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Chapter 9
New-Product Development and
Product Life-Cycle Strategies
9-1
Road Map: Previewing the Concepts
Explain how companies find and develop
new-product ideas.
List and define the steps in the newproduct development process.
Describe the stages of the product life
cycle.
Explain how marketing strategies change
during the product’s life cycle.
9-2
New-Product Development
Strategy
Strategies for Obtaining New-Product Ideas
Acquired
Companies
Original
Products
Acquired
Patents
Product
Improvements
Acquired
Licenses
Product
Modifications
New
Brands
9-3
Causes of New-Product Failures
One study estimated that as many as 80% of new
consumer packaged products fail.
Only about 40% of new consumer products are
around 5 years after introduction.
Why?
Overestimation of market size,
Product design problems,
Product incorrectly positioned, priced, or advertised,
Product may have been pushed despite poor marketing
research findings,
Costs of product development, or
Competitive actions.
9-4
Improving New-Product Success
New-product success
depends on having a:
Unique superior product
(one with higher
quality, features, and
value in use), and a
Well-defined product
concept (a defined
target market, product
requirements, and
benefits).
To create successful
new products, the
company must:
understand its
consumers, markets,
and competitors, and
develop products
that deliver superior
value to customers.
9-5
Major Stages in New-Product
Development (Fig. 9-1)
9-6
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas
Obtained From Employees and Also From:
Customers
Competitors
Distributors
Suppliers
9-7
New Product Development Process
Step 2. Idea Screening
Helps spot good ideas and drop poor ones as
soon as possible.
Many companies have systems for rating and
screening ideas which estimate:
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Then, the idea is evaluated against a set of
general company criteria.
9-8
New Product Development Process
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
Product Image is the
Way Consumers
Perceive an Actual or
Potential Product
3. Choose the One That Has the
Strongest Appeal to Target
Customers
9-9
DaimlerChrysler’s Electric Car
The company’s task is
to develop its fuel-cell
powered electric car
into alternative
product concepts, find
out how attractive
each is to customers,
and choose the best
one.
9-10
New Product Development Process
Step 4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy
9-11
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits
Projections to See if They Satisfy Company Objectives
If No, Eliminate
Product Concept
If Yes, Move to
Product Development
9-12
New Product Development Process
Step 7. Test Marketing
Product and
marketing program
are introduced into
more realistic
market settings.
Can be very
expensive and time
consuming.
Test the following:
Positioning strategy,
Advertising,
Distribution,
Pricing,
Branding,
Packaging,
Budget levels.
9-13
New Product Development Process
Step 8. Commercialization
Introducing the New Product into the
Market
When is the
Right Time to
Introduce
Product?
Where to
Launch a
New
Product?
9-14
Form students into groups of three to five.
Each group should read the opening vignette
to the chapter about Microsoft and the
software industry. Each group should then
answer the following questions:
Comment on Microsoft’s ability to bring new
products to the marketplace.
What lies ahead for Microsoft?
What secrets has Microsoft learned?
9-15
Step 1
Step 2
Step 3
Step 4
Step 2
Sequential
Step 1
Speeding Up New-Product
Development
Simultaneous (Team-Based)
Step 3
Step 4
9-16
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
9-17
Applications of the Product Life
Cycle
Product class which has the longest life cycles (i.e.
gas-powered cars),
Product form which tends to have the standard PLC
shape (i.e. minivans),
Brand which can change quickly because of changing
competitive attacks and responses (i.e. Ford Taurus),
Style which is a basic and distinctive mode of
expression (formal clothing),
Fashion which is a popular style in a given field
(business casual),
Fad which is a fashion that enters quickly, is adopted
quickly, and declines fast (pet rocks).
9-18
Problems Using the PLC
The PLC Concept can be
Trouble identifying
applied by marketers for
Which Stage of the
PLC the Product Is
describing how products
In
and markets work, but
may also present some Difficult to Forecast
the Sales Level, the
problems:
Length of Each Stage,
and Shape of the PLC
Strategy is Both a
Cause and a Result
of the Product’s Life
Cycle
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Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Low sales
Costs
High cost per customer
Profits
Negative or low
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Usually is high
Distribution
High distribution expenses
Advertising
Spending is high to inform consumers
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Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Maximize market share
Product
Offer new product features and models
Price
Remain where they are or fall slightly
Distribution
Increase number of distribution outlets
Educating consumers and meeting
competition
Advertising
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Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Begin to slow
Costs
Low cost per customer
Profits
Product
High profits, then lower profits
Maximize profits while defending
market share
May modify product
Price
May decline
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
Marketing Objectives
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Maturity Stage of the PLC
Company tries to increase consumption of
the current product
Changing characteristics such as quality,
features, or styles to attract new users
Company tries to improve sales by changing
one or more marketing mix elements
9-23
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Marketing Objectives
Reduce expenditure and maintain,
harvest, or drop the product
Product
Phase out weak items
Price
Cut price
Distribution
Selective: phase out unprofitable outlets
Reduce to level needed to retain
hard-core loyal customers
Advertising
9-24
Pick a soft drink, car, or food product,
and trace the product’s life cycle.
Project when the product might enter a
decline stage and discuss strategies to
reverse the decline.
9-25
Rest Stop: Reviewing the Concepts
Explain how companies find and develop
new-product ideas.
List and define the steps in the newproduct development process.
Describe the stages of the product life
cycle.
Explain how marketing strategies change
during the product’s life cycle.
9-26