Download Chapter 7 Marketing Research and Decision Support Systems

Chapter 10
Developing and Managing Products
Types of innovations
 Continuous innovations - normal upgrading, no change in
user behaviors.
 New to the market
 New to seller
 New to producer
 Discontinuous innovations – require users to change
behaviors. New-to-the-world products.
NPD Process
4. Development
3. Business Analysis
Alternative versions,
describe in consumer terms
5. Test marketing
6. Commercialization
Physical product, $$$
2. Idea
Screening
Reduce # quickly
1. Idea
Generation
Many -- employees, customers, suppliers, distributors, competitors
New Product Development
2. Idea Screening (what do we have? +/-)
• In pharmacy, 1 of 5,000 new drug ideas is
common
• In autos, 1 of 20 new car concepts is made to
prototype
• Point? Brainstorm, then cut via research
• Short and long run $ performance
• Social issues:
• Consumer welfare (Ben and Jerry’s)
• Safety ( Marlboro cigarettes) – liability
(McDonald’s hot coffee)
New Product Development
3. Business Analysis
• Examine consumer perceptions (Coors banquet beer)
• Consider view of retailers and wholesaler (Frito Lay)
4. Development (can go hand-in-hand with analysis)
• Product tests (New Coke, movies)
• Risky: (leaks, skewed results)
• Virtual product development: examine without
construction
• Prototype product and marketing strategy
• Longest process (Minute Rice took 18 years!)
Concept Test
Concept Test
A test to evaluate a
new-product idea,
usually before any
prototype has been
created.
Test Marketing
+Costs
+Brand Equity
-Jamming
-Duplication
Standard
Test Market
Limited introduction in a small market
supported by a full-fledged marketing campaign to
gauge customer reactions
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 Cycles
Introduction
Growth
Maturity
Decline
Dollars
Industry
Sales
Industry
Profits
0
Time
Product Life Cycles
INTRODUCTION
Sales
Product
Strategy
Limited models
Frequent
changes
GROWTH
More models
Frequent
changes.
Distribution
Strategy
Limited
Expanded
Wholesale/
dealers. Longretail distributors term relations
Promotion
Strategy
Awareness.
Aggressive ads.
Stimulate
Stimulate
demand.Sampling
demand
Pricing
Strategy
High to recoup
development
costs
Fall as result of
competition &
efficient production.
Time
MATURITY
DECLINE
Large number
Eliminate
of models.
unprofitable
models
Extensive.
Margins drop.
Shelf space
Advertise.
Promote
heavily
Prices fall
(usually).
Phase out
unprofitable
outlets
Phase out
promotion
Prices
stabilize at
low level.
Some misconceptions about PLC
 At the level of the category and not the brand – Cell
phones not CINGULAR wireless.
 Different products go through the stages differently.
 Timing of stages may vary substantially.
Product Life Cycle
 Criticisms:
 Self fulfilling prophecy
 All do not follow pattern
 Product may be in different stages by the market
 What do you see are the advantages of the PLC? Why should
m.managers care?
Product Life Cycle

Factors that may speed products through PLC:
1.
2.
3.
4.
Ease of trial (supermarkets, no risk, test drive)
Ease of use (some assembly required; Toys R Us (bike); Gateway
store)
Easy to communicate advantages (Always low price; cars)
Compatible with customer experience (Poland & free samples)
The Consumer Adoption Process
 Adoption process: series of stages for which consumers
decide whether or not to become a regular user of a new
product, including:
 Awareness
 Interest
 Evaluation
 Trial
 Adoption or rejection
Diffusion
Diffusion
The process by
which the adoption of
an innovation
spreads.
Adopter Categories
Diffusion Process and PLC Curve
Introduction
Growth
Decline
Maturity
Product
life cycle
curve
Sales
LO6
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
Product Characteristics and
the Rate of Adoption
Complexity
Compatibility
Relative Advantage
Observability
Trialability