Download Chapter 8 slides

Developing New Products
and Managing the
Product Life-Cycle
Chapter 8
Rest Stop: Previewing the Concepts
• Explain how companies find and develop
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new-product ideas
List and define the steps in the new-product
development process and the major
considerations in managing this process
Describe the stages of the product life cycle
and how marketing strategies change during
the product’s life cycle
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Rest Stop: Previewing the Concepts
• Discuss two additional product and services
issues: socially responsible product decisions
and international product and services
marketing
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First Stop: Google—New-Product
Innovation at the Speed of Light
• New product planning looks ahead only four
to five months
• Engineers spend 20% of time developing their
own new ideas
• New applications are launched on Google
Labs; users test them and provide feedback
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New-product development
• The development of original
products, product improvements,
product modifications, and new
brands through the firm’s own
product development efforts
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New-Product Failures
• Overestimation of
market size
• Design problems
• Incorrect pricing or
positioning
• High development
costs
• Competitor reaction
Each product failure represents
squandered dollars and hopes
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Figure 8.1 - Major Stages in
New-Product Development
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Idea Generation
• Internal sources
• The traditional R&D process
• Intrapreneurs within the company
• External sources
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Distributors and suppliers
Competitors and their products
Trade magazines and shows
Customers
• Crowdsourcing
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Idea Generation
• Analyze customer
questions and
complaints to find
new products that
better solve
consumer problems
• Invite customers to
share suggestions
and ideas
To harness customer new-product
input, 3M has opened customer
innovation centers, which generate
customer-driven new-product
ideas and help 3M establish longterm customer relationships
Crowdsourcing
• Invites customers,
employees,
independent
scientists and
researchers, and
even the public at
large, into the newproduct innovation
process
When Netflix wanted ideas for
improving the accuracy of its online
recommendation system, it decided to
“open it up to the world,” promising a
$1 million prize for the best solution
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Idea screening
• Screening new-product ideas to spot good
ideas and drop poor ones as soon as
possible
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Concept Development and Testing
• Product idea: An idea for a possible product
that the company can see itself offering to
the market
• Product concept: A detailed version of the
new-product idea stated in meaningful
consumer terms
• Product image: The way consumers perceive
an actual or potential product
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Concept Development
• To develop a new
product into
alternative product
concepts, find out
how attractive each
concept is to
customers, and
choose the best one
Tesla’s initial all-electric roadster,
will be followed by moreaffordable mass-market models
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Concept Testing
• Testing new-product concepts with a group of
target consumers to find out if the concepts
have strong consumer appeal
• Using a description, picture or model of the
product
• Asking consumers about their reactions
Marketing strategy
development
• Designing an initial marketing
strategy for a new product
based on the product concept
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Marketing Strategy Statement
• Describes the target market, planned value
proposition, sales, market share, and profit
goals
• Outlines the product’s planned price,
distribution, and marketing budget
• Describes the planned long-run sales and
profit goals, marketing mix strategy
Business Analysis
• A review of the sales, costs, and profit
projections for a new product to find out
whether these factors satisfy the company’s
objectives
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Product Development
• Developing the product concept into a
physical product to ensure that the product
idea can be turned into a workable market
offering
• Prototypes are made
• Consumer tests are conducted
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Test Marketing
• Introducing the
product and
marketing program
in realistic market
settings
Starbucks spent 20 years developing
Starbucks VIA instant Coffee and several
months testing the product in Starbucks
shops in Chicago and Seattle before
releasing the product nationally
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Test Marketing
• Standard test markets are usually extensive
and costly to use
• Simulated test markets
• Researchers measure consumer responses to in
laboratory stores or simulated online shopping
environments
• Controlled test markets
• New products and tactics are tested among
controlled panels of shoppers and stores
Commercialization
• Introducing a new product into the market
• Companies must decide:
• When to introduce the product
• Where to introduce the product
• Single location, state, region, nationally, internationally
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Managing New-Product Development
• Companies must take a holistic approach to
new product development
• This requires:
• Customer-centered new-product development
• Team-based new-product development
• Systematic new-product development
Customer-Centered New-Product
Development
• New-product
development that
focuses on finding
new ways to solve
customer problems
and create more
customer-satisfying
experiences
Customers are urged to submit
their own ideas for new
products and services on P&G’s
crowdsourcing site Connect +
Develop
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Team-Based New-Product
Development
• Various company departments work closely
together, overlapping the steps in the product
development process to save time and
increase effectiveness
• Cross-functional teams lead to fast and flexible
development
• Causes more organizational tension and
confusion than the sequential approach
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Systematic New-Product Development
• The new-product development process
should be holistic and systematic
• Innovation management systems can help
companies collect, review, evaluate, and
manage new-product ideas
• They help create an innovation-oriented
company culture
• They yield a larger number of new-product ideas
Marketing at Work
• Faced with falling
sales, LEGO began
new-product
development by
listening to
customers and
including them in
the design process
LEGO’s Design By Me site lets customers
download 3D design software, create a
LEGO toy, and then order the kit to build it
Product life cycle
• The course of a product’s sales and profits
over its lifetime
Figure 8.2 - Sales and Profits Over the
Product’s Life From Inception to Decline
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The Product Life Cycle
• All products do not
follow all five stages
of the PLC
• Marketers can apply
the PLC as a
framework for
describing how
products and
markets work
Some products die quickly,
while others stay in the mature
stage for a long, long time like
TABASCO® sauce
Applying the Product Life-Cycle
Concept
• The PLC concept can describe a product class,
a product form , or a brand
• Product class has the longest life cycle
• Product form tends to the standard PLC shape
• PLCs for brands can change quickly because of
changing competitive attacks and responses
• The PLC concept also can be applied to what
are known as styles, fashions, and fads
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Style
• A basic and distinctive mode of expression
Fashion
• A currently accepted or popular style in a given field
Fad
• A temporary period of unusually high sales driven
by consumer enthusiasm and immediate product or
brand popularity
Figure 8.3 - Styles, Fashions, and
Fads
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Introduction Stage Characteristics
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Sales: Low
Costs: High cost per customer
Profits: Negative or low
Customers: Innovators
Competitors: Few
Marketing objective: Create product
awareness and trial
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Introduction Stage Strategies
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Product: Offer a basic product
Price: Use cost-plus pricing
Distribution: Build selective distribution
Advertising: Build product awareness among
early adopters and dealers
• Promotion: Use heavy promotion to entice
product trial
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Growth Stage Characteristics
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Sales: Rapidly rising
Costs: Average cost per customer
Profits: Rising profits
Customers: Early adopters
Competitors: Growing number
Marketing objective: Maximize market share
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Growth Stage Strategies
• Product: Offer product extensions, service,
warranty
• Price: Price to penetrate the market
• Distribution: Build intensive distribution
• Advertising: Build awareness and interest in
the mass market
• Promotion: Reduce to take advantage of
heavy consumer demand
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Maturity Stage Characteristics
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Sales: Peak sales
Costs: Low cost per customer
Profits: High profits
Customers: Middle majority
Competitors: Stable number beginning to
decline
• Marketing objective: Maximize profits while
defending market share
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Maturity Stage Strategies
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Product: Diversify brand and models
Price: Match or beat competitors
Distribution: Build more intensive distribution
Advertising: Stress brand differences and
benefits
• Promotion: Increase to encourage brand
switching
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Maturity Stage Strategies
• Modifying the market
• Increase the consumption of the current product
• How?
• Look for new users and market segments
• Reposition the brand to appeal to larger or
faster-growing segment
• Look for ways to increase usage among present
customers
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Maturity Stage Strategies
• Modifying the product
• Changing characteristics such as quality, features,
style or packaging to attract new users and
inspire more usage
• How?
• Improve durability, reliability, speed, taste
• Improve styling and attractiveness
• Add new features
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Maturity Stage Strategies
• Modifying the marketing mix
• Improving sales by changing one or more
marketing mix elements
• How?
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Offer new or improved services
Cut prices
Launch a better ad campaign
Move into new market channels
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Maturity Stage Strategies
• Reinvigorating a
mature brand:
Kellogg kept its 55year-old Special K
brand growing by
turning it into a
healthful, slimming
lifestyle brand
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Decline Stage Characteristics
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Sales: Declining sales
Costs: Low cost per customer
Profits: Declining profits
Customers: Laggards
Competition: Declining number
Marketing objective: Reduce expenditures
and milk the brand
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Decline Stage Strategies
• Product: Phase out weak items
• Price: Cut price
• Distribution: Go selective—phase out
unprofitable outlets
• Advertising: Reduce to level needed to retain
hard-core loyals
• Promotion: Reduce to minimal level
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Marketing at Work
• Over its 79-year
history, the Zippo
brand has evolved to
meet changing
market needs
• Broadened its focus
from just selling
lighters to selling “all
things flame”
Product Decisions and Social
Responsibility
• Companies must consider
• Public policy issues
• Regulations regarding acquiring or dropping
products
• Patent protection
• Product quality and safety, and warranties
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International Product and Services
Marketing
• Companies face
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challenges in the
international market
They can
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Standardize
products across
markets
Adapt products to
local tastes
Kit Kat benefits from a coincidental
similarity between the bar’s name and
the Japanese phrase, kitto katsu, which
roughly translates to “Surely you win!”
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Rest Stop: Reviewing the Concepts
• Explain how companies find and develop
•
•
new-product ideas
List and define the steps in the new-product
development process and the major
considerations in managing this process
Describe the stages of the product life cycle
and how marketing strategies change during
the product’s life cycle
8 - 48
Rest Stop: Reviewing the Concepts
• Discuss two additional product and services
issues: socially responsible product decisions
and international product and services
marketing
8 - 49
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mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright © 2013 Pearson Education, Inc.
Publishing as Prentice Hall
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