This document discusses chapter 9 of a marketing textbook. It covers new product development strategies and the product lifecycle. The key points are: 1. New product development involves finding ideas, screening concepts, testing products, and commercializing. Many new products fail due to poor development processes. 2. The product lifecycle has five stages: development, introduction, growth, maturity, and decline. Marketing strategies must change as products move through each stage. 3. In the introduction stage, marketing builds awareness among early adopters. In growth, marketing expands distribution and builds mass market interest. In maturity, marketing focuses on brand loyalty as competition increases.

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

2. Learning Goals
1. Explain how companies find and develop
new-product ideas
2. List and define the steps in the new-product
development process
3. Describe the stages of the product life cycle
4. Describe how marketing strategies change
during the product’s life cycle
9-2

3. Case Study
Nokia
Focus on Innovation Corporate Results
• Names its culture of • Annual sales of $36 billion
continuous innovation across 130 countries
“renewal” • Global market share of
• Organizes into 38%, greater than that of
autonomous units, which its nearest three rivals
helps foster innovation combined
• Large R&D budget of $3
billion with 40% of
employees involved in
R&D 9-3

4. Learning Goals
• Explain how companies find and develop
new-product ideas
• List and define the steps in the new-product
development process
• Describe the stages of the product life cycle
• Describe how marketing strategies change
during the product’s life cycle
9-4

5. Definition
• New Product Development
– Development of original products,
product improvements, product
modifications, and new brands
through the firm’s own R&D efforts.
Video Snippet
AMEX introduces a
new product
9-5

6. New Product
Development Strategy
• New products can be obtained via
acquisition or development.
• New products suffer from high
failure rates.
• Several reasons account for
failure.
9-6

7. Nike acquired Converse in 2003
for $305 million
9-7
Marketing in Action

8. Discussion Question
• Think of products
you have seen
recently in
stores. Can you
think of any that
seem doomed to
fail?
• Why?
9-8

9. Learning Goals
• Explain how companies find and develop
new-product ideas
• List and define the steps in the new-product
development process
• Describe the stages of the product life cycle
• Describe how marketing strategies change
during the product’s life cycle
9-9

10. Stages of the New Product
Development Process
Figure 9.1
9 - 10

11. Stages of the New Product
Development Process
• Stage 1: Idea Generation
– Internal idea sources:
•R&D
– External idea sources:
• Customers, competitors, distributors,
suppliers
9 - 11

12. Intuit, a marketer of financial
software, asks for new product
ideas from customers
Click on screenshot for
website 9 - 12
Marketing in Action

13. Stages of the New Product
Development Process
• Stage 2: Idea Screening
– Product development costs increase
substantially in later stages so poor
ideas must be dropped
– Ideas are evaluated against criteria;
most are eliminated
9 - 13

14. Stages of the New Product
Development Process
• Stage 3: Concept Development
and Testing
– Concept development creates a
detailed version of the idea stated in
meaningful consumer terms.
– Concept testing asks target
consumers to evaluate product
concepts.
9 - 14

15. MIT Virtual Research
MIT has
developed
online
techniques to
gain
consumer
feedback on
new product
ideas
Click on screenshot for
website 9 - 15
Marketing in Action

16. Stages of the New Product
Development Process
• Stage 4: Marketing Strategy
Development
• The target market, product positioning,
and sales, share, and profit goals for the
first few years.
• Product price, distribution, and
marketing budget for the first year.
• Long-run sales and profit goals and the
marketing mix strategy.
9 - 16

17. Stages of the New Product
Development Process
• Stage 5: Business Analysis
– Sales, cost, and profit projections
• Stage 6: Product Development
– Prototype development and testing
9 - 17

18. Stages of the New Product
Development Process
• Stage 7: Test Marketing
– Standard test markets
– Controlled test markets
– Simulated test markets
• Stage 8: Commercialization
9 - 18

19. Online Test Marketing
Is it in the Near Future?
• Silicon Valley startup
called There launched
their site in 2003.
• Users enter a virtual
world where they can
network, hang out,
dress up and try new
products.
• There is catching
marketers’ attention as
a tool to test brands
and products.
• There will also help
marketers identify
leaders and heavy
users of their products.
Click on screenshot for
website 9 - 19
Marketing in Action

20. Online Test Marketing
Is it in the Near Future?
• Levi and Nike have
partnered with There for
market research data.
• Levi’s has found that
jeans and jean jacket
buyers were more likely
to be virtual club-goers.
• They can also track how
long people wear a
certain jean or jacket in
their virtual world.
• Discussion Question:
Do you believe the
Internet can supply
valuable test marketing
data?
9 - 20
Marketing in Action

21. Learning Goals
• Explain how companies find and develop
new-product ideas
• List and define the steps in the new-product
development process
• Describe the stages of the product life cycle
• Describe how marketing strategies change
during the product’s life cycle
9 - 21

22. Stages of the PLC
Figure 9.2
9 - 22

23. Alternative Product
Life Cycles
Figure 9.3
9 - 23

24. Product Life-Cycle
Strategies
• The product life cycle concept can
be applied to a:
– Product class (soft drinks)
– Product form (diet colas)
– Brand (Diet Dr. Pepper)
• Using the PLC to forecast brand
performance or to develop marketing
strategies is problematic
9 - 24

25. Learning Goals
• Explain how companies find and develop
new-product ideas
• List and define the steps in the new-product
development process
• Describe the stages of the product life cycle
• Describe how marketing strategies change
during the product’s life cycle
9 - 25

26. Product Life-Cycle
Strategies
PLC Stages • Begins when the
company develops a
• Product development new-product idea
• Introduction • Sales are zero
• Growth
• Investment costs
• Maturity
are high
• Decline
• Profits are negative
9 - 26

27. Product Life-Cycle
Strategies
PLC Stages • Low sales
• High cost per
• Product development customer acquired
• Introduction
• Negative profits
• Growth
• Maturity • Innovators are
• Decline targeted
• Little competition
9 - 27

28. Which stage of
the PLC?
How do you
know?
• Product
development
• Introduction
• Growth
• Maturity
• Decline
9 - 28
Marketing in Action

29. Marketing Strategies:
Introduction Stage
• Product – Offer a basic product
• Price – Use cost-plus basis to set
• Distribution – Build selective
distribution
• Advertising – Build awareness among
early adopters and dealers/resellers
• Sales Promotion – Heavy expenditures
to create trial
9 - 29

30. Product Life-Cycle
Strategies
PLC Stages • Rapidly rising
sales
• Product development • Average cost per
• Introduction customer
• Growth
• Rising profits
• Maturity
• Decline • Early adopters are
targeted
• Growing
competition 9 - 30

31. Which stage of
the PLC?
How do you
know?
• Product
development
• Introduction
• Growth
• Maturity
• Decline
9 - 31
Marketing in Action

32. Marketing Strategies:
Growth Stage
• Product – Offer product extensions, service,
warranty
• Price – Penetration pricing
• Distribution – Build intensive distribution
• Advertising – Build awareness and interest in
the mass market
• Sales Promotion – Reduce expenditures to
take advantage of consumer demand
9 - 32

33. Product Life-Cycle
Strategies
PLC Stages • Sales peak
• Low cost per
• Product development customer
• Introduction
• High profits
• Growth
• Maturity • Middle majority
• Decline are targeted
• Competition
begins to decline
9 - 33

34. Which stage of
the PLC?
How do you
know?
• Product
development
• Introduction
• Growth
• Maturity
• Decline
9 - 34
Marketing in Action

35. Marketing Strategies:
Maturity Stage
• Product – Diversify brand and models
• Price – Set to match or beat competition
• Distribution – Build more intensive
distribution
• Advertising – Stress brand differences and
benefits
• Sales Promotion – Increase to encourage
brand switching
9 - 35

36. Product Life-Cycle
Strategies
PLC Stages • Declining sales
• Low cost per
• Product development customer
• Introduction
• Declining profits
• Growth
• Maturity • Laggards are
• Decline targeted
• Declining
competition
9 - 36

37. Marketing Strategies: Decline
Stage
• Product – Phase out weak items
• Price – Cut price
• Distribution – Use selective distribution:
phase out unprofitable outlets
• Advertising – Reduce to level needed to
retain hard-core loyalists
• Sales Promotion – Reduce to minimal level
9 - 37

38. Discussion
• How can
marketers help
products bounce
back from the
decline stage?
9 - 38

39. Low-dose Aspirin Ad
• Baby Aspirin has
been in the decline
stage for over 10
years after
discovery that it
may have
dangerous side
effects for children.
• Recently it has
been discovered it
helping to prevent
heart attacks in
adults and is now
marketed to this
new target.
Marketing in Action
Click on screenshot for 9 - 39
website with products