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Developing and Managing Products

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Developing and Managing Products

  1. 1. CHAPTER 10 Developing and Managing Products Designed by Eric Brengle B-books, Ltd. Prepared by Deborah Baker Texas Christian University Introduction to Marketing McDaniel, Lamb, Hair 9
  2. 2. Learning Outcomes Explain the importance of developing new products and describe the six categories of new products Explain the steps in the new-product development process Explain why some products succeed and others fail LO I LO 2 LO 3
  3. 3. Learning Outcomes Discuss global issues in new-product development Explain the diffusion process through which new products are adopted Explain the concept of product life cycles LO 5 LO 6 LO 4
  4. 4. The Importance of New Products Explain the importance of developing new products and describe the six categories of new products LO I
  5. 5. New Product A product new to the world, the market, the producer, the seller, or some combination of these. LO I New Product
  6. 6. Categories of New Products LO I Market Development Diversification Increase market share among existing customers Attract new customers to existing products Introduce new products into new markets Create new products for present markets New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products
  7. 7. New Product for Starbucks <ul><li>Starbucks recently marketed the film “Akeelah and the Bee”. </li></ul><ul><li>It says the film is a natural extension of the Starbucks experience. </li></ul><ul><li>Critics say the pervasive chain is overextending its welcome. </li></ul>LO I SOURCE: Janet Adamy, “Lights, Camera, Action at Starbucks ,” Wall Street Journal, April 22-23/2006, A2.
  8. 8. REVIEW LEARNING OUTCOME Developing New Products LO I
  9. 9. The New Product Development Process Explain the steps in the new-product development process LO 2
  10. 10. The New-Product Development Process LO 2 Long-term commitment Company-specific approach Capitalize on experience Establish an environment New Product Success Factors
  11. 11. New-Product Development Process LO 2 New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product
  12. 12. Idea Generation LO 2 Diversification http://www.ideo.com Customers Employees Distributors Competitors Vendors R & D Consultants Sources of New-Product Ideas Online
  13. 13. Tips for New Product Development <ul><li>Disperse R & D around the globe </li></ul><ul><li>Keep teams small and empower employees </li></ul><ul><li>Flatten hierarchy </li></ul><ul><li>Encourage generation of crazy new ideas </li></ul><ul><li>Welcome mistakes </li></ul>LO 2
  14. 14. Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. LO 2 Brainstorming
  15. 15. Idea Screening LO 2 The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason. Screening
  16. 16. Concept Test LO 2 Concept Test A test to evaluate a new-product idea, usually before any prototype has been created.
  17. 17. Business Analysis LO 2 Considerations in Business Analysis Stage Demand Cost Sales Profitability
  18. 18. Development LO 2 <ul><ul><li>Creation of prototype </li></ul></ul><ul><ul><li>Marketing strategy </li></ul></ul><ul><ul><li>Packaging, branding, labeling </li></ul></ul><ul><ul><li>Promotion, price, and distribution strategy </li></ul></ul><ul><ul><li>Manufacturing feasibility </li></ul></ul><ul><ul><li>Final government approvals if needed </li></ul></ul>
  19. 19. Simultaneous Product Development LO 2 Simultaneous Product Development A new team-oriented approach to new-product development where all relevant functional areas and outside suppliers participate in the development process.
  20. 20. Test Marketing LO 2 The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. http://www.merwyn.com Test Marketing Online
  21. 21. Alternatives to Test Marketing <ul><li>Single-source research using supermarket scanner data </li></ul><ul><li>Simulated (laboratory) market testing </li></ul><ul><li>Online test marketing </li></ul>LO 2 Online http://www.newproductworks.com
  22. 22. Biz Flix October Sky LO 2
  23. 23. Commercialization LO 2 Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising
  24. 24. REVIEW LEARNING OUTCOME New-Product Development Process LO 2
  25. 25. Why Some Products Succeed and Others Fail Explain why some products succeed and others fail LO 3
  26. 26. Why New Products Fail <ul><li>No discernible benefits </li></ul><ul><li>Poor match between features and customer desires </li></ul><ul><li>Overestimation of market size </li></ul><ul><li>Incorrect positioning </li></ul><ul><li>Price too high or too low </li></ul><ul><li>Inadequate distribution </li></ul><ul><li>Poor promotion </li></ul><ul><li>Inferior product </li></ul>LO 3
  27. 27. Success Factors LO 3 Match between product and market needs Different from substitute products Factors in Successful New Products Benefit to large number of people
  28. 28. Success Factors LO 3 Listening to customers Producing the best product Vision of future market Strong leadership Commitment to new-product development Project-based team approach Getting every aspect right
  29. 29. REVIEW LEARNING OUTCOME Why Products Succeed and Others Fail LO 3
  30. 30. Global Issues in New-Product Development Discuss global issues in new-product development LO 4
  31. 31. Global Issues LO 4 <ul><li>Develop product for potential worldwide distribution </li></ul><ul><li>Build in unique market requirements </li></ul><ul><li>Design products to meet regulations and key market requirements </li></ul>
  32. 32. REVIEW LEARNING OUTCOME Global Issues in New-Product Development LO 4 Single product worldwide Modification of products Multiple products in multiple countries
  33. 33. The Spread of New Products Explain the diffusion process through which new products are adopted LO 5
  34. 34. Diffusion LO 5 Diffusion The process by which the adoption of an innovation spreads.
  35. 35. Categories of Adopters LO 5 Laggards Late Majority Early Majority Early Adopters Innovators
  36. 36. Product Characteristics and the Rate of Adoption LO 5 http://www.electronicgadgetdepot.com Trialability Observability Relative Advantage Compatibility Complexity Online
  37. 37. Sales of New Audio Products LO 5
  38. 38. Marketing Implications of the Adoption Process LO 5 Direct from Marketer Word of Mouth Communication Aids the Diffusion Process
  39. 39. REVIEW LEARNING OUTCOME Diffusion Process for New Products LO 5
  40. 40. Product Life Cycles Explain the concept of product life cycles LO 6
  41. 41. Product Life Cycle LO 6 A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Product Life Cycle
  42. 42. Product Life Cycle LO 6 Time Dollars Profits Sales Introductory Stage Growth Stage Maturity Stage Decline Stage 0
  43. 43. Product Life Cycles for Styles, Fashions, and Fads LO 6
  44. 44. U.S. Sales of Televisions LO 6
  45. 45. Introductory Stage <ul><li>High failure rates </li></ul><ul><li>Little competition </li></ul><ul><li>Frequent product modification </li></ul><ul><li>Limited distribution </li></ul><ul><li>High marketing and production costs </li></ul><ul><li>Negative profits with slow sales increases </li></ul><ul><li>Promotion focuses on awareness and information </li></ul><ul><li>Communication challenge is to stimulate primary demand </li></ul>LO 6
  46. 46. Introductory Stage in Europe LO 6
  47. 47. Growth Stage <ul><li>Increasing rate of sales </li></ul><ul><li>Entrance of competitors </li></ul><ul><li>Market consolidation </li></ul><ul><li>Initial healthy profits </li></ul><ul><li>Aggressive advertising of the differences between brands </li></ul><ul><li>Wider distribution </li></ul>LO 6
  48. 48. Maturity Stage <ul><li>Sales increase at a decreasing rate </li></ul><ul><li>Saturated markets </li></ul><ul><li>Annual models appear </li></ul><ul><li>Lengthened product lines </li></ul><ul><li>Service and repair assume important roles </li></ul><ul><li>Heavy promotions to consumers and dealers </li></ul><ul><li>Marginal competitors drop out </li></ul><ul><li>Niche marketers emerge </li></ul>LO 6
  49. 49. Decline Stage <ul><li>Long-run drop in sales </li></ul><ul><li>Large inventories of unsold items </li></ul><ul><li>Elimination of all nonessential marketing expenses </li></ul><ul><li>“Organized abandonment” </li></ul>LO 6
  50. 50. Diffusion Process and PLC Curve LO 6 Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusion curve Introduction Growth Maturity Decline Sales
  51. 51. REVIEW LEARNING OUTCOME LO 6 Product Life Cycles Time INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion High to recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. Sales

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