Developing New Products and Managing the Product Life-Cycle 8 Developing New Products and Managing the Product Life-Cycle

Chapter Outline New-Product Development Strategy The New-Product Development Process Managing New-Product Development Product Life-Cycle Strategies Product Decisions and Social Responsibility International Product and Services Marketing

Today’s Outline New product development process Class activity three

What do you think about these NEW PRODUCTS? Smucker’s ketchup Gerber’s beef mushroom gravy Fruit of loom detergent Eagle snacks (Anheuser-Busch)

Why New Products Fail LO3 No discernible benefits Chapter 10 Developing and Managing Products Why New Products Fail No discernible benefits Poor match between features and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product Notes:* In consumer goods, 70 to 90 percent of all new products fail within the first year. Reasons are shown on this slide. Failure can be a matter of degree. Absolute failure occurs when a company cannot recover its development, marketing, and production costs. A relative product failure occurs when the product returns a profit but fails to achieve sales, profit, or market share goals. Discussion/Team Activity: Discuss products that have failed. Attempt to characterize the likely reasons for the failure. LO3

New-product Development Strategy New-product development is the development of original products, product improvements, product modifications, and new brands through the firm’s own product- development efforts. Notes to Accompany Slide: Reasons for product failure may include the company overestimating market size, poor design, incorrect positioning, launching at the wrong time, priced too high, or poorly advertised. A high-level executive might push a favorite idea despite poor marketing research findings. Sometimes the costs of product development are higher than expected, and sometimes competitors fight back harder than expected.

The New-product Development Process

Idea Generation Internal Idea Sources External Idea Sources Notes to Accompany Slide: Idea Generation is the systematic search for new-product ideas. Internal sources: includes formal research and development. External sources: includes distributors and suppliers; competitors; online collaborative; customers.

Idea Generation

Idea screening Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible. Real Any real need and wants from customer? Win Any competitive advantage? Worthdoing Sufficient profit?

Concept Development and Testing Product concept is a detailed version of the new-product idea stated in meaningful consumer terms.

Concept Development and Testing Concept testing is testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

Concept Testing Questions Battery-Powered Electric Car

Marketing Strategy Development Marketing Strategy Statement Step 1 Target market Planned value proposition Sales Market share Profit goals Step 2 Price Distribution Marketing budget Step 3 Long-run sales Marketing mix strategy

Business Analysis Business analysis is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

Product development Product development is developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable market offering.

Test marketing Test marketing is the stage of new-product development in which the product and marketing program are tested in realistic market settings. Notes to Accompany Slide: Test marketing costs can be high, and it takes time that may allow competitors to gain advantages. When the costs of developing and introducing the product are low, or when management is already confident about the new product, the company may do little or no test marketing. In fact, test marketing by consumer-goods firms has been declining in recent years.

Commercialization Commercialization involves introducing a new product into the market.

New Product Development Process

Customer-Centered New-Product Development New-product development that focuses on finding new ways to solve customer problems and create more satisfying customer experiences. Notes to Accompany Slide: One study found that the most successful new products are ones that are differentiated, solve major customer problems, and offer a compelling customer value proposition. Another study showed that companies that directly engage their customers in the new-product innovation process had twice the return on assets and triple the growth in operating income of firms that don’t.

Class activity four New product development

Systematic New-Product Development The new-product development process should be holistic and systematic rather than compartmentalized and haphazard.

Product Life-cycle Strategies Notes to Accompany Slide: Product development begins when the company finds and develops a new product idea. During product development, sales are zero and the company’s investment costs mount. Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. Growth is a period of rapid market acceptance and increasing profits. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. Decline is the period when sales fall off and profits drop.

Style, Fashion, and Fads Notes to Accompany Slide: A style is a basic and distinctive mode of expression. A fashion is a currently accepted or popular style in a given field. Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.

Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

General Mills Video Case