Copyright © 2007 Pearson Education Canada9-1 Chapter Nine New Product Development and Product Life Cycle Strategies with Duane Weaver

Copyright © 2007 Pearson Education Canada9-2 Outline

Copyright © 2007 Pearson Education Canada9-3 Why Develop New Products? ?

Copyright © 2007 Pearson Education Canada9-4 Why Develop New Products? Follow changing market demands. Remain competitive. Keep up to changing technology. Replace dying products. Refresh and evolve existing products. Diversify product offering to reduce risk.

Copyright © 2007 Pearson Education Canada9-5 Obtaining New Products Acquire. –Patents. –Licenses. –Companies. Develop. –New products. –Modifications to existing products. –Improvements to existing products.

Copyright © 2007 Pearson Education Canada9-6 Some Succeed – Most Fail Successful new products. –Offer a unique superior product. –Have a well-defined product concept. Products fail. –Market size may have been overestimated. –Poor quality or design. –Incorrect positioning, pricing or promotion. –Does not deliver superior value.

Copyright © 2007 Pearson Education Canada9-7 New-Product Failures Only 10% of new products are still on the market and profitable after 3 years. Failure rate for industrial products is as high as 30%. –Overestimation of market size. –Design problems. –Incorrectly positioned, priced or advertised. –Pushed despite poor marketing research findings. –Development costs. –Competition.

Copyright © 2007 Pearson Education Canada9-8 Disciplined Development Process 1.Idea generation. 2.Idea screening. 3.Product concept. 4.Marketing strategy. 5.Business analysis. 6.Product development. 7.Test marketing. 8.Commercialization.

Copyright © 2007 Pearson Education Canada9-9 Looking at Marketing Strategy Phase One. –Target market, planned market positioning, sales, market share, profit goals. Phase Two. –Product’s planned price, distribution, marketing budget. Phase Three. –Sales and profit goals, marketing mix strategy.

Copyright © 2007 Pearson Education Canada9-10 The Business Analysis Involves a review of the sales, costs and profit projections to assess fit with company objectives. If yes, then move to the product development phase.

Copyright © 2007 Pearson Education Canada9-11 Product Development Develop concept into physical product. Calls for large jump in investment. Prototypes are made. Prototype must have correct physical features and convey psychological characteristics.

Copyright © 2007 Pearson Education Canada9-12 Testing & Commercialization Test marketing. –Test product in selected markets. –Can include virtual testing. Launch product. –Full market distribution at once or in stages. –Often heavy and costly promotion. –Measure market acceptance. –Adjust to meet launch sales objectives.

Copyright © 2007 Pearson Education Canada9-13 Commercialization Must decide on timing (i.e. when to introduce the product). Must decide on where to introduce the product (e.g. single location, state, region, nationally, internationally). Must develop a market rollout plan.

Copyright © 2007 Pearson Education Canada9-14 Product Life Cycle Development – No customers, no profits, heavy spending. Introduction – Early adopter customers, no profits, high launch costs. Growth – Early majority customers, rapid sales growth and revenues. Maturity – Late majority customers, flat sales, declining profits. Decline – Laggard customers, declining sales, replaced by new products. Disposal – often forgotten step – product is recycled, returned, replaced, wears out

Copyright © 2007 Pearson Education Canada9-15 Product Life Cycle Lengths Product class has the longest life cycle (e.g. gas-powered cars). Product form tends to have the standard PLC shape (e.g. dial telephone). Brand PLCs can change quickly because of changing competitive attacks and responses (e.g. Tide, Cheer).

Copyright © 2007 Pearson Education Canada9-16 Style, Fashion and Fads Style is a basic and distinctive mode of expression (e.g. formal clothing, Danish modern furniture). Fashion is a popular style in a given field (e.g. business casual). Fad is a fashion that enters quickly, is adopted quickly and declines fast (e.g. pet rocks).

Copyright © 2007 Pearson Education Canada9-17 That’s All Folks!