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New-Product Development and Product Life-Cycle Strategies

Published in: Business


  1. 1. New-Product Development and Product Life-Cycle Strategies Marketing : An Introduction An Asian Perspective
  2. 2. New-Product Development Strategy Acquisition of: Companies Patents Licenses New Products: Original Products Improvements Modifications Strategies for Obtaining New-Product Ideas
  3. 3. New-Product Failures <ul><li>Only 10% of new products are still on the market and profitable after 3 years. </li></ul><ul><li>Failure rate for industrial products is as high as 30%. </li></ul><ul><li>Why? </li></ul><ul><ul><li>Overestimation of market size </li></ul></ul><ul><ul><li>Design problems </li></ul></ul><ul><ul><li>Incorrectly positioned, priced, or advertised </li></ul></ul><ul><ul><li>Pushed despite poor marketing research findings </li></ul></ul><ul><ul><li>Development costs </li></ul></ul><ul><ul><li>Competition </li></ul></ul>
  4. 4. Major Stages in New-Product Development
  5. 5. Idea Generation Company Employees Customers Competitors Distributors Suppliers
  6. 6. Idea Generation When Heinz asked kids what would make the product more fun, they said, “Change the color!” so, Heinz developed and launched EZ Squirt, now in a variety of colors targeted at kids. The EZ Squirt bottle’s special nozzle also emits a thin stream so tykes can autograph their burgers.
  7. 7. Idea Screening <ul><li>Process to spot good ideas and drop poor ones. </li></ul><ul><li>Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return. </li></ul><ul><li>Evaluate these findings against set of company criteria for new products. </li></ul>
  8. 8. Concept Development and Testing <ul><li>Product Idea : idea for a possible product that the company can see itself offering. </li></ul><ul><li>Product Concept : detailed version of the idea stated in meaningful consumer terms. </li></ul><ul><li>Product Image : the way consumers perceive an actual or potential product. </li></ul>
  9. 9. <ul><li>The company’s task is to develop its fuel-cell-powered electric car into alternative product concepts, find out how attractive each is to customers, and choose the best one. </li></ul>DiamlerChrysler’s Fuel-Cell-Powered Electric Car
  10. 11. Marketing Strategy Development Part One Describes: The Target Market Planned Product Positioning Sales, Market Share, & Profit Goals Part Two Outlines the First-Year’s: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Run: Sales & Profit Goals Marketing Mix Strategy
  11. 12. Business Analysis <ul><li>Involves a review of the sales, costs, and profit projections to assess fit with company objectives. </li></ul><ul><li>If yes, move to the product development phase. </li></ul>
  12. 13. Product Development <ul><li>Develop concept into physical product </li></ul><ul><li>Calls for large jump in investment </li></ul><ul><li>Prototypes are made </li></ul><ul><li>Prototype must have correct physical features and convey psychological characteristics </li></ul>
  13. 14. Test Marketing <ul><li>Product and program introduced in more realistic market setting. </li></ul><ul><li>Not needed for all products. </li></ul><ul><li>Can be expensive and time consuming, but better than making major marketing mistake. </li></ul>
  14. 15. Commercialization <ul><li>Must decide on timing (i.e., when to introduce the product). </li></ul><ul><li>Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally). </li></ul><ul><li>Must develop a market rollout plan. </li></ul>
  15. 16. New-Product Development-Successful Product Concepts, Costs and Risk
  16. 17. Sales and Profits Over the Product’s Life from Inception to Decline (The Product Life Cycle) Figure 8.3
  17. 18. Product Life Cycle Applications <ul><li>Product class has the longest life cycle (e.g., gas-powered cars) </li></ul><ul><li>Product form tends to have the standard PLC shape (e.g. sports utility vehicles) </li></ul><ul><li>Brand can change quickly because of changing competitive attacks and responses (e.g. Volvo XC 90) </li></ul><ul><li>Sometimes there are “lifecycles within a product life cycle” </li></ul>
  18. 19. The Product Life Cycle Applied to the Digital Video Market
  19. 20. <ul><li>Style is a basic and distinctive mode of expression (e.g., formal clothing, Balinese furniture) </li></ul><ul><li>Fashion is a popular style in a given field (e.g., business casual) </li></ul><ul><li>Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., Neopets and bubble tea) </li></ul>Product Life Cycle Applications
  20. 21. Alternative PLC Shapes
  21. 22. Practical Problems of PLC Hard to identify which stage of the PLC the product is in Hard to pinpoint when the product moves to next stage Hard to identify factors that affect product’s movement through stages Hard to forecast sales level, length of each stage, and shape of PLC Strategy is both a cause and result of the PLC