lhm 12e ch11_ppt_ie

Copyright Cengage Learning 2013

All Rights Reserved

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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

Copyright 2013 by Cengage Learning Inc. All Rights Reserved

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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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lhm 12e ch11_ppt_ie

Documents

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learning outcomesexplain

newproduct idea

new product advantages

newproduct developmentexplain

diffusion process