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9-1
Chapter 9
New Product Development
and
Product Life-Cycle Strategies
PRINCIPLES OF MARKETING
9-2
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.
9-3
New Product Development
Process
• Idea Generation and Screening
• Concept Development and Testing
• Marketing Strategy
• Business Analysis
• Product Development
• Test Marketing
• Commercialization
9-4
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product
Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
9-5
• 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 Process
Step 2. Idea Screening
9-6
New Product Development Process
Step 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
9-7
New Product Development Process
Step 4. Marketing Strategy Development
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
9-8
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If Yes, Move to
Product Development
If No, Eliminate
Product Concept
9-9
New Product Development Process
Step 7. Test Marketing
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
9-10
Product Life Cycle
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/
Investments ($)
Sales and
Profits ($)
9-11
Introduction Stage of the
PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
Create product awareness
and trial
Offer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising Build product awareness among
early adopters and dealers
9-12
Growth Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer product extensions,
service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising Build awareness and interest in
the mass market
9-13
Maturity Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak sales
Low cost per customer
High profits
Maximize profit while defending
market share
Diversify brand and models
Price to match or best
competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and
benefits
9-14
Decline Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits
Reduce expenditure and milk the
brand
Phase out weak items
Cut price
Distribution Go selective: phase out
unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyal customers

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NPD-PLC.ppt

  • 1. 9-1 Chapter 9 New Product Development and Product Life-Cycle Strategies PRINCIPLES OF MARKETING
  • 2. 9-2 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.
  • 3. 9-3 New Product Development Process • Idea Generation and Screening • Concept Development and Testing • Marketing Strategy • Business Analysis • Product Development • Test Marketing • Commercialization
  • 4. 9-4 New Product Development Process Step 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers
  • 5. 9-5 • 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 Process Step 2. Idea Screening
  • 6. 9-6 New Product Development Process Step 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
  • 7. 9-7 New Product Development Process Step 4. Marketing Strategy Development Part Two - Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy Marketing Strategy Statement Formulation Part One - Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share
  • 8. 9-8 New Product Development Process Step 5. Business Analysis Step 6. Product Development Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives If Yes, Move to Product Development If No, Eliminate Product Concept
  • 9. 9-9 New Product Development Process Step 7. Test Marketing Standard Test Market Full marketing campaign in a small number of representative cities. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Controlled Test Market A few stores that have agreed to carry new products for a fee.
  • 10. 9-10 Product Life Cycle Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($)
  • 11. 9-11 Introduction Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers
  • 12. 9-12 Growth Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market
  • 13. 9-13 Maturity Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits
  • 14. 9-14 Decline Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers

Editor's Notes

  1. New Product Development Process This CTR corresponds to Figure 9-1 on p. 275 and relates to the discussion on pp. 275-286.
  2. Test Marketing This CTR relates to the discussion on pp. 282-284.
  3. 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.
  4. 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.
  5. Product Life-Cycle Strategies This CTR relates to the material on pp. 289-290 and 293.
  6. 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.
  7. Product Life-Cycle Strategies This CTR relates to the material on pp. 292-293.