The Product Lifecycle and New Product Development Chapter 10

New Product Development Definition - the development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts. New products can also come from acquisition of other companies, patents, or licenses – e.g. trap-ease .

Consumers’ perspectives on Newness (Exhibit 10-1) Dynamically Continuous Innovation Major change Discontinuous Innovation Breakthrough Continuous Innovation Ongoing alteration 2

New Product Development Importance of New Product Development: Follow changing market demands To remain competitive Keep up with changing technology Replace dying/old products Diversify product offerings to reduce risks

Characteristics of Successful New Products and Services Relative Advantage Compatibility with existing consumption patterns Trialability – The Opportunity for buyer testing Observability – The Chance to see the newness Simplicity of Usage

Exercise Form groups of 3-4 students. Pick a new product that is less than a 1 year old. How has it become successful/unsuccessful? What was it’s marketing approach?

New Product Development Successful new products: Offer a unique superior product, such as higher quality, new features, or higher value in use Have a well-defined (and tested) product concept, before development investment is made New products fail at a high rate due to: Market size may have been overestimated Poor quality or design Incorrect positioning, pricing, or promotion (i.e., trap-ease)

New Product Development Generally a five step process: 1. Idea generation 2. Screening of ideas 3. Business analysis 4. Prototype development 5. Commercialization

The Product Lifecycle

Understanding the Product Lifecycle Product life cycle (PLC): the course of a product’s sales and profits over its lifetime Interesting idea, developed in the 1950’s, still here! The product lifecycle has four stages: Introduction Growth Maturity Decline

Product Life-Cycle Strategies Introduction: slow sales growth, profits still negative due to high costs of development and product launch Growth: rapid sales growth and profits Maturity: sales slow down, profits decline due to competition Decline: sales and profits fall as product is replaced by new alternatives

Product Life-Cycle - Illustrated Tide Detergent Sales Profit ($) Sales VCRs Video Phones Hybrid Vehicles Profits Loss ($) Development Introduction Growth Maturity Decline

Maturity Stage Strategy Modifying the product. Changing characteristics such as quality, features or style to attract new users and to inspire more usage. How? Improve durability, reliability, speed, taste. Improve styling and attractiveness. Add new features. Expand usefulness, safety, convenience. Chapter 9, page 360

Maturity Stage Strategy Modifying the market. Increase the consumption of the current product. How? Look for new users and market segments. Reposition the brand to appeal to larger or faster-growing segment. Look for ways to increase usage among present customers. Modifying the marketing mix. Improving sales by changing one or more marketing mix elements. How? Cut prices. Launch a better ad campaign. Move into larger market channels (distribution). Offer new or improved services to buyers. Chapter 9, page 360

Discussion Question – page 282, Question #2

Special Life Cycles Styles: Basic and distinctive mode of expression Once accepted, popularity will vary over time Fashion: A currently accepted or popular style Gains acceptance, peaks, then declines Tend to go in cycles with generations Fads: Gain rapid acceptance, peak early, and decline quickly Tend to attract limited market Products that are novel and do not address basic needs

Length of the Product Life Cycle Ranges from a few weeks to decades. Length of individual stages varies from one product category to the next (Hershey chocolate). Stages of any given life cycle usually last for different periods. Some products make several different entrances and exits through the Product Life Cycle – examples?.

Adoption processes Awareness Interest Evaluation Trial Adoption TIME 31

The Diffusion Process (Exhibit 10-7)

Expansion Strategies Product line extension Product category extension Item added to an existing product line Product category extension New item or new line of items in a product category Cannibalize To eat into the sales revenues of another product item in the same line