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New Product Development (NPD) and Product Life Cycle (PLC) Strategies
Chapter 9
New products
 Last year food products alone accounted for more than 10,000 of the year’s 25,261 total new-product
launches, according to Marketing Intelligence Service. That’s 486 product launches a week, or 69 per day.
 Interesting, considering the launch of a new shampoo can range in cost from $20 to $50 million dollars.
When is a New Product Really New?
- never been introduced before (i.e. inventions); functionally new
- firm enters into new product category or offers a modification of an old one
- how much consumer learning is involved to use product
- generally, a product is “new” for only six months
New Product Strategy Development
 Involves defining the role of new products in achieving the firm’s overall objectives.
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 Cross functional teams seem to produce best results in searching for new product and/or market
opportunities.
Causes of New Product Failures
One study estimated that as many as 80% of new consumer packaged products failed.
Only about 40% of new consumer products are around 5 years after introduction.
Why Do Products Fail?
 Rush to market
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Product design problems
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Product may have been pushed despite poor marketing research findings
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Costs of product development
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Consumer “need” was a fad, or short-lived
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Timing
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Major Stages in New Product Development (Fig 9.1)
Idea Generation
Idea Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
Strategies for Obtaining New Product Ideas
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New Product Development Process
Step 1. Idea Generation - Idea Generation is the Systematic Search for New Product Ideas Obtained Internally
From Employees and Also From:
Step 2. Idea Screening
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Many companies have systems for rating and screening ideas which estimate:
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Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Step 3. Concept Development
1. Develop New Product Ideas into Alternative Detailed Product Concepts
2. Concept Testing - Test the New Product Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal to Target Customers
Step 4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Step 5. Business Analysis
Business Analysis - Review of Product Sales, Costs, and Profits Projections to See if they Meet Company
Objectives
Step 6. Product Development
Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic
Market Settings.
- Full marketing campaign in a small number of representative cities.
- A few stores that have agreed to carry new products for a fee.
- Test in a simulated shopping environment to a sample of consumers.
Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
Where?
When?
Speeding Up New Product Development
Sequential
Product Development Costs
Consumer vs. Industrial
Simultaneous
Product Life Cycle (Fig. 9.2)
Product Life Cycle (Fig. 9.2)
Sales and
Profits ($)
Sales
Profits
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and Profits Over the Product’s Life From Inception
to Demise
Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life
Cycle, However Some Problems Can Arise:
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Characteristic
Sales
Costs
Profits
Marketing
Objectives
Product
Price
Distribution
Advertising
Introduction
Growth
Maturity
Decline