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Product Development Products Fall into 2 Categories: ► Business Goods: goods purchased by organizations for use in their operation. Ex: Foot Locker purchases shoes from Nike. Promotion Method: Discounts for large volume purchases ► Consumer Goods: goods purchased and used by the consumer for personal use. ►Ex: We buy Nike shoes at Foot Locker. ►Promotion Method: TV, Magazines, Sporting Events ► Point of Difference: Unique product characteristic or benefit that sets the product apart from a competitor’s product. Steps in New Product Development #2. Idea Generation – Generating new product ideas. New ideas come from: ► Consumers ► Employees ► Research ► Development Departments ► Competitors Protocol: statement that identifies a target market, specifies customers needs and wants, explains the new product and its point of difference. ► Focus Groups: a panel of six to ten consumers who discuss opinions about a topic under the guidance of a moderator. Business Analysis: Financial aspect of producing and marketing the product are analyzed. Development: Creating the product ► Prototype: the first model of the product. Company tests its production capabilities to see if the product can be produced at a reasonable cost. #6: Test Marketing ► Test marketing involves offering the product for sale in a small geographic area. This helps project sales. #7: Commercialization – ► Produce the product for mass market. Product Life Cycle ► Product Life Cycle: stages that a product goes through during its life in the marketplace. Introduction Stage: ► The product is first introduce into the market place. Ex: Gatorade Biggest challenge: Attaining shelf space in retail outlets. Two pricing strategies: ►Price Skimming – pricing products high to cover research and development costs ►Penetration pricing – price products low in comparison to a competitors product to increase demand for the product. Growth Stage ► Competitors enter the marketplace if they see that a new product is successful. ► New product features are added – new flavors, colors, sizes ► Distribution outlets increase (vending machines, fountain service, snack bars) Maturity Stage ► Sales slow down for the product ► Must be innovative with your product to move out of this stage. ► Hardees ($6.00 burger) Decline Stage ► Sales, profits and profiles begin to drop. ► Technological changes can cause an entire product category to go to the decline (8Track, cassettes, cd players) ► When they reach this stage, a company does one of two things: Drop the product Keep the product in the market in smaller quantities for brand loyal customers.