New product development and life cycle strategies

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Principles of Marketing, by Kotler, Philip; Armstrong, Gary. This chapters focuses on developing new products and managing products through their life cycles.

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  • Nike is no stranger to new products. They design continuously. They also acquire new products, including Converse retro style sneakers.
  • Common reasons for failure include: -Overestimation of market size -Poor design -Incorrect positioning -Priced too high -Advertised poorly -High level managers pushing idea with poor research findings -Development costs too high -Competition
  • Do not click on the image above – it does not connect to a website.
  • Depends whether talking about milk or low carb…
  • They can reposition to a new target or to the existing target with new benefits. They can change features and attributes. If it is a style, it often returns at the whim of fashion designers.
  • New product development and life cycle strategies

    1. 1. Chapter 9 New-ProductDevelopment andProduct Life-Cycle Strategies
    2. 2. Learning Goals1. Explain how companies find and develop new-product ideas2. List and define the steps in the new-product development process3. Describe the stages of the product life cycle4. Describe how marketing strategies change during the product’s life cycle 9-2
    3. 3. Case Study NokiaFocus on Innovation Corporate Results• Names its culture of • Annual sales of $36 billion continuous innovation across 130 countries “renewal” • Global market share of• Organizes into 38%, greater than that of autonomous units, which its nearest three rivals helps foster innovation combined• Large R&D budget of $3 billion with 40% of employees involved in R&D 9-3
    4. 4. Learning Goals• Explain how companies find and develop new-product ideas• List and define the steps in the new-product development process• Describe the stages of the product life cycle• Describe how marketing strategies change during the product’s life cycle 9-4
    5. 5. Definition• New Product Development – Development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts. Video Snippet AMEX introduces a new product 9-5
    6. 6. New Product Development Strategy• New products can be obtained via acquisition or development.• New products suffer from high failure rates.• Several reasons account for failure. 9-6
    7. 7. Nike acquired Converse in 2003 for $305 million 9-7Marketing in Action
    8. 8. Discussion Question• Think of products you have seen recently in stores. Can you think of any that seem doomed to fail?• Why? 9-8
    9. 9. Learning Goals• Explain how companies find and develop new-product ideas• List and define the steps in the new-product development process• Describe the stages of the product life cycle• Describe how marketing strategies change during the product’s life cycle 9-9
    10. 10. Stages of the New Product Development Process Figure 9.1 9 - 10
    11. 11. Stages of the New Product Development Process• Stage 1: Idea Generation – Internal idea sources: •R&D – External idea sources: • Customers, competitors, distributors, suppliers 9 - 11
    12. 12. Intuit, a marketer of financial software, asks for new product ideas from customersClick on screenshot for website 9 - 12Marketing in Action
    13. 13. Stages of the New Product Development Process• Stage 2: Idea Screening – Product development costs increase substantially in later stages so poor ideas must be dropped – Ideas are evaluated against criteria; most are eliminated 9 - 13
    14. 14. Stages of the New Product Development Process• Stage 3: Concept Development and Testing – Concept development creates a detailed version of the idea stated in meaningful consumer terms. – Concept testing asks target consumers to evaluate product concepts. 9 - 14
    15. 15. MIT Virtual Research MIT has developed online techniques to gain consumer feedback on new product ideasClick on screenshot for website 9 - 15Marketing in Action
    16. 16. Stages of the New Product Development Process• Stage 4: Marketing Strategy Development • The target market, product positioning, and sales, share, and profit goals for the first few years. • Product price, distribution, and marketing budget for the first year. • Long-run sales and profit goals and the marketing mix strategy. 9 - 16
    17. 17. Stages of the New Product Development Process• Stage 5: Business Analysis – Sales, cost, and profit projections• Stage 6: Product Development – Prototype development and testing 9 - 17
    18. 18. Stages of the New Product Development Process• Stage 7: Test Marketing – Standard test markets – Controlled test markets – Simulated test markets• Stage 8: Commercialization 9 - 18
    19. 19. Online Test Marketing Is it in the Near Future? • Silicon Valley startup called There launched their site in 2003. • Users enter a virtual world where they can network, hang out, dress up and try new products. • There is catching marketers’ attention as a tool to test brands and products. • There will also help marketers identify leaders and heavy users of their products.Click on screenshot for website 9 - 19Marketing in Action
    20. 20. Online Test Marketing Is it in the Near Future? • Levi and Nike have partnered with There for market research data. • Levi’s has found that jeans and jean jacket buyers were more likely to be virtual club-goers. • They can also track how long people wear a certain jean or jacket in their virtual world. • Discussion Question: Do you believe the Internet can supply valuable test marketing data? 9 - 20Marketing in Action
    21. 21. Learning Goals• Explain how companies find and develop new-product ideas• List and define the steps in the new-product development process• Describe the stages of the product life cycle• Describe how marketing strategies change during the product’s life cycle 9 - 21
    22. 22. Stages of the PLC Figure 9.2 9 - 22
    23. 23. Alternative Product Life Cycles Figure 9.3 9 - 23
    24. 24. Product Life-Cycle Strategies• The product life cycle concept can be applied to a: – Product class (soft drinks) – Product form (diet colas) – Brand (Diet Dr. Pepper) • Using the PLC to forecast brand performance or to develop marketing strategies is problematic 9 - 24
    25. 25. Learning Goals• Explain how companies find and develop new-product ideas• List and define the steps in the new-product development process• Describe the stages of the product life cycle• Describe how marketing strategies change during the product’s life cycle 9 - 25
    26. 26. Product Life-Cycle Strategies PLC Stages • Begins when the company develops a• Product development new-product idea• Introduction • Sales are zero• Growth • Investment costs• Maturity are high• Decline • Profits are negative 9 - 26
    27. 27. Product Life-Cycle Strategies PLC Stages • Low sales • High cost per• Product development customer acquired• Introduction • Negative profits• Growth• Maturity • Innovators are• Decline targeted • Little competition 9 - 27
    28. 28. Which stage of the PLC? How do you know? • Product development • Introduction • Growth • Maturity • Decline 9 - 28Marketing in Action
    29. 29. Marketing Strategies: Introduction Stage• Product – Offer a basic product• Price – Use cost-plus basis to set• Distribution – Build selective distribution• Advertising – Build awareness among early adopters and dealers/resellers• Sales Promotion – Heavy expenditures to create trial 9 - 29
    30. 30. Product Life-Cycle Strategies PLC Stages • Rapidly rising sales• Product development • Average cost per• Introduction customer• Growth • Rising profits• Maturity• Decline • Early adopters are targeted • Growing competition 9 - 30
    31. 31. Which stage of the PLC? How do you know? • Product development • Introduction • Growth • Maturity • Decline 9 - 31Marketing in Action
    32. 32. Marketing Strategies: Growth Stage• Product – Offer product extensions, service, warranty• Price – Penetration pricing• Distribution – Build intensive distribution• Advertising – Build awareness and interest in the mass market• Sales Promotion – Reduce expenditures to take advantage of consumer demand 9 - 32
    33. 33. Product Life-Cycle Strategies PLC Stages • Sales peak • Low cost per• Product development customer• Introduction • High profits• Growth• Maturity • Middle majority• Decline are targeted • Competition begins to decline 9 - 33
    34. 34. Which stage of the PLC? How do you know? • Product development • Introduction • Growth • Maturity • Decline 9 - 34Marketing in Action
    35. 35. Marketing Strategies: Maturity Stage• Product – Diversify brand and models• Price – Set to match or beat competition• Distribution – Build more intensive distribution• Advertising – Stress brand differences and benefits• Sales Promotion – Increase to encourage brand switching 9 - 35
    36. 36. Product Life-Cycle Strategies PLC Stages • Declining sales • Low cost per• Product development customer• Introduction • Declining profits• Growth• Maturity • Laggards are• Decline targeted • Declining competition 9 - 36
    37. 37. Marketing Strategies: Decline Stage• Product – Phase out weak items• Price – Cut price• Distribution – Use selective distribution: phase out unprofitable outlets• Advertising – Reduce to level needed to retain hard-core loyalists• Sales Promotion – Reduce to minimal level 9 - 37
    38. 38. Discussion• How can marketers help products bounce back from the decline stage? 9 - 38
    39. 39. Low-dose Aspirin Ad • Baby Aspirin has been in the decline stage for over 10 years after discovery that it may have dangerous side effects for children. • Recently it has been discovered it helping to prevent heart attacks in adults and is now marketed to this new target.Marketing in Action Click on screenshot for 9 - 39 website with products

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