1. New Product Development In general, 80-94% of new products fail. Even in a large cereal company that invests a great deal in R&D, 40% of their products fail. A Booz, Allen & Hamilton study of 700 companies reported that 31% of profits come from new products Only one of every 60 products makes it from the idea stage to the test market stage RJR Nabisco spent $325 million on its smokeless cigarette and $125 million on an updated version called the Eclipse– they failed! There are 150 kinds of wine coolers, 75 body washes, over 600 package/flavor/size combinations of one producer of coffee In 1997 over 30,000 new products were introduced (doubled since 1986) The average supermarket contains about 30,000 products In the UK only 2% of products are substantially new

2. Influence of Product Characteristics on Rate of Adoption Divisibility Can the innovation be used on a trial basis? Compatibility Does the innovation fit the values and experience of the target market? Complexity Is the innovation difficult to understand or use? Relative Advantage Is the innovation superior to existing products? Communicability Can results be easily observed or described to others? Product Characteristics Product Characteristics

3. Causes of New Product Failures Causes of New Product Failures Sales are too low: –Need is not shared by enough customers. –Lack of awareness –Wrong market definition Lack of fit with company: –Low motivation –Failure to build necessary capabilities Not new or different: –No product improvement –No perceived improvement Positioning issues: –Unclear Positioning –Inferior Positioning Product design problems Cost of product development Competitive reaction: –Unanticipated –Imitation and Improvement Supply changes: –Cost of raw material, labor or capital increase. –Suppliers’ breakdown Lack of repeat purchase: –Product only “good on paper” –Product is too good Not meeting financial goals: –ROI, breakeven time, etc. Lack of channel support: –Availability. –Shelf space –Demo’s –Service Forecasting error: –Too optimistic –Too pessimistic Bad Timing: –Too early –Too late –Technological and Marketing windows of opportunity

4. New-Product Development Strategies Original Products Original Products Product Improvements Product Improvements Product Modifications Product Modifications New Brands New Brands Acquired Companies Acquired Companies Acquired Patents Acquired Patents Acquired Licenses Acquired Licenses Strategies for Obtaining New Product Ideas

6. Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Distribution Increase number of distribution outlets Advertising Build awareness and interest in the mass market

7. Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits, then lower profits Maximize profits while defending market share Diversify brand and models Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

8. Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers Reduce to level needed to retain hard-core loyal customers

9. Product Life Cycle Diffusion of Floppy Drives

12. The Marketing BSC