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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. 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 Product design problems Product may have been pushed despite poor marketing research findings Costs of product development Consumer “need” was a fad, or short-lived Timing 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 – – – 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 • • • Many companies have systems for rating and screening ideas which estimate: • • • • • 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: Characteristic Sales Costs Profits Marketing Objectives Product Price Distribution Advertising Introduction Growth Maturity Decline