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Chapter 11 MKT120 Product Development

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Chapter 11 MKT120 Product Development

  1. 1. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  2. 2. Learning Objectives LEARNING OBJECTIVES How can firms create value through innovation? What is the diffusion of innovation theory, and how can managers use it to make product line decisions? How do firms create new products and services? What is a product life cycle, and how can the concept be applied to product line decisions? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-2
  3. 3. Innovation and Value© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-3
  4. 4. New Product Introductions Pioneers radicallychange competition and consumer preferences. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-4
  5. 5. Diffusion of Innovation© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-5
  6. 6. Using the Diffusion of Innovation Theory© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-6
  7. 7. How Firms Develop New Products © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-7
  8. 8. Idea Generation© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-8
  9. 9. Internal R&D  High product development costs  Often the source of technological products  Often the source of breakthrough products Crystal Pepsi Commercial© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-9
  10. 10. R&D Consortia Lower costs and risks; firms join together Form research consortiums Benefits spread to all firms Example, pharmaceutical industry research © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-10
  11. 11. Licensing Firms purchase the rights to technology or ideas from other research-intensive firms University research centers also often provide such licenses © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-11
  12. 12.  Groups work together to generate ideas No idea can be immediately dismissed IDEO Website © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-12
  13. 13. Competitors’ Products© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-13
  14. 14. Customer Input As much as 85% of new business to business products come from customers Lead users modify existing products according to their own specific needs © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-14
  15. 15. Concept Testing Concept is a brief written description of the product Customers reactions determine whether or not it goes forward Triggers the marketing research process © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-15
  16. 16. Product Development© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-16
  17. 17. Market Testing Dodge Commercial© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-17
  18. 18. Market TestingHow do firms know what market tests need toHow do firms know what market tests need tobe performed to ensure a successful product? be performed to ensure a successful product? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-18
  19. 19. Product Launch© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-19
  20. 20. New Product Marketing Mix© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-20
  21. 21. Launching a New ProductHow do firms launch a new product innovation?How do firms launch a new product innovation? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-21
  22. 22. Evaluation of Results© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-22
  23. 23. Product Life Cycle© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-23
  24. 24. Stages in the Product Life Cycle Exhibit 11.6© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-24
  25. 25. Strategies Based on the Product Life Cycle: Some Caveats Theoretically they are bell shaped but in reality they can take many shapes Managers do not know exactly what the shape each product’s life cycle will take so there is no way to know precisely what stage they are in. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-25
  26. 26. Inventables Build a living showcase of what’s possible to deliverinspiration and innovation to the dreamers of the world. Inventables Website © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-26
  27. 27. Introduction© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-27
  28. 28. The introduction stage of the PLC © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-28
  29. 29. Growth© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-29
  30. 30. The growth stage of the PLC© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-30
  31. 31. Maturity© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-31
  32. 32. The maturity stage of the PLC© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-32
  33. 33. Decline© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Companies, Inc., McGraw-Hill/Irwin © 2007 McGraw-Hill 11-33
  34. 34. A behavior in the decline stage?© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-34
  35. 35. Check Yourself 1. What are the five groups depicted in the diffusion of innovation curve? 2. What factors enhance the diffusion of a good or service?© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-35
  36. 36. Check Yourself 1. What are the steps in the new product development process? 2. Identify different sources of new product ideas.© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-36
  37. 37. Check Yourself 1. What are the stages in the product life cycle? 2. How do sales and profits change during the various stages?© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-37
  38. 38. GlossaryAlpha testing is testing where the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-38
  39. 39. GlossaryBeta testing uses potential consumers, who examine the product prototype in a “real use” setting to determine its functionality, performance, potential problems, and other issues specific to its use. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-39
  40. 40. GlossaryFirms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or they completely exit the market. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-40
  41. 41. GlossaryDiffusion of innovation is the process by which the use of an innovation spreads throughout a market group, over time and over various categories of adopters. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-41
  42. 42. GlossaryThe growth stage of the product life cycle is marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-42
  43. 43. GlossaryInnovation is the process by which ideas are transformed into new products and services that will help firms grow. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-43
  44. 44. GlossaryThe introduction stage for a new, innovative product or service usually starts with a single firm, and innovators are the ones to try the new offering. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-44
  45. 45. GlossaryThe maturity stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-45
  46. 46. GlossaryPioneers or breakthroughs are new product introductions, especially new-to-the-world products that create new markets. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-46
  47. 47. GlossaryPremarket tests are conducted by firms before they actually bring a product or service to market to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-47
  48. 48. GlossaryThe product life cycle defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-48
  49. 49. GlossaryA prototype is the first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes—sometimes even crafted individually. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-49
  50. 50. GlossaryReverse engineering involves taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitors’ patents, if any exist. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-50
  51. 51. GlossaryTest marketing introduces the offering to a limited geographical area prior to a national launch. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 11-51

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