1. Chapter 9- slide 1
Chapter Nine
New-Product Development and
Product Life-Cycle Strategies

2. New-Product Development and
Product Life-Cycle Strategies
• New-Product Development Strategy
• New-Product Development Process
• Managing New-Product Development
Topic Outline
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• Managing New-Product Development
• Product Life-Cycle Strategies
• Additional Product and Service
Considerations

3. New-Product Development Strategy
Acquisition refers to the buying of a whole
company, a patent, or a license to produce
someone else’s product
Two ways to obtain new products
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someone else’s product
New product development refers to original
products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development

4. New-Product Development
Reasons for new product failure
Overestimation of market size
Poor design
Incorrect positioning
Wrong timing
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Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition

5. New-Product Development Process
Major Stages in New-Product Development
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6. New-Product Development Process
Idea generation is the systematic search
for new-product ideas
Sources of new-product ideas
Idea Generation
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Sources of new-product ideas
• Internal
• External

7. New-Product Development Process
Internal sources refer to the company’s own formal
research and development, management and staff,
and “intrapreneurial” programs
External sources refer to sources outside the company
Idea Generation
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External sources refer to sources outside the company
such as customers, competitors, distributors,
suppliers, and outside design firms

8. New-Product Development Process
• Identify good ideas and drop poor ideas
• R-W-W Screening Framework:
– Is it real?
Idea Screening
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– Is it real?
– Can we win?
– Is it worth doing?

9. New-Product Development Process
Product idea is an idea for a possible product
that the company can see itself offering
to the market
Concept Development and Testing
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to the market
Product concept is a detailed version of the
idea stated in meaningful consumer
terms
Product image is the way consumers
perceive an actual or potential product

10. New-Product Development Process
Concept testing refers to testing new-product
concepts with groups of target consumers
Concept Development and Testing
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11. New-Product Development Process
• Marketing strategy development refers to
the initial marketing strategy for
introducing the product to the market
Marketing Strategy Development
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introducing the product to the market
• Marketing strategy statement includes:
– Description of the target market
– Value proposition
– Sales and profit goals

12. New-Product Development Process
Business analysis involves a review of the
sales, costs, and profit projections to find
Marketing Strategy Development
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sales, costs, and profit projections to find
out whether they satisfy the company’s
objectives

13. New-Product Development Process
Product development involves the creation
and testing of one or more physical versions by
the R&D or engineering departments
Marketing Strategy Development
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the R&D or engineering departments
• Requires an increase in investment

14. New-Product Development Process
Test marketing is the stage at which the
product and marketing program are
introduced into more realistic marketing
settings
Provides the marketer with experience in
Marketing Strategy Development
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Provides the marketer with experience in
testing the product and entire marketing
program before full introduction

15. New-Product Development Process
Marketing Strategy Development
When firms test
market
• New product
with large
When firms may
not test market
• Simple line
extension
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with large
investment
• Uncertainty
about product
or marketing
program
extension
• Copy of
competitor
product
• Low costs
• Management
confidence

16. Product Life-Cycle Strategies
Product Life Cycle
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17. • Product development
– Sales are zero and investment costs mount
• Introduction
– Slow sales growth and profits are nonexistent
• Growth
Product Life-Cycle Strategies
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• Growth
– Rapid market acceptance and increasing profits.
• Maturity
– Slowdown in sales growth and profits level off or
decline
• Decline
– Sales fall off and profits drop

18. Product Life-Cycle Strategies
Fads are temporary periods of
unusually high sales driven by
consumer enthusiasm and immediate
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consumer enthusiasm and immediate
product or brand popularity

19. Product Life-Cycle Strategies
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20. Product Life-Cycle Strategies
• Slow sales growth
• Little or no profit
Introduction Stage
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• Little or no profit
• High distribution and promotion expense

21. Product Life-Cycle Strategies
• Sales increase
• New competitors enter the market
• Price stability or decline to increase volume
Growth Stage
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• Price stability or decline to increase volume
• Consumer education
• Profits increase
• Promotion and manufacturing costs gain
economies of scale

22. Product Life-Cycle Strategies
• Slowdown in sales
• Many suppliers
• Substitute products
Maturity Stage
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• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to support
sales and profits

23. Product Life-Cycle Strategies
• Market modifying
• Product
Maturity Stage Modifying Strategies
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• Product
modifying
• Marketing mix
modifying

24. Product Life-Cycle Strategies
• Maintain the product
• Harvest the product
Decline Stage
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• Harvest the product
• Drop the product