New-Product Development and Product Life-Cycle Strategies

Improving New-Product Success To create successful new products, the company must: Understand its consumers, markets, and competitors AND Develop products that deliver superior value to customers.

New Product Development Process New Product Idea Generation Systematic Search for New Product Ideas Obtained From Employees and Also From: Competitors Customers Distributors Suppliers

New Product Screening Estimate Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Evaluate the idea against a set of general company criteria.

New Product Concept Development 1. Develop New Product Ideas into Alternative Detailed Product Concept New Product Concept Development 2. Concept Testing - Test the New-Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers

New Product Marketing Strategy Target Market Marketing Mix Strategy Marketing Budget Sales & Profit Goals Review of above to See if They Satisfy Company Objectives New Product Marketing Strategy

New Product Test Marketing Positioning strategy Advertising Distribution Pricing Branding Packaging Budget levels

Product Life Cycle (Fig. 9-2) Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise

Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative or low Create product awareness and trial Offer a basic product Usually is high Distribution High distribution expenses Advertising Spending is high to inform consumers

Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer new product features and models Remain where they are or fall slightly Distribution Increase number of distribution outlets Advertising Educating consumers and meeting competition

Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Begin to slow Low cost per customer High profits, then lower profits Maximize profits while defending market share May modify product May decline Distribution Build more intensive distribution Advertising Stress brand differences and benefits

Maturity Stage of the PLC Modifiying the Market Company tries to increase consumption of the current product Modifying the Product Changing characteristics such as quality, features, or styles to attract new users Modifying the Marketing Mix Company tries to improve sales by changing one or more marketing mix elements

Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, harvest, or drop the product Phase out weak items Cut price Distribution Selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers

Discussion Question 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. This is an action-oriented discussion question intended to get the student to apply the information and knowledge gained from the text material to a “real-world” example. The instructor can apply more structure by specifically assigning which product the students will use (the instructor could select from any of the areas mentioned in the question) or the class can be divided into teams and given the assignment. However, the method of administration, the instructor should allow enough time to discuss the results of the project so all students can benefit from the learning experience. Students should carefully follow the life cycle description given in the chapter (See Table 9-2 for a good summary of the stages or Marketing at Work 9-3 for a practical application illustrations). If there is deviation, the student should be asked to explain the rationale for the deviation. In addition, students should be asked how they drew their conclusions on the decline of their chosen product. Factors that contributed to the decline should be discussed. How could the decline be reversed (if at all)?