This document summarizes the new product development process and product life cycle strategies. It outlines 8 steps in the new product development process: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, test marketing, and commercialization. It then describes the 4 stages of the product life cycle: introduction, growth, maturity, and decline. For each stage it provides characteristics, objectives, and strategies.

1. 9-1
9-1
PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong
Chapter
Chapter
9
9
New Product Development
and
Product Life-Cycle Strategies
© Copyright 1999 Prentice Hall

2. New-Product Development
New-Product Development
Strategies
Strategies
Strategies for Obtaining New Product Ideas
Acquired
Acquired
Companies
Companies
Original
Original
Products
Products
Acquired
Acquired
Patents
Patents
Product
Product
Improvements
Improvements
Acquired
Acquired
Licenses
Licenses
Product
Product
Modifications
Modifications
© Copyright 1999 Prentice Hall
New
New
Brands
Brands
9-2
9-2

3. Causes of New Product Failures
Causes of New Product Failures
• 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.
© Copyright 1999 Prentice Hall
9-3
9-3

4. New Product Development
New Product Development
Process
Process
Marketing
Strategy
Concept
Development
and Testing
9-4
9-4
Business
Analysis
Product
Development
Idea
Screening
Test
Marketing
Idea
Generation
Commercialization
© Copyright 1999 Prentice Hall

5. New Product Development Process
New Product Development Process
9-5
9-5
Step 1. Idea Generation
Step 1. Idea Generation
Idea Generation is the Systematic
Search for New Product Ideas
Obtained Internally and From:
C
C
U
U
S
S
T
T
O
O
M
M
E
E
R
R
S
S
C
C
O
O
M
M
P
P
E
E
T
T
II
T
T
O
O
R
R
S
S
© Copyright 1999 Prentice Hall
D
D
II
S
S
T
T
R
R
II
B
B
U
U
T
T
O
O
R
R
S
S
S
S
U
U
P
P
P
P
L
L
II
E
E
R
R
S
S

6. New Product Development Process
New Product Development Process
Step 2. Idea Screening
Step 2. Idea Screening
• Process to spot good ideas and drop
poor ones as soon as possible.
• Many companies have systems for rating
and screening ideas which estimate:
–
–
–
–
–
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
• Then, the idea is evaluated against a set
of general company criteria.
© Copyright 1999 Prentice Hall
9-6
9-6

7. New Product Development Process
New Product Development Process
Step 3. Concept Development & Testing
Step 3. Concept Development & Testing
1. Develop Product Ideas into
1. Develop Product Ideas into
Alternative
Alternative
Product Concepts
Product Concepts
2. Concept Testing --Test the
2. Concept Testing Test the
Product Concepts with Groups
Product Concepts with Groups
of Target Customers
of Target Customers
3. Choose the Best One
3. Choose the Best One
© Copyright 1999 Prentice Hall
9-7
9-7

8. New Product Development Process
New Product Development Process
Step 4. Marketing Strategy Development
Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One Describes Overall:
Part One Describes Overall:
Target Market
Target Market
Planned Product Positioning
Planned Product Positioning
Sales & Profit Goals
Sales & Profit Goals
Market Share
Market Share
Part Two Describes Short-Term:
Part Two Describes Short-Term:
Product’s Planned Price
Product’s Planned Price
Distribution
Distribution
Marketing Budget
Marketing Budget
Part Three Describes Long-Term:
Part Three Describes Long-Term:
Sales & Profit Goals
Sales & Profit Goals
Marketing Mix Strategy
© Copyright 1999 Prentice Hall
Marketing Mix Strategy
9-8
9-8

9. New Product Development Process
New Product Development Process
Step 5. Business Analysis
Step 5. Business Analysis
Step 6. Product Development
Step 6. Product Development
Business Analysis
Business Analysis
Review of Product Sales, Costs,
Review of Product Sales, Costs,
and Profits Projections to See if
and Profits Projections to See if
They Meet Company Objectives
They Meet Company Objectives
If No, Eliminate
If No, Eliminate
Product Concept
Product Concept
If Yes, Move to
If Yes, Move to
Product Development
Product Development
© Copyright 1999 Prentice Hall
9-9
9-9

10. New Product Development Process
New Product Development Process
Step 7. Test Marketing
Step 7. Test Marketing
Standard
Standard
Test Market
Test Market
Full marketing campaign
Full marketing campaign
in a small number of
in a small number of
representative cities.
representative cities.
Controlled
Controlled
Test Market
Test Market
A few stores that have
A few stores that have
agreed to carry new
agreed to carry new
products for a fee.
products for a fee.
Simulated
Simulated
Test Market
Test Market
Test in a simulated
Test in a simulated
shopping environment
shopping environment
to a sample of
to a sample of
consumers.
consumers.
© Copyright 1999 Prentice Hall
9-10
9-10

11. New Product Development Process
New Product Development Process
9-11
9-11
Step 8. Commercialization
Step 8. Commercialization
Commercialization is the
Introduction of the New Product
into the Marketplace.
When?
When?
Where?
Where?
To
To
Whom?
Whom?
© Copyright 1999 Prentice Hall
How?
How?

12. Speeding Up Development
Speeding Up Development
Simultaneous
Step 1
Sequential
9-12
9-12
Step 2
Step 1
Step 1
Step 2
Step 2
Step 3
Step 3
Step 3
Step 4
Step 4
Step 4
© Copyright 1999 Prentice Hall

13. Product Life Cycle
Product Life Cycle
9-13
9-13
Sales and Profits Over the Product’s Life From
Introduction to Decline
Sales and
Profits ($)
Sales
Profits
Time
Product
Development
Introduction
Growth
Losses/
Investments ($)
© Copyright 1999 Prentice Hall
Maturity
Decline

14. Introduction Stage of the PLC
Introduction Stage of the PLC
9-14
9-14
Summary of Characteristics, Objectives, & Strategies
Sales
Sales
Low sales
Low sales
Costs
Costs
High cost per customer
High cost per customer
Profits
Profits
Product
Product
Negative
Negative
Create product awareness
Create product awareness
and trial
and trial
Offer a basic product
Offer a basic product
Price
Price
Use cost-plus
Use cost-plus
Distribution
Distribution
Build selective distribution
Build selective distribution
Advertising
Advertising
Build product awareness among
Build product awareness among
early adopters and dealers
early adopters and dealers
Marketing Objectives
Marketing Objectives
© Copyright 1999 Prentice Hall

15. Growth Stage of the PLC
Growth Stage of the PLC
9-15
9-15
Summary of Characteristics, Objectives, &
Strategies
Sales
Sales
Rapidly rising sales
Rapidly rising sales
Costs
Costs
Average cost per customer
Average cost per customer
Profits
Profits
Rising profits
Rising profits
Marketing Objectives
Marketing Objectives
Maximize market share
Maximize market share
Product
Product
Price
Price
Offer product extensions,
Offer product extensions,
service, warranty
service, warranty
Price to penetrate market
Price to penetrate market
Distribution
Distribution
Build intensive distribution
Build intensive distribution
Advertising
Advertising
Build awareness and interest in
Build awareness and interest in
the mass market
the mass market
© Copyright 1999 Prentice Hall

16. Maturity Stage of the PLC
Maturity Stage of the PLC
9-16
9-16
Summary of Characteristics, Objectives, &
Strategies
Sales
Sales
Peak sales
Peak sales
Costs
Costs
Low cost per customer
Low cost per customer
Profits
Profits
High profits
High profits
Marketing Objectives
Marketing Objectives
Maximize profit while defending
Maximize profit while defending
market share
market share
Diversify brand and models
Diversify brand and models
Product
Product
Price
Price
Distribution
Distribution
Advertising
Advertising
Price to match or best
Price to match or best
competitors
competitors
Build more intensive distribution
Build more intensive distribution
Stress brand differences and
Stress brand differences and
benefits
benefits
© Copyright 1999 Prentice Hall

17. Decline Stage of the PLC
Decline Stage of the PLC
9-17
9-17
Summary of Characteristics, Objectives, &
Strategies
Sales
Sales
Declining sales
Declining sales
Costs
Costs
Low cost per customer
Low cost per customer
Profits
Profits
Declining profits
Declining profits
Marketing Objectives
Marketing Objectives
Product
Product
Reduce expenditure and milk the
Reduce expenditure and milk the
brand
brand
Phase out weak items
Phase out weak items
Price
Price
Cut price
Cut price
Distribution
Distribution
Go selective: phase out
Go selective: phase out
unprofitable outlets
unprofitable outlets
Reduce to level needed to retain
Reduce to level needed to retain
hard-core loyal customers
hard-core loyal customers
Advertising
Advertising
© Copyright 1999 Prentice Hall