1. Marketing Management New Product Development and the Product Life Cycle
Paul Dishman, Ph.D.
Department of Business Management
Marriott School of Management
Brigham Young University
Lecture 14

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

3. Causes of New Product Failures
One study estimated that as many as 80% of new consumer packaged products failed.
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

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

5. Major Stages in New-Product Development (Fig. 9.1)
Marketing
Strategy
Business
Analysis
Concept
Development
and Testing
Product
Development
Idea
Screening
Test
Marketing
Idea
Generation
Commercialization

6. NPD: Idea Screening
Process to 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.

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

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

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

10. Elements that May be Test Marketed by a Company
NPD: Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels
Product
Packaging
Positioning
Branding
Advertising
Elements that May be Test Marketed by a Company
Pricing
Distribution

11. NPD: Test Marketing Standard Controlled Test Market Test Market
Full marketing campaign
in a small number of
representative cities.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.

12. NPD: Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When is the
Right Time to
Introduce
Product?
Where to
Launch a
New
Product?

13. Discussion Connections
Suppose that you’re on a panel to nominate the “best new products of the year”.
What products would you nominate and why?
In groups, apply the new-product development process you’ve just studied, and develop an idea for an innovative new snack food product and sketch out a brief plan for bringing it to market.

14. Product Life Cycle (Fig. 9.2)
Time
Losses/
Investments ($)
Sales and
Profits ($)
Product
Develop-
ment
Introduction
Growth
Maturity
Decline
Sales
Profits
Sales and Profits Over the Product’s Life From Inception to Demise

15. Applications of the Product Life Cycle
The PLC concept can describe a:
Product class which has the longest life cycles (i.e. gas-powered cars),
Product form which tend to have the standard PLC shape (i.e. minivans),
Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus),
Style which is a basic and distinctive mode of expression,
Fashion which is a popular style in a given field,
Fad which is a fashion that enters quickly, is adopted quickly and declines fast.

16. Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
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

17. Introduction Stage of the PLC
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; use cost-plus formula
Distribution
High distribution expenses
Advertising
Build product awareness among early adopters and dealers

18. Growth Stage of the PLC 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

19. Maturity Stage of the PLC
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

20. 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.

21. Decline Stage of the PLC
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

22. Exercise Close your books and forget the examples Get in groups
Based on the characteristics of each stage in the PLC, think of four examples of products in each stage and defend your answer
Judge

23. Product Examples Product Development Introduction Growth Maturity
Decline