New-Product Development & Product Life-Cycle Strategies

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization The systematic search for new product ideas.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization Screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization Development an attractive idea into a product concept which provides more detailed stated in meaningful consumer terms. Then test new- product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization Designing an initial marketing strategy for a new product based on the product concept.

Marketing Strategy Statement Consists of 3 parts:  Target market  The planned value proposition  The sales, market share, and profit goals for the first few years.

Marketing Strategy Statement Example: electric car Product concept:  A “green” car appealing to an environmentally conscious people who want practical, low polluting transportation. Marketing strategy statement:  The target market is younger, well-educated, moderate-to high- income individuals, couples, or small families seeking practical, environmentally responsible transportation. The car will be positioned as more fun to drive and less polluting than today’s internal combustion engine or hybrid cars. The company will aim to sell 100,000 cars in the first year, at loss of not more than $15 million. In second year, the company will aim for sales of 120,000 cars and a profit of $25 million.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization A review of the sales, costs, and profit projections for new product to find out whether these factors satisfy the company’s objectives.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization Developing the product concept into a physical product in order to ensure that the product idea can be turn into a workable market offering.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization The stage of new-product development in which the product and marketing program are tested in realistic market settings.

New Product Development Process Idea generation Idea screening Concept Development & testing Marketing strategy development Business analysis Product development Test marketing Commercialization Introducing a new product into the market

Product Life-Cycle Strategies The course of a product’s sales and profits over its lifetime. It involves five distinct stages: 1.Product development 2.Introduction 3.Growth 4.Maturity 5.Decline

Sales & Profits over the Product’s Life from Inception to Decline Sales and profits ($) Losses/ Investment ($) Time This shows typical product life cycle (PLC), not all products follow this PLC.

Stage 1 Product development: Begins when company finds and develops a new-product idea. During this stage, sales are zero and the company’s investment costs add up.

Stage 2 Introduction: Starts when the new product is first launched. Is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent or low in this stage because of the heavy expenses of product introduction.

Stage 3 Growth: Is a period of rapid market acceptance and increasing profits. Product’s sales start climbing quickly.

Stage 4 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.

Stage 5 Decline: Is the period when sales fall off and profits drop. Sales decline for many reasons: technological advances, shifts in consumer tastes, and increased competition. – A firm must regularly review product sales, market shares, costs, and profit trends. Then, management can decide whether to maintain, harvest, or drop the declining products.

Summary of PLC Characteristics Characteristics IntroductionGrowthMaturityDecline SalesLow salesRapidly rising sales Peak salesDeclining sales CostsHigh cost per customer Average cost per customer Low cost per customer Low cost per customers ProfitsNegativeRising profitsHigh profitsDeclining profits CustomersInnovatorsEarly adoptersMiddle majority Laggards CompetitorsFewGrowing number Stable number begin to decline Declining number

Summary of PLC Objectives IntroductionGrowthMaturityDecline Marketing Objectives Create product awareness and trial Maximize market share Maximize profit while defending market share Reduce expenditure and milk the brand

Summary of PLC Strategies Strategies IntroductionGrowthMaturityDecline ProductOffer a basic product Offer product extensions, service, warranty Diversify brand and models Phase out weak items PriceUse cost-plusPrice to penetrate market Price to match or beat competitors Cut price DistributionBuild selective distribution Build intensive distribution Build more intensive distribution Go selective: phase out unprofitable outlets AdvertisingBuild product awareness among early adopters and dealers Build awareness and interest in the mass market Stress brand differences and benefits Reduce to level needed to retain hard-core loyals Sales promotionUse heavy sales promotion to entice trial Reduce to take advantage of heavy consumer demand Increase to encourage brand switching Reduce to minimal level