Ford lost $350 million on its Edsel automobile RCA lost $580 million on its SelectaVision videodisc player Texas Instruments lost a staggering $660 million before withdrawing from the home computer business new consumer packaged goods (consisting mostly of line extensions) fail at a rate of 80 percent
Nike is no stranger to new products. They design continuously. They also acquire new products, including Converse retro style sneakers.
you must first generate hundreds and potentially thousands of unconventional strategic ideas in order to get one good one Major sources of new-product ideas include internal sources and external sources such as customers, competitors, distributors and suppliers, and others Intrapreneurial are programs that encourage employees to think up and develop new-product ideas. The search for new-product ideas should be systematic rather than haphazard For example, 3M's well-known &quot;15 percent rule&quot; allows employees to spend 15 percent of their time &quot;bootlegging&quot;—working on projects of personal interest, whether those projects directly benefit the company or not. The spectacularly successful Post-it notes evolved out of this program BofA
Active exercise 10.3 about product failure
Smart Car at http://www.smart.com See concept development example in activebook GE electric car
The target market is younger, well-educated, moderate-to-high-income individuals, couples, or small families seeking practical, environmentally responsible transportation. The car will be positioned as more economical to operate, more fun to drive, and less polluting than today's internal combustion engine or hybrid cars, and as less restricting than battery-powered electric cars, which must be recharged regularly. The company will aim to sell 100,000 cars in the first year, at a loss of not more than $15 million. In the second year, the company will aim for sales of 120,000 cars and a profit of $25 million. The fuel-cell-powered electric car will be offered in three colors—red, white, and blue—and will have optional air-conditioning and power-drive features. It will sell at a retail price of $20,000—with 15 percent off the list price to dealers. Dealers who sell more than 10 cars per month will get an additional discount of 5 percent on each car sold that month. An advertising budget of $30 million will be split 50-50 between national and local advertising. Advertising will emphasize the car's fun spirit and low emissions. During the first year, $100,000 will be spent on marketing research to find out who is buying the car and their satisfaction levels. DaimlerChrysler intends to capture a 3 percent long-run share of the total auto market and realize an after-tax return on investment of 15 percent. To achieve this, product quality will start high and be improved over time. Price will be raised in the second and third years if competition permits. The total advertising budget will be raised each year by about 10 percent. Marketing research will be reduced to $60,000 per year after the first year.
To estimate sales, the company might look at the sales history of similar products and conduct surveys of market opinion. It can then estimate minimum and maximum sales to assess the range of risk. After preparing the sales forecast, management can estimate the expected costs and profits for the product, including marketing, R&D, operations, accounting, and finance costs. The company then uses the sales and costs figures to analyze the new product's financial attractiveness.
Develop the smart and test it.
With the smart car, they give it to employees to take home over night. Have consumers drive it.
For example, it launched its Palmolive Optims shampoo and conditioner first in Australia, the Philippines, Hong Kong, and Mexico, then rapidly rolled it out into Europe, Asia, Latin America, and Africa. However, most international companies now introduce their new products in swift global assaults. Colgate introduced its Actibrush battery-powered toothbrush into 50 countries in a year, generating $115 million in sales
For example, styles appear in homes (colonial, ranch, transitional), clothing (formal, casual), and art (realist, surrealist, abstract). Once a style is invented, it may last for generations, passing in and out of vogue For example, the more formal &quot;business attire&quot; look of corporate dress of the 1980s and early 1990s has now given way to the &quot;business casual&quot; look of today. Fashions tend to grow slowly, remain popular for a while, then decline slowly. &quot;Pet rocks&quot; are a classic example of a fad
Depends whether talking about milk or low carb…
Chapter 8 New-Product Development and Product Life-Cycle Strategies
Idea Generation: the systematic search for new product ideas
Firms typically generate thousands of ideas of which only a few make it to production
Internal Idea Sources: the company can find new ideas through formal research and development; by picking the brains of company executives, scientists, engineers, etc.; or through an intrapreneurial program
External Idea Sources: good new-product ideas also come from watching and listening to customers, competitors, distributors and suppliers
The search for new product ideas should be systematic and companies would benefit from an idea management system that directs the flow of new ideas to a central point where they can be collected, reviewed and evaluated
The company finds a small number of representative test cities, conducts a full marketing campaign in these cities, and uses stare audits, consumers and distributor surveys, and other measures to gauge product performance
Controlled Test Markets: several research firms keep controlled panels of stores that have agreed to carry new products for a fee
Simulated Test Markets: the company or research firm shows ads and promotions for a variety of products, including the new product being tested, to a sample of consumers. It gives consumers a small amount of money and invites them to a real or laboratory store where they may keep the money or use it to buy items
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 Source Advertising Age
Sequential Product Development: under this approach, one company department works individually to complete its stage of the process before passing the new product along to the next department and stage
Simultaneous Product Development: under this approach, company departments work closely together through cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness
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
Product Life-Cycle Strategies
The Category Product Life Cycle Total Retail Sales Introduction Growth Maturity Decline Time Introduction Growth Maturity Decline Strategy variable Target market High-income Middle-income Mass market Low-income Innovators adapters and laggards Variety One basic Some variety Greater variety Less variety offering Distribution Limited or More retailers More retailers Fewer Intensity extensive retailers Price Penetrating Wide range Lower prices Lower prices or skimming Promotion Informative Persuasive Competitive Limited
If the new product satisfies the market, it will enter a growth stage in which sales will start climbing quickly
New competitors may enter the market, new product features may be introduced, number of distribution outlets may increase, ultimately leading to an increase in sales
Profits increase as promotion costs are spread over a large volume and as unit manufacturing costs fall
By spending a lot of money on product improvement, promotion, and distribution, the company can capture a dominant position in the market—in doing so, however, it gives up maximum current profit, which it hopes to make up in the next stage
Gillette’s Fusion razor combines a precision trimmer blade (on back) with a five blade shaving surface (on front). The flexible comfort guard and Enhanced Indicator Lubrastrip (containing vitamin E and aloe) enhance shaving comfort.