Identify successful products and find out what they have in common
Develop a superior product
Have a clearly defined product concept before commencing development
Provide sufficient budget and support to achieve sales objectives
Ensure commitment from senior management
Each company needs to fully understand its consumers; markets; and competitors in order to correctly cost; position; and price the product
The first stage in the new product development process is generally considered to be:
Main steps in N.P.D. Fig. 9.1 Idea Generation Idea Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialisation
New-product development starts with idea generation - the systematic search for possible new products
Internal idea sources:
Formal research and development
Consult company scientists; engineers and product manufacturing staff
‘ Brainstorm’ new ideas with senior staff
Consult with the company’s salespeople
External idea sources :
D istributors and suppliers
Trade magazines; trade shows and seminars; government agencies; new-product consultants; advertising agencies; marketing research firms; commercial laboratories; and research universities
all of the above
The best new product ideas come from:
The purpose of this, and the ongoing stages, is to reduce the number of ideas generated. The objective is to spot good ideas and drop inappropriate ones as soon as possible
Product development costs rise significantly in later stages, therefore it is financially important to remove ‘bad’ ideas early. A company wants to go ahead only with those product ideas that will turn into profitable products
Most rejections occur at this stage of process
Concept Development / Testing
An idea for a possible product that the company believes it could offer to the market
A detailed version of an idea stated in terms that would be meaningful to consumers
The way consumers perceive the potential product
The process of testing the product concept with a group of potential target customers
This is a process to evaluate the potential success of a new product idea, usually before a prototype has been created.
Does the basic concept appeal to consumers, and are they likely to buy it?
Marketing Strategy Development
The process of designing the initial marketing strategy for the introduction of a new product
The marketing strategy consists of three parts:
Describing the target market; the planned product positioning; the projected sales; the market-share and profit goals for the first few years
Outlining the product’s projected price; distribution; and marketing budget for the first year
Describing the planned long-term sales; profit goals; and marketing-mix strategy
This involves a review of the sales; costs; and profit projections to find out whether or not they satisfy the company’s objectives.
If they do, the product can then move to the product-development stage.
The firm would need to consider:
cost and revenue estimates
level of competition
The ‘product concept’ is developed into a physical product (a prototype). To this point, the product has existed only as a word description; a drawing; or perhaps a mock-up.
The product-development step, however, requires a significant increase in the level of investment. It will show whether the product idea can be turned into a workable product.
The R&D department will develop one or more physical versions of the product concept for testing purposes
A new product must have the required functional features and convey the intended psychological characteristics
The current pace of change requires a faster product-development process. Some firms use ‘alliance’ partners to assist
If product passes functional and consumer tests, the next step is test marketing
Test marketing is the limited introduction of the product/ marketing program, to test the reactions of potential customers in a more realistic market setting
This will enable an evaluation of the ‘mix’, and any alternative strategies
Select a test market that is most likely to match the buying behaviour of total market
Test Marketing Approaches
Standard test markets
These test the new consumer product in situations similar to those it would face in a full-scale launch
Controlled test markets
Research firms keep ‘controlled’ panels of stores that have agreed to carry new products for a fee
Simulated test markets (Laboratory situation)
Companies can also test new products in a simulated shopping environment
The company, or a research firm, shows a sample of consumers the ads and promotions for a variety of products, including the new product being tested
Test Marketing Business Products
B2B marketers use different methods for test marketing their new products
They may conduct product-use tests, where the industrial marketer selects a small group of potential customers who agree to use the new product for a limited time
New products can also be tested with large numbers of potential buyers at trade shows
This is the final stage , when a new product is introduced into the market
The company launching a new product must make four decisions about its intro:
When - economy/ competition
Where - how many locations
To whom - early adopters/ opinion leaders
How - appropriate marketing mix
Commercialisation of a product will include:
Manufacturing the product and building inventory
Distributing to locations – warehouses; resellers
Ongoing training of the sales force
Trade announcements (PUSH)
Advertising to potential consumers (PULL)
This is the most expensive stage of the product development process
Managing New-Product Development
New-product development needs to be customer centred, focusing on finding new ways to solve their problems and create more satisfying experiences
Good product development requires a team-based, total company, cross-functional effort
Combining a customer-centred focus with a team-based approach can deliver strong results
Usually, the sooner a new product is ready for the market the better. This will help keep a firm ahead of its competitors
The Product Life Cycle (PLC)
A concept that provides a means of tracing the various stages of a product’s acceptance in the market; from its introduction, to its ultimate decline and removal
After launching a new product, the firm wants the product to enjoy a long and successful life
Although it does not expect the product to sell forever, the firm wants to earn enough profit to cover all the effort and risk that went into the product, and to fund future activities
Each product will have its own distinctive life cycle, although the exact shape and length of that cycle is not known in advance
Product development (Stage 1)
Begins when the company finds and develops a new product idea
Introduction (Stage 2)
A period of slow sales growth as the product is being introduced to the market
Growth (Stage 3)
A period of rapid market acceptance and growth in sales volumes
Stages of the PLC
Maturity (Stage 4)
A period of slowdown in sales growth as the product has already been accepted by a majority of would-be buyers
Decline (Stage 5)
A period of major decline in sales and profits as customers switch to new products
Low sales, often high failure rates
Limited level of competition
Basic product, but may need modification
Limited distribution of product (selective)
High production and marketing costs
Possible initial monetary loss
Promotion focused on product awareness and informing the market
Intensive personal selling to intermediaries
Increasing rate of sales
Entry of competitors to the market
Possible market consolidation
(buy-out of smaller firms)
Strong profits, initially
Strong brand advertising
Aim for wider distribution – establish a greater market presence
Product price usually falls (penetration)
Recovery of development costs
Decline in growth of sales
(sales increase, but at decreasing rate)
Extension of product line (attract more
Changes in style rather than in function
Heavy promotion to dealers and consumers (encourage brand switch)
Marginal competitors drop out
- not profitable
Prices and profits falling
Possible Niche marketers
Long-term decline in sales volumes
May have inventories of unsold goods
Discontinue non-performing products
Removal of non-essential marketing expenses (try to maintain profit levels)
Figure 9.2 - Product Life Cycle (PLC)
Variations to the Cycle
A style is a basic and distinctive mode of expression.
Styles can relate to houses (colonial, federation); clothing (formal, casual); art (realistic, abstract).
Once a style is invented, it can last for generations, coming in and out of favour at various times.
A style usually has a cycle that shows several periods of renewed interest.
A fashion is a currently accepted or popular style in a given field.
Fashions pass through many stages
First, a small number of consumers take an interest in something new to set themselves apart.
Then, other consumers become interested out of a desire to copy the fashion leaders.
Next, the fashion becomes popular and is adopted by the mass market.
Fads are fashions that enter a market quickly, are adopted with great enthusiasm, achieve a peak early, and then decline very fast.
Theses types of products usually last for only a short time, and tend to attract a limited number of buyers.
Fads are often novel or unusual, e.g. Rubik’s Cube; platform shoes; yo-yos.
Fads appeal to people looking for excitement, for a way to set themselves apart, or for something to talk about to others.
Figure 9.3 -Fashion, Style and Fad
PLC Concept: Application
The PLC concept can be applied by marketers as a useful framework for describing how products and markets perform over time
However, using the PLC concept for forecasting product performance, or for developing marketing strategies, can present some practical problems
Managers may have difficulty in identifying which stage of the PLC the product is in; pinpointing when a product moves from one stage to the next; and determining the factors that influence a product’s advancement through the various stages
In practice, it is difficult to forecast the sales level at each stage; the length of each stage; and the shape of the curve .
However, when used carefully, the PLC concept can help a firm in developing appropriate marketing strategies for different stages of the product life cycle .
This would include adjustments to the Mix
Attempts to influence
Taking steps to cope with PLC changes through:
increase usage by current users
find new users/ segments
change characteristics/ quality/ features of product
change the other Mix elements
PLC Summary - Table 9.5
The Alpha Corporation is just beginning to experience new competitors attempting to draw sales from its latest new product Alpha's product is probably entering its: