1. New Product Development and Product Life-Cycle Strategies9
Chapter
New Product Development and Product Life-Cycle Strategies
Course: Mkt 202 (Section 6 & 21)
Lecturer: Emran Mohammad

2. New-Product Development and Product Life-Cycle Strategies
Topic Outline
9.1 New-Product Development Strategy
9.2 New-Product Development Process
9.3 Managing New-Product Development
9.4 Product Life-Cycle Strategies
9.5 Additional Product and Service Considerations
Ch 9 -2
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3. Product Life-Cycle Strategies for new products
1. Product development
Sales are zero and investment costs mount.
2. Introduction
Slow sales growth and profits are nonexistent.
3. Growth
Rapid market acceptance and increasing profits.
4. Maturity
Slowdown in sales growth and profits level off or decline.
5. Decline
Sales fall off and profits drop.
Notes to Instructor
Real Marketing 9.2 presents how Etislat challenged different stages of the product life cycle in different countries.
Etisalat joined different markets at different stages of their product life cycle and faced fierce competition in each of these markets. It had to adapt to different competitive situations, adopt different strategies, and employ different tactics to cope with
the various dynamics in each of these markets.
Ch 9 -3
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4. Product Life-Cycle Strategies
1. Product Development
At LEGO, new-product development begins with listening to customers and including them in the design process. The LEGO Design by Me site lets customers download 3D design software, create a LEGO toy, and then order the kit to build it.

5. Reasons for new product failure
Overestimation of market size
Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
Note to Instructor
If you are running a marketing plan project in your class, this is a good time to ask why their project ideas might fail in the real market. You can then ask what they plan to do to prevent failure.
The book provides Keda tea as an example of new product failure. Keda Tea was launched with a successful advertising campaign in order to raise awareness of the product, but consumers couldn’t find it on the shelves. There was a production problem, which significantly affected Keda Tea’s performance in the market. The product was discontinued and exited the market quickly. Such a problem at the introductory phase harmed the image and credibility of the brand.
Ch 9 -5
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6. Copyright © 2011 Pearson Education
The New-Product Development Process: 8 steps
Ch 9 -6
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7. The New-Product Development Process
i) Idea generation is the systematic search for new-product ideas.
Sources of new-product ideas:
a. Internal: Gathering new product ideas by-
Formal R&D
Own employees
b. External: Gathering new product ideas from-
Distributors
Suppliers
Customers (most important external source)
Note to Instructor
Discussion Question
In groups of four come up with one idea for a new products.
It might be helpful if you assign each group a category including kitchen products, office supplies, laptop accessories, dessert products, bathroom accessories, children’s toys, baby products, etc. Students will realize this is very difficult.
Ch 9 -7
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8. The New-Product Development Process
c. Crowdsourcing or Open Innovation:
Inviting broad communities of people— customers, employees, independent scientists and researchers, and even the public at large—into the new-product innovation process.
Own crowdsourcing: Netfix
Third party crowdsourcing: Paypal
ii) Idea Screening
Screening new-product ideas to spot good ideas and drop poor ones as soon as possible
Crowdsourcing: When Netflix wanted ideas for improving the accuracy of its Cinematch online recommendation system, it decided to “open it up to the world,” promising a $1 million prize for the best solution.

9. The New-Product Development Process
iii) Concept Development and Testing
Product idea is an idea for a possible product that the company can see itself offering to the market.
Product concept is a detailed version of the idea stated in meaningful consumer terms.
Product image is the way consumers perceive an actual or potential product.
Ch 9 -9
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10. The New-Product Development Process
Concept Development
The marketer’s task is to:
Develop the new product into alternative product concepts
Find out how attractive each concept is to customers
Choose the best one
Concept testing
refers to testing new product concepts with groups of target consumers.
Product testing: HP signs up consumers to evaluate prototype imaging and printing products in their homes and offices to gain
insights about their products
Note to Instructor
Concept development: The initial Tesla electric car will go from 0 to 60mph in 4 seconds, travel more than 400 kilometers on a single charge, and cost about a penny a mile to power.
Ch 9 -10
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11. The New-Product Development Process
iv) Marketing Strategy Development
Marketing strategy development refers to the initial marketing strategy for introducing the product to the market. It consists of three parts:
1st: Describes the target market; planned value proposition; sales, market share, and profit goals for the first few years.
2nd: Outlines the product’s planned price, distribution, and marketing budget for the first year.
3rd: Describes the planned long-run sales, profit goals, and marketing-mix strategy.
Ch 9 -11
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12. The New-Product Development Process
v) Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives. vi) Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments.
Ch 9 -12
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13. The New-Product Development Process
vii) Test marketing provides the marketer with experience in testing the product and entire marketing program before full introduction.
Note to Instructor
KFC test marketed its new Kentucky Grilled Chicken product for three years before rolling it out widely. Says the chain’s president, “We had to get it right.”
Standard test markets
Controlled test markets
Simulated test markets
Test marketing: KFC test marketed its new Kentucky Grilled Chicken product for three years before rolling it out nationally.
Ch 9 -13
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14. The New-Product Development Process
New product with large investment
Uncertainty about product or marketing program
When firms test market
Simple line extension
Copy of competitor product
Low costs
Management confidence
When firms may not test market
Note to Instructor
This Web link takes you to Decision Insight—a company involved with online market testing. You can click at many examples they offer of clients as well as their virtual shopping testing products.
Ch 9 -14
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15. The New-Product Development Process
viii) Commercialization: Introducing the new product into the market. The company must decide on:
Introduction timing
Where to launch the product
Microsoft spent $100 million or more on marketing to introduce its Bing search engine
Ch 9 -15
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16. Managing New-Product Development
Successful new-product development should be:
Customer centered new product development: focuses on finding new ways to solve customer problems and create more customer satisfying experiences.
Begins and ends with solving customer problems.
Sequential new-product development is a development approach where company departments work closely together individually to complete each stage of the process before passing it along to the next department or stage
Benefit: Increased control in risky or complex projects
Problem: Slow process
Note to Instructor
In many cases, product development may consist of introducing an adapted version of an existing product for a different market. Real Marketing 9.1 (Nasamat Al-Riyadh) provides a good example about that. Nasamat Al-Riyadh is the outcome of the
accumulated experience of Talaat Moustafa Group (TMG) and Al Oula real-estate companies. Talaat Moustafa Group and Al Oula work on property development and construction projects in the Arab world.
Ch 9 -16
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17. Managing New-Product Development
Team-based new-product development is a development approach where company departments work closely together in cross-functional teams, overlapping in the product-development process to save time and increase effectiveness.
Comparatively fast process: overcome bottlenecks
Sometimes creates organizational tension or confusion
Systematic new-product development is an innovative development approach that collects, reviews, evaluates, and manages new-product ideas.
Creates an innovation-oriented culture
Yields a large number of new-product ideas
Ch 9 -17
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18. Product Life-Cycle Strategies
2. Introduction Stage
Slow sales growth
Little or no profit
High distribution and promotion expense
Managing the PLC: Despite its long list of familiar old brands, until recently, Kraft had far too few good new products. It’s now emphasizing new-product innovation. “Welcome to the new Kraft.”
Ch 9 -18
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19. Product Life-Cycle Strategies
3. Growth Stage
Sales increase
New competitors enter the market
Price stability or decline to increase volume
Consumer education
Profits increase
Promotion and manufacturing costs gain economies of scale
Ch 9 -19
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20. Product Life-Cycle Strategies
4. Maturity Stage
Slowdown in sales
Many suppliers
Substitute products
Overcapacity leads to competition
Increased promotion and R&D to support sales and profits
Note to Instructor
Cars are very mature products so companies are always coming up with new models and features. This is a link to a very funny YouTube ad about a new car product.
Product life cycle: Some products die quickly; others stay in the mature stage for a long, long time. TABASCO® sauce is “over 140 years old and yet still able
to totally whup your butt!”
Ch 9 -20
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21. Product Life-Cycle Strategies
Modifying Strategies in Maturity Stage:
Market modifying
Product modifying
Marketing mix modifying
Note to Instructor
This link is for 1000 Uses of Glad Web site. It is described below, and in the book, as a way to modify the product.
In modifying the market, the company tries to increase the consumption of the current product. It may look for new users and new market segments. The manager may also look for ways to increase usage among present customers. The company might also try modifying the product—changing characteristics such as quality, features, style, or packaging to attract new users and to inspire more usage. It can improve the product’s styling and attractiveness. It might improve the product’s quality and performance—its durability, reliability, speed, taste.
Modifying the market: 101-year old cardmaker American Greetings is reaching out to younger consumers through social-networking widgets
and instant-messaging channels.
Ch 9 -21
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22. Product Life-Cycle Strategies
5. Decline Stage
Maintain the product
Harvest the product
Drop the product
Ch 9 -22
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23. Product Life-Cycle Strategies
Style: A basic and distinctive mode of expression.
Fashion: A currently accepted or popular style in a given field.
Fad: A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.
Note to Instructor
Style is a basic and distinctive mode of expression.
Fashion is a currently accepted popular style in a given field.
Ch 9 -23
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24. Product Life-Cycle Strategies