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Chapter 9 Developing and Managing Products Prepared by Deborah Baker Texas Christian University Chapter 9 Ver 2e ©2000 South-Western College Publishing 1 Chapter 9 Objectives 1. Explain the importance of developing new products and describe the six categories of new products. 2. Explain the steps in the new-product development process. 3. Explain the concept of product life cycles. 4. Explain the diffusion process through which new products are adopted. Chapter 9 Ver 2e ©2000 South-Western College Publishing 2 Categories of New Products New-To-The-World New Product Lines Six Categories of New Products Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Chapter 9 Ver 2e ©2000 South-Western College Publishing 3 The New-Product Development Process Long-Term Commitment New Product Strategy Capitalize on Experience New Product Success Factors Chapter 9 Ver 2e Establish an Environment ©2000 South-Western College Publishing 4 New-Product Development Process New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product Chapter 9 Ver 2e ©2000 South-Western College Publishing 5 Idea Generation Customers Employees Distributors Competitors Sources of New-Product Ideas R&D Consultants Creative Thinking Chapter 9 Ver 2e ©2000 South-Western College Publishing 6 Business Analysis Preliminary Demand Considerations in Business Analysis Stage Cost Sales Profitability Chapter 9 Ver 2e ©2000 South-Western College Publishing 7 Development Development Phase Decisions Creation of prototype Packaging Branding Labeling Promotion strategy Pricing Distribution Technical production feasibility Final government approvals if needed Chapter 9 Ver 2e ©2000 South-Western College Publishing 8 Test Marketing Criteria for Choosing a Test Market Similar to planned distribution Relative isolation Advertising availability Diversified cross section No atypical purchase habits Representative population Typical per capita income Chapter 9 Ver 2e Not overly used Not easily “jammed” Year-round sales stability No dominant TV; multiple media Available retailers Available research/audit Free of unusual influences ©2000 South-Western College Publishing 9 Four Stages of Product Life Cycle Maturity Stage Decline Stage Dollars Introductory Growth Stage Stage Product Category Sales Product Category Profits 0 Time Chapter 9 Ver 2e ©2000 South-Western College Publishing 10 Introductory Stage Full-Scale Launch of New Products High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels Chapter 9 Ver 2e ©2000 South-Western College Publishing 11 Growth Stage Offered in more sizes, flavors, options Increasing rate of sales Entrance of competitors Market consolidation Healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered Economies of scale Chapter 9 Ver 2e ©2000 South-Western College Publishing 12 Maturity Stage Many consumer products are in Maturity Declining sales growth Saturated markets Cosmetic product changes Extending product line Marginal competitors drop out Heavy promotions to dealers and consumers Prices and profits fall Niche marketers emerge Chapter 9 Ver 2e ©2000 South-Western College Publishing 13 Decline Stage Rate of decline depends on change in tastes or adoption of substitute products Long-run drop in sales Competitors forced out of market Small specialty firms manufacture product Chapter 9 Ver 2e ©2000 South-Western College Publishing 14 Implications for Marketing Management Promote more frequent use Find new target markets Find new uses Price below market Strategies to Prevent Decline Phase New distribution channels Change ingredients Dramatic new guarantee Chapter 9 Ver 2e ©2000 South-Western College Publishing 15 Marketing Strategies During PLC INTRODUCTION Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Chapter 9 Ver 2e Limited models Frequent changes GROWTH More models Frequent changes. Limited Expanded Wholesale/ dealers. Longretail distributors term relations MATURITY Large number Eliminate of models. unprofitable models Extensive. Margins drop. Shelf space Awareness. Aggressive ads. Advertise. Stimulate Stimulate Promote heavily demand.Sampling demand Higher/recoup development costs Fall as result of competition & efficient production. DECLINE Prices fall (usually). ©2000 South-Western College Publishing Phase out unprofitable outlets Phase out promotion Prices stabilize at low level. 16 The Spread of New Products Innovators Early Adopters Categories of Adopters in the Diffusion Process Early Majority Late Majority Laggards Chapter 9 Ver 2e ©2000 South-Western College Publishing 17 Percentage of Adopters Categories of Adopters Early Innovators Adopters 13.5% 2.5% Early Majority 34% Late Majority 34% Laggards 16% Time Chapter 9 Ver 2e ©2000 South-Western College Publishing 18 Rate of Adoption Complexity Compatibility Product Characteristics Predict Rate of Adoption Relative Advantage Observability Trialability Chapter 9 Ver 2e ©2000 South-Western College Publishing 19 Product Life Cycle & Diffusion Process Introduction Growth Decline Maturity Product life cycle curve Early majority Late majority Early adopters Innovators Laggards Diffusion curve Chapter 9 Ver 2e ©2000 South-Western College Publishing 20
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