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  • 1. Chapter 9 New-Product Development and Product Life-Cycle Strategies
  • 2. 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
  • 3.
    • Focus on Innovation
    • Names its culture of continuous innovation “renewal”
    • Organizes into autonomous units, which helps foster innovation
    • Large R&D budget of $3 billion with 40% of employees involved in R&D
    • Corporate Results
    • Annual sales of $36 billion across 130 countries
    • Global market share of 38%, greater than that of its nearest three rivals combined
    Case Study Nokia 9 -
  • 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
  • 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
  • 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.
  • 7. Nike acquired Converse in 2003 for $305 million Marketing in Action 9 -
  • 8. Discussion Question
    • Think of products you have seen recently in stores. Can you think of any that seem doomed to fail?
    • Why?
    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
  • 10. Stages of the New Product Development Process Figure 9.1 9 -
  • 11.
    • Stage 1: Idea Generation
      • Internal idea sources:
        • R & D
      • External idea sources:
        • Customers, competitors, distributors, suppliers
    Stages of the New Product Development Process
  • 12. Intuit, a marketer of financial software, asks for new product ideas from customers Marketing in Action Click on screenshot for website 9 -
  • 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
  • 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.
  • 15. MIT Virtual Research
    • MIT has developed online techniques to gain consumer feedback on new product ideas
    Marketing in Action Click on screenshot for website 9 -
  • 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.
  • 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
  • 18. Stages of the New Product Development Process
    • Stage 7: Test Marketing
      • Standard test markets
      • Controlled test markets
      • Simulated test markets
    • Stage 8: Commercialization
  • 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.
    Marketing in Action Source: Advertising Age Click on screenshot for website 9 -
  • 20.
    • 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?
    Online Test Marketing Is it in the Near Future? Marketing in Action 9 -
  • 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
  • 22. Stages of the PLC Figure 9.2 9 -
  • 23. Alternative Product Life Cycles Figure 9.3 9 -
  • 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
  • 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
  • 26. Product Life-Cycle Strategies
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    • Begins when the company develops a new-product idea
    • Sales are zero
    • Investment costs are high
    • Profits are negative
    PLC Stages
  • 27. Product Life-Cycle Strategies
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    • Low sales
    • High cost per customer acquired
    • Negative profits
    • Innovators are targeted
    • Little competition
    PLC Stages
  • 28.
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    Which stage of the PLC? How do you know? Marketing in Action 9 -
  • 29.
    • 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
    Marketing Strategies: Introduction Stage
  • 30. Product Life-Cycle Strategies
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    • Rapidly rising sales
    • Average cost per customer
    • Rising profits
    • Early adopters are targeted
    • Growing competition
    PLC Stages
  • 31.
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    Marketing in Action Which stage of the PLC? How do you know? 9 -
  • 32.
    • 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
    Marketing Strategies: Growth Stage
  • 33. Product Life-Cycle Strategies
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    • Sales peak
    • Low cost per customer
    • High profits
    • Middle majority are targeted
    • Competition begins to decline
    PLC Stages
  • 34.
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    Which stage of the PLC? How do you know? Marketing in Action 9 -
  • 35.
    • 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
    Marketing Strategies: Maturity Stage
  • 36. Product Life-Cycle Strategies
    • Product development
    • Introduction
    • Growth
    • Maturity
    • Decline
    • Declining sales
    • Low cost per customer
    • Declining profits
    • Laggards are targeted
    • Declining competition
    PLC Stages
  • 37.
    • 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
    Marketing Strategies: Decline Stage
  • 38. Discussion
    • How can marketers help products bounce back from the decline stage?
    9 -
  • 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.
    Click on screenshot for website with products Marketing in Action 9 -
  • 40. 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