New Product Development Process This CTR corresponds to Figure 9-1 on p. 275 and relates to the discussion on pp. 275-286. Stages in New Product Development Idea Generation . This stage is the systematic search for new product ideas. Sources for new product ideas include internal sources, customers, competitor's products, distributors & suppliers, and other sources. Screening. This stage focuses on reducing the number of ideas by dropping poor ideas as soon as possible. This helps reduce costs and focus attention more productively. Concept Development and Testing. This stage involves translating ideas into product concepts or detailed versions of the ideas stated in meaningful consumer terms. Concepts are then tested on target consumers. Marketing Strategy. This stage consists of three parts. The first part describes the target market, the second part outlines the product's projected price, distribution, and budget for the first year, the third part describes long-term sales, profit goals, and marketing mix strategy. Business Analysis. This stage reviews the sales, costs, and profit projections for the product to find out if they satisfy overall company objectives. Product Development. This stage involves bringing the product concept into existence as a physical product to ensure that the idea is a workable product. Test Marketing . This is the stage at which the product and marketing program are implemented in one or more realistic market settings. Commercialization. This stage involves actually introducing the new product into the competitive marketplace. In this stage, the company must make decisions involving when to introduce, where, to whom, and how.
Test Marketing This CTR relates to the discussion on pp. 282-284. Test Marketing Standard Test Markets . Under this approach, the company finds a small number of representative test cities, conducts a full marketing campaign in those cities, and then measures and evaluates performance. This provides a “real world” picture of how the product performs. But there are drawbacks. Standard testing is expensive, long, and tips competitors to company strategy. Controlled Test Markets . This approach uses a research firm that has designated store placement space for their clients. Participating stores receive a fee. Some services like Scantrack (Nielsen) and BehaviorScan (IRI) offer computerized monitoring of individual consumer panels whose television viewing is cross-tabulated with store purchases. Controlled testing is quicker and less expensive than standard testing. Concerns revolve around representativeness of the test markets (small size) and tipping off competitors. Simulated Test Markets . This approach creates a simulated shopping environment by the company or research firm. Consumers are exposed to promotions and then given money to shop with. Purchase patterns are observed and consumers are interviewed afterward by researchers. Simulated test marketing is inexpensive and quick. Representativeness and demand characteristics are concerns and this approach might be used as a pretest for a go-no go decision on further testing.
The Product Life-Cycle This CTR corresponds to Figure 9-2 on p. 288 and relates to the material on pp. 287-293. Instructor’s Note: This CTR can be used to overview the life cycle concept. Strategies appropriate for each stage are discussed on the following CTRs. Product Life Cycle Stages Product Development. Development begins when the company finds and develops a new product idea. During development the product has costs but no sales. Development costs must be strategically weighed against the projected length of the product's PLC. Introduction. During the introduction of new products initial sales growth is slow as the market is just becoming aware of the product. Profits are usually nonexistent at this stage due to heavy promotional spending. Growth. This stage is characterized by rapid market acceptance of the product and increasing profits. Maturity . In maturity there is a slowdown in sales growth as the product has achieved acceptance by most potential customers. Profits may level off or decline as marketing costs increase to defend existing market share. Decline. In this period sales begin to fall off and profits decline dramatically.
Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Product Life Cycle Strategies Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 289-290 and 293. Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments.
Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Product Life-Cycle Strategies This CTR relates to the material on pp. 290-292 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 292-293. Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether.
WHAT IS A PRODUCT?A product is anything that can be offered to amarket for attention, acquisition, use, orconsumption that might satisfy a want or need.1. A product may be a tangible good, a service, an idea, or any combination of these three.2. Product features include packaging, style, color, options, and size. Service features include the seller’s image, the manufacturer’s reputation, and the way consumers believe others will view the product.4. Services and ideas are also considered products.
POTENTIAL PRODUCT Namely all of the augmentations andtransformations that thisproduct might ultimately undergo in the future.
Product ClassificationsBusiness A product used to manufacture other goods or services, to facilitate an organization’s operations,Product or to resell to other consumers.Consumer Product bought to satisfy an Product individual’s personal wants 06/22/12 13
Types of Products PRODUCTS Consumer Business Products ProductsConvenience Shopping Specialty Unsought Products Products Products Products 06/22/12 14
Types of Business Products Major Equipment Accessory Equipment Raw Materials Component Parts Major Processed MaterialsCategories Suppliesof Business Products Business Services 06/22/12 15
• Major equipment: capital goods such as large or expensive machines, airplanes, buildings. Personal selling is an important marketing strategy.• Accessory equipment: Less expensive and shorter- lived than major equipment, includes fax machines, personal computers, power tools. Often charged as an expense. Often standardized and purchased by more customers. Advertising is an important promotional tool.• Raw materials: Unprocessed products, such as minerals, lumber, wheat, corn, fish. Become part of finished products. Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user. 06/22/12 16
4. Component parts: Finished items ready for assembly or that need very little processing. Examples are tires and electric motors. Two important markets for component parts: original equipment manufacturer (OEM) and replacement market.5. Processed materials are used directly in manufacturing other products. Sheet metals, chemicals, and lumber. Do not retain their identity in final products. Price and service are important factors in choosing a supplier.6. Supplies are consumable items that do not become part of the final product. Short lives and inexpensive. Generally fall into categories of maintenance, repair, or operating supplies (MRO), and include such items as detergents, pencils, paper, etc.7. Business services are expense items that do not become part of the final product. This includes, advertising, legal, and maintenance services. 06/22/12 17
Types of Consumer ProductsConvenience A relatively inexpensive item that Product merits little shopping effort. Shopping A product that requires comparison shopping, because it is usually more Product expensive and found in fewer stores. Specialty A particular item that consumers search extensively for and are Product reluctant to accept substitutes. Unsought A product unknown to the potential buyer or a known product that the Product buyer does not actively seek. 06/22/12 18
Examples For each product categories•Convenience: candy, soft drinks, deodorant, aspirin,hardware, dry cleaning.•Shopping: Homogeneous shopping products such aswashers, televisions. Decisions are based on the lowest-priced brand with the desired features.Heterogeneous shopping products are essentially different,for example furniture, clothing, housing, universities.Decisions are highly-individual and based on “finding thebest product for me.”•Specialty: fine watches, expensive automobiles.•Unsought: new products, insurance, encyclopedias. 06/22/12 19
Marketing Management Rarely companies offer a single product. Moreoften they sell group of product items to meetvarying needs. . .PRODUCT ITEM A Specific version of a product that can bedesignated as a distinct offering among anorganization’s products.Ex:
Marketing ManagementPRODUCT LINEA group of closely related product items.Ex: Personal care- HULPRODUCT MIXA group of product lines offered by thecompany.Ex: Personal care & Food- HUL
Marketing ManagementProduct mix will have a certain width, length, depth. WIDTHThe number of product lines an organization offers. LENGTHTotal number of product items in the company’s mix. DEPTH Variants offered of each product in the line by the companyProduct Consistency: how closely the product linesare related in usage
Product WidthP Personal Fabric Care Skin Care Oral Care Tea Coffee CareRODUCTLENGT WIDTH: The number of product lines an organization offers.H LENGTH: Total number of product items in the company’s mix DEPTH: Variants offered of each product in the line by the company CONSISTENCY: How closely the product lines are related in usage.
Marketing ManagementProduct Line ExtensionAdding additional productsto an existing product line inorder to compete morebroadly in the industry.
New Product Development &Product Life-Cycle Strategies
Causes of New ProductFailures Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand it’s customers, markets and competitors develop products that deliver superior value to customers.
New ProductDevelopmentProcess Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization
New Product Development ProcessStep 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers
New Product Development ProcessStep 2. Idea Screening Process to spot good ideas and drop poor ones Criteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return
New Product Development ProcessStep 3. Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One
New Product Development ProcessStep 4. Marketing Strategy Development Marketing Strategy Statement Formulation Part One - Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two - Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives If No, Eliminate Product Concept If Yes, Move to Product Development
New Product Development ProcessStep 7. Test MarketingTest Marketing: is the stage where the entire product and marketing programme is triedout for the first time in smaller no of chosen well chosen sales environment - Philip Kotler Standard Test Market Controlled Test Market Full marketing campaign A few stores that have in a small number of agreed to carry new representative cities. Products. Simulated Test Market Test in a simulated shopping environment to a sample of consumers.
Product Life Cycle Sales and Profits ($) Sales ProfitsN Time Product Introduction Growth Maturity Decline Develop- ment Losses/ Investments ($) CLASSICAL PATTERN OF PLC
Introduction Stage ofthe PLC Sales Low sales Costs High cost per customer Profits Negative Create product awareness Marketing Objectives and trial Product Offer a basic product Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers
Growth Stage of the PLC Sales Rapidly rising sales Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Offer product extensions, Product service, warranty Price Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market
Maturity Stage of the PLC Sales Peak sales Costs Low cost per customer Profits High profits Marketing Objectives Maximize profit while defending market share Product Diversify brand and models Price to match or best Price competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits
Decline Stage of the PLC Sales Declining sales Costs Low cost per customer Profits Declining profits Marketing Objectives Reduce expenditure Product Phase out weak items Price Stable or low price Go selective: phase out Distribution unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers
Distribution StrategiesSelective : use of more than one but fewerthan all, of the intermediaries who are willingto carry the company’s products.Ex:Exclusive: giving a limited number of dealers theexclusive right to distribute the company’sproducts in their TerritoriesEx:
Distribution StrategiesIntensive Distribution:Stocking the products as many asmany outlets as possible.Ex:
Marketing Strategies for PLC INTRODUCTION INTRODUCTION GROWTH MATURITY DECLINE Product Limited models More models Large number Eliminate Strategy Frequent Frequent of models. unprofitable changes changes. modelsDistribution Limited Expanded Extensive. Phase out Strategy Wholesale/ dealers. Long- Margins drop. unprofitable retail distributors term relations outlets Awareness. Aggressive ads. Advertise. Phase outPromotion Promote promotion Strategy heavily Higher/recoup Fall as result of Prices fall Prices Pricing development competition & (usually). stabilize at Strategy costs efficient produc- low level. tion. 51 06/22/12
ALTERNATE PATTERNS OF PLC Growth Slump Maturity Pattern: Often characteristics of small kitchen appliances.S Some years ago, sales ofAL electric knives grewE rapidly when the productS was first introduced andV then fell in to a petrifiedO level. The petrified level isL sustained by late adoptersUM buying the products for theE first time and early adopters replacing the product. TIME
Cycle and Recycle Pattern This is applicable for pharmaceuticalS companies, theyAL aggressively promotesE new drug and thisS produces the firstV cycle.OL Later sales startU declining and theME company gives drug another promotion push which produces a second cycle. TIME
Scalloped Pattern Here sales passes throughS a succession of life cycleA based on the discovery ofL new product characteristicsES uses or users. Nylon’s sales for example,VOL Many new uses-U parachutes, shirts,M carpeting, boat sales,E automobile tyres That continue to be TIME discovered over a time.
Style, Fashion and Fad Life CycleStyle:A basic and distinctive mode ofexpression. It’s a product look andfeels to the buyer. styleFashion: currently accepted popularstyle in a given field.Fad: a craze that unpredictable, shortlived and without social, political, andeconomical significance. S Fashion A L E S V O L U M E Time
Marketing ManagementA mixture of tangible and intangible attributes, symbolized in a trademark, which is properly managed, creates influence and generate VALUE
What is Trademark?It is a brand name or mark registered under the law for protectionagainst its copying or imitation, its legal protection against misuse bycompetitors.In India it is registered under Trademark and Mechanize Marks Act,1958 www.ponds.com www.axe.com
Advantages of Branding Helps in identifying goods and services. It stimulates the purchase decision of the consumer It helps in creating customer loyalty It helps to the company to main the leadership position in the market if they are already a market leader
Disadvantages of Branding Requires huge investment An unsuccessful brand bring –ve image to the company Customer may not willing to pay extra because it is branded.
Brand Name Selection Marketing Management SHOULD SUGGEST SOMETHING ABOUT THE PRODUCT’S BENEFITS SHOULD SUGGEST PRODUCT QUALITIES SUCH AS ACTION OR COLOR SHOULD BE EASY TO PRONOUNCE, RECOGNIZE, & REMEMBER SHOULD NOT CARRY POOR MEANINGS IN OTHER COUNTRIES AND LANGAUAGES
Marketing Management BRAND WHO SPONSERSHIP SHOULD SPONSORTHE BRAND?MANUFACTURE’S BRANDPRIVATE BRANDLICENSED BRANDCO-BRANDING
Packaging and Labeling Packaging: the process of designing and producing the container or wrapper for a product. It gives proper protection to the product It helps in bulk braking Entices the consumer to buy the product
Packaging Strategies Adopting the same package for entire product line Multiple packs for multiple products Changing the packages continuously
Labeling It carries the information about the seller. Types of labels: Brand label: only brand name is mentioned on the product Grade label: identifies the product judged quality with a letter number or a wordEx: fertilizers 19-19-0-19 bikes MD2DDDZZZPLV12345 Descriptive Label: gives the information about the product, use and careEx: Godreg Hair Dye Packet, medicines
Life is a beautiful journey travel it.May be whoever leads you!Enjoy the things what you have.Always Dream for good “Thought” who knows your thought can become “Thing” infuture!!!Jo guzar gaya vo kal hai jo aana hai voh bhi kal hai faisla aapko karna hai aapkis kal main jeena Chahate ho!!Love the life!!!!!
KEEP SMILING BecauseOne Smile Can Change The Way of Life!!!!! All the best for your Exams & Career. Your loving RAJ