Multiple products in multiple countriesMultiple products in multiple countries


Explain the diffusion process through

which new products are adopted

The Spread of New ProductsThe Spread of New ProductsLO4


Diffusion

LO4

The process by which the

adoption of an innovation

spreads.

DiffusionDiffusion


Categories of Adopters

LO4 LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators


Product Characteristics and the Rate of Adoption

LO4

TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

Online

http://www.electronicgadgetdepot.com


Sales of New Audio Products

LO4


Marketing Implications of the Adoption Process

LO4

Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process



Diffusion Process for New Products

Innovators2.5%

Early adopters13.5%

Early majority 34% Late majority

34%

Laggards34%

Percentage of total adoptions by categoryProduct Characteristics (Influence Rate of Adoption)

• Complexity

• Relative Advantage• Compatibility

• Observability• “Trialability”

Sal

es


Explain the concept of product life

cycles

Product Life CyclesProduct Life CyclesLO5


Product Life Cycle

LO5

ProductLife Cycle

ProductLife Cycle

A concept that provides a

way to trace the stages of a

product’s acceptance, from

its introduction (birth) to its

decline (death).


Product Life Cycle

LO5Time

Do

llar

s

Profits

SalesSalesIntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0


Product Life Cycles for Styles, Fashions, and Fads

LO5


U.S. Sales of Televisions

LO5


Introductory Stage

LO5

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


Growth Stage

LO5

Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the

differences between brands Wider distribution


Maturity Stage

LO5

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


Decline Stage

LO5

Long-run drop in sales Large inventories of

unsold items Elimination of all nonessential

marketing expenses “Organized abandonment”


Diffusion Process and PLC Curve

LO5

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

Introduction Growth Maturity DeclineS

ales

DiffusionDiffusioncurvecurve



Product 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 and efficient production.

Prices fall (usually).

Prices stabilize at low level.

Sa

les

chapter 10copyright ©2010 cengage learning inc. all rights reserved 1 mktg designed by amy mcguire,...

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