1. New-Product Development and Product Life-Cycle Strategies
Chapter 9
New-Product Development and Product Life-Cycle Strategies

2. Road Map: Previewing the Concepts
Explain how companies find and develop new-product ideas.
List and define the steps in the new-product development process.
Describe the stages of the product life cycle.
Explain how marketing strategies change during the product’s life cycle.

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

4. Causes of New-Product Failures
One study estimated that as many as 80% of new consumer packaged products fail.
Only about 40% of new consumer products are around 5 years after introduction.
Why?
Overestimation of market size,
Product design problems,
Product incorrectly positioned, priced, or advertised,
Product may have been pushed despite poor marketing research findings,
Costs of product development, or
Competitive actions.

5. Improving New-Product Success
New-product success depends on having a:
Unique superior product (one with higher quality, features, and value in use), and a
Well-defined product concept (a defined target market, product requirements, and benefits).
To create successful new products, the company must:
understand its consumers, markets, and competitors, and
develop products that deliver superior value to customers.

6. Major Stages in New-Product Development (Fig. 9-1)

7. New Product Development Process New Product Development Process Step 1
New Product Development Process New Product Development Process Step 1. Idea Generation
Systematic Search for New Product Ideas Obtained From Employees and Also From:
Competitors
Customers
Distributors
Suppliers

8. New Product Development Process Step 2. Idea Screening
Helps spot good ideas and drop poor ones as soon as possible.
Many companies have systems for rating and screening ideas which estimate:
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Then, the idea is evaluated against a set of general company criteria.

9. New Product Development Process Step 3. Concept Development
1. Develop New Product Ideas
into Alternative Detailed
Product Concepts
New Product Development Process Step 3. Concept Development
2. Concept Testing - Test the
New-Product Concepts with
Groups of Target Customers
Product Image is the Way Consumers Perceive an Actual or Potential Product
3. Choose the One That Has the
Strongest Appeal to Target
Customers

10. DaimlerChrysler’s Electric Car
The company’s task is to develop its fuel-cell powered electric car into alternative product concepts, find out how attractive each is to customers, and choose the best one.

11. New Product Development Process Step 4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
New Product Development Process Step 4. Marketing Strategy
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy

12. Step 5. Business Analysis Step 6. Product Development
Review of Product Sales, Costs, and Profits
Projections to See if They Satisfy Company Objectives
Step 5. Business Analysis Step 6. Product Development
If No, Eliminate
Product Concept
If Yes, Move to
Product Development

13. New Product Development Process Step 7. Test Marketing
Product and marketing program are introduced into more realistic market settings.
Can be very expensive and time consuming.
Test the following:
Positioning strategy,
Advertising,
Distribution,
Pricing,
Branding,
Packaging,
Budget levels.

14. New Product Development Process Step 8. Commercialization
Introducing the New Product into the Market
When is the
Right Time to
Introduce
Product?
Where to
Launch a
New
Product?

15. Interactive Student Assignments
Form students into groups of three to five. Each group should read the opening vignette to the chapter about Microsoft and the software industry. Each group should then answer the following questions:
Comment on Microsoft’s ability to bring new products to the marketplace.
What lies ahead for Microsoft?
What secrets has Microsoft learned?

16. Speeding Up New-Product Development
Step 1
Step 2
Step 3
Step 4
Simultaneous (Team-Based)
Step 1
Step 2
Step 3
Step 4
Sequential

17. Product Life Cycle (Fig. 9-2)
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and
Profits ($)
Sales and Profits Over the Product’s Life From Inception to Demise

18. Applications of the Product Life Cycle
Product class which has the longest life cycles (i.e. gas-powered cars),
Product form which tends to have the standard PLC shape (i.e. minivans),
Brand which can change quickly because of changing competitive attacks and responses (i.e. Ford Taurus),
Style which is a basic and distinctive mode of expression (formal clothing),
Fashion which is a popular style in a given field (business casual),
Fad which is a fashion that enters quickly, is adopted quickly, and declines fast (pet rocks).

19. Problems Using the PLC
The PLC Concept can be applied by marketers for describing how products and markets work, but may also present some problems:
Trouble identifying Which Stage of the PLC the Product Is In
Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC
Strategy is Both a Cause and a Result of the Product’s Life Cycle

20. Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative or low
Create product awareness and trial
Offer a basic product
Usually is high
Distribution
High distribution expenses
Advertising
Spending is high to inform consumers

21. 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 and models
Remain where they are or fall slightly
Distribution
Increase number of distribution outlets
Advertising
Educating consumers and meeting competition

22. Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Begin to slow
Low cost per customer
High profits, then lower profits
Maximize profits while defending market share
May modify product
May decline
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits

23. Maturity Stage of the PLC
Modifiying the Market
Company tries to increase consumption of the current product
Modifying the Product
Changing characteristics such as quality, features, or styles to attract new users
Modifying the Marketing Mix
Company tries to improve sales by changing one or more marketing mix elements

24. 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, harvest, or drop the product
Phase out weak items
Cut price
Distribution
Selective: phase out unprofitable outlets
Advertising
Reduce to level needed to retain
hard-core loyal customers

25. Discussion Question
Pick a soft drink, car, or food product, and trace the product’s life cycle.
Project when the product might enter a decline stage and discuss strategies to reverse the decline.
This is an action-oriented discussion question intended to get the student to apply the information and knowledge gained from the text material to a “real-world” example. The instructor can apply more structure by specifically assigning which product the students will use (the instructor could select from any of the areas mentioned in the question) or the class can be divided into teams and given the assignment. However, the method of administration, the instructor should allow enough time to discuss the results of the project so all students can benefit from the learning experience.
Students should carefully follow the life cycle description given in the chapter (See Table 9-2 for a good summary of the stages or Marketing at Work 9-3 for a practical application illustrations). If there is deviation, the student should be asked to explain the rationale for the deviation. In addition, students should be asked how they drew their conclusions on the decline of their chosen product. Factors that contributed to the decline should be discussed. How could the decline be reversed (if at all)?

26. Rest Stop: Reviewing the Concepts
Explain how companies find and develop new-product ideas.
List and define the steps in the new-product development process.
Describe the stages of the product life cycle.
Explain how marketing strategies change during the product’s life cycle.