Download products that change consumption behavior 2. New

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New Product Strategy
Why do new products fail?
Inability of the company to match up its
offerings to the needs of the customers
Categories of New Product
1. New-to-the-world product
Product that are inventions; products
that change consumption behavior
2. New category entries
Products that take a firm into a
category new to it. Products are not new
to the world
Categories of New Product
3. Additions to product lines (product line
Products that are line extensions to firm’s
current markets – Hallmark’s email greeting
4. Product improvements
Improved performance; greater perceived
value – Windows XP
Categories of New Product
5. Repositionings
Products retargeted for a new use or
Market penetration strategy
6. Cost reductions: new products that
provide similar performance at a lower
Applications: Ensuring Success
1. Product Improvement
Make the use easier: ask customers why
they don’t use the product as much
Packages that can be placed directly in
a microwave
Frozen waffles
Applications: Ensuring Success
2. Revitalize the brand: introduce some
energy, vitality, and buzz into brand
Abercrombie and Fitch
Applications: Ensuring Success
3. New category entries: find commonality
in distribution, marketing, or brand
name recognition.
Family branding: Gerber baby clothes,
Pierre Cardin wallets, Benihana frozen
Challenge in Developing New Products
Need to shorten products “time to market”
- Reduce time between idea generation
and product availability
A short “time to market” can create a
competitive advantage
Challenge in Developing New Products
Research – need for timely and accurate
information: tracking competitors and
customers; tracking marketing
Is new product development consistent
with organizational mission and
Challenge in Developing New Products
Will customers benefit?
Are there manufacturing, marketing, or
distribution cost efficiencies with the
new product?
Schwinn - exercise bicycles
Challenge in Developing New Products
Does the firm have the needed
competencies and resources in R&D,
manufacturing, and marketing to
successfully develop product?
Adding wood stains to a line of paints:
includes totally new manufacturing
effort, raw materials technology, or
marketing effort.
Sales & profits ($)
Sales & Profit Life Cycles
Product Life Cycle
Introduction - low sales; negative profits; high
costs: technological problems, recover R&D
Create product awareness and trial;
samples/coupons to induce trial; price
skimming to recoup development costs; price
penetration to capture market share
Product Life Cycle
Growth – rapidly rising sales; rising profits;
growing competition
Maximize market share; improve product
quality; add new features
Product Life Cycle
Maturity – peak sales; high profits
Maximize profit; defend market share;
enter new market segments (diet cola);
win competitors customers (Pepsi-Cola)
Product Life Cycle
Decline – declining sales and profits;
causes of decline: technological advances;
change in consumer tastes; competition
Reduce expenditure and “milk” the
brand/product - cut costs
Product Life Cycle
Different products have different life
spans (length and shape of PLC)
Anticipate differences in sales over time
and develop appropriate strategies
Product Life Cycle