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Chapter 11 Developing and Managing Products There are degrees of “newness” New to the World Discontinuous innovation Dynamically Continuous Innovation Continuous Innovations Line extensions Brand extensions Product modifications New-Product Development Process New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product Idea Generation Customers Employees Distributors Competitors Sources of New-Product Ideas Vendors R & D Consultants Brainstorming Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. Idea Screening Screening The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason. Concept Test Concept Test A test to evaluate a new-product idea, usually before any prototype has been created. Business Analysis Demand Considerations in Business Analysis Stage Cost Sales Profitability Simultaneous Product Development Simultaneous Product Development A new team-oriented approach to new-product development where all relevant functional areas and outside suppliers participate in the development process. Test Marketing Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Why New Products Fail No discernible benefits Poor match between features and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product Success Factors Match between product and market needs Different from substitute products Benefit to large number of people Global Issues in New-Product Development Single product worldwide Modification of products Multiple products in multiple countries Diffusion The process by which the adoption of an innovation spreads. Categories of Adopters Innovators Early Adopters Early Majority Late Majority Laggards Product Characteristics and the Rate of Adoption and/or Success Complexity Compatibility Relative Advantage Observability Trialability Marketing Implications of the Adoption Process Word of Mouth Communication Aids the Diffusion Process Direct from Marketer Product Life Cycle Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). Product Life Cycle Growth Stage Maturity Stage Decline Stage Sales Dollars Introductory Stage Profits 0 Time Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and information Communication challenge is to stimulate primary demand Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution Maturity Stage Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses “Organized abandonment” Diffusion Process and PLC Curve Sales Introduction Growth Decline Maturity Product life cycle curve Early majority Late majority Early adopters Innovators Laggards Diffusion curve Product Life Cycles INTRODUCTION Sales Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes GROWTH More models Frequent changes. MATURITY Large number Eliminate of models. unprofitable models Limited Expanded Wholesale/ dealers. Longretail distributors term relations Extensive. Margins drop. Shelf space Awareness. Aggressive ads. Stimulate Stimulate demand.Sampling demand Advertise. Promote heavily High to recoup Fall as result of Prices fall competition & (usually). development efficient produccosts tion. Time DECLINE Phase out unprofitable outlets Phase out promotion Prices stabilize at low level.