0 Chapter 10 Developing, Positioning, and Differentiating Products through the Life Cycle

1 Objectives Understand the challenges a company faces in developing and introducing new products. Learn the main stages in developing new products and how they can be better managed. Know the factors that affect the rate at which consumers adopt new products.

2 Objectives Learn what marketing strategies are appropriate at each stage of the product life cycle. Understand how a company can choose and communicate an effective market position.

3 New Product Development What is a “New” Product? – New-to-the-world products – New product lines – Additions to existing product lines – Improvements and revisions of existing products – Repositioned products – Cost reduction products

4 New Product Development New Product Failure is Rampant: – 95% of new U.S. consumer products – 90% of new European consumer products Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions

5 New Product Development Successful new products: – Offer a strong relative advantage – Reflect better understanding of customer needs, and beat the competition to market – Exhibit higher performance-to-cost ratios and higher contribution margins – Are launched with larger budgets – Have stronger top management support

6 Managing New Products Idea generation Idea screening Concept development Concept testing Marketing strategy development Business analysis New Product Development Process: Ideas to Strategy

7 Managing New Products Product development Market testing Commercialization New Product Development Process: Development to Commercialization

8 Consumer Adoption Process Adopters of new products move through five stages: – Awareness – Interest – Evaluation – Trial – Adoption

9 Consumer Adoption Process People adopt new products at different rates – Innovators – Early adopters – Early majority – Late majority – Laggards

10 Marketing Through the Product Life Cycle Five product characteristics influence the rate of adoption: – Degree of relative advantage – Degree of compatibility – Degree of complexity – Degree of divisibility (trialability) – Degree of communicability

11 Stages of the Product Life Cycle PLC Stages Introduction Introduction Growth Maturity Decline Low sales High costs per customer Negative profits Innovator customers Few competitors

12 Stages of the Product Life Cycle PLC Stages Introduction Growth Growth Maturity Decline Rising sales Average costs Rising profits Early adopters customers Growing competition

13 Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Maturity Decline Peak sales Low costs High profits Middle majority customers Stable/declining competition

14 Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Decline Declining sales Low costs Declining profits Laggard customers Declining competition

15 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Introduction Growth Maturity Decline Objective: to create awareness and trial Offer a basic product Price at cost-plus Selective distribution Awareness – dealers and early adopters Induce trial via heavy sales promotion

16 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Growth Growth Maturity Decline Objective: maximize market share Offer service, product extensions, warranty Price to penetrate Intensive distribution Awareness and interest – mass market Reduce promotions due to heavy demand

17 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Growth Maturity Maturity Decline Objective: maximize profit while defending market share Diversify brands/items Price to match or beat competition Intensive distribution Stress brand differences and benefits Increase promotions to encourage switching

18 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Decline Objective: reduce costs and milk the brand Phase out weak models Cut price Selective distribution Reduce advertising to levels needed to retain hard-core loyalists Reduce promotions to minimal levels

19 Positioning and Differentiation Two views of positioning: – Ries and Trout: products are positioned in the mind of prospect – Treacy and Wiersema: positioning via value disciplines Product leader firm Operationally excellent firm Customer intimate firm

20 Positioning and Differentiation Positioning statements: – To (target group and need) our (brand) is (concept) that (point-of-difference) Example: To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

21 Positioning and Differentiation Differentiated products feature meaningful and valuable differences that distinguish the company’s offering from the competition. Differences are stronger when they are important, distinctive, superior, preemptive, affordable, and profitable.

22 Positioning and Differentiation Form Features Performance Conformance Durability Reliability Repairability Style Design Product Differentiation Tools

23 Positioning and Differentiation Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Miscellaneous Services Differentiation Tools

24 Positioning and Differentiation Competence Courtesy Credibility Reliability Responsiveness Communication Personnel Differentiation Tools

25 Positioning and Differentiation Coverage Expertise Performance Channel Differentiation Tools Symbols Media Atmosphere Events Image Differentiation Tools