New Product Strategy Why do new products fail? Inability of the company to match up its offerings to the needs of the customers

Categories of New Product 1.New-to-the-world product Product that are inventions; products that change consumption behavior 2.New category entries Products that take a firm into a category new to it. Products are not new to the world

Categories of New Product 3.Additions to product lines (product line extension) Products that are line extensions to firm’s current markets – Hallmark’s greeting cards 4.Product improvements Improved performance; greater perceived value – Windows XP

Categories of New Product 5.Repositionings Products retargeted for a new use or application Market penetration strategy 6.Cost reductions: new products that provide similar performance at a lower cost

Applications: Ensuring Success 1.Product Improvement Make the use easier: ask customers why they don’t use the product as much Packages that can be placed directly in a microwave Frozen waffles

Applications: Ensuring Success 2.Revitalize the brand: introduce some energy, vitality, and buzz into brand name Abercrombie and Fitch

Applications: Ensuring Success 3.New category entries: find commonality in distribution, marketing, or brand name recognition. Family branding: Gerber baby clothes, Pierre Cardin wallets, Benihana frozen entrees

Challenge in Developing New Products Need to shorten products “time to market” -Reduce time between idea generation and product availability -A short “time to market” can create a competitive advantage

Challenge in Developing New Products Research – need for timely and accurate information: tracking competitors and customers; tracking marketing environment Is new product development consistent with organizational mission and objectives?

Challenge in Developing New Products Will customers benefit? Are there manufacturing, marketing, or distribution cost efficiencies with the new product? Schwinn - exercise bicycles

Challenge in Developing New Products Does the firm have the needed competencies and resources in R&D, manufacturing, and marketing to successfully develop product? Adding wood stains to a line of paints: includes totally new manufacturing effort, raw materials technology, or marketing effort.

Sales & Profit Life CyclesIntroductionGrowthMaturityDecline Time Sales & profits ($)

Product Life Cycle Introduction - low sales; negative profits; high costs: technological problems, recover R&D Create product awareness and trial; samples/coupons to induce trial; price skimming to recoup development costs; price penetration to capture market share

Product Life Cycle Growth – rapidly rising sales; rising profits; growing competition Maximize market share; improve product quality; add new features

Product Life Cycle Maturity – peak sales; high profits Maximize profit; defend market share; enter new market segments (diet cola); win competitors customers (Pepsi-Cola)

Product Life Cycle Decline – declining sales and profits; causes of decline: technological advances; change in consumer tastes; competition Reduce expenditure and “milk” the brand/product - cut costs

Product Life Cycle Implications Different products have different life spans (length and shape of PLC) Anticipate differences in sales over time and develop appropriate strategies

Product Life Cycle Time