1. PRODUCT LIFE CYCLES AND NEW PRODUCT DEVELOPMENT Professor Chip Besio Cox School of Business Southern Methodist University

2. How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

3. Stages of the product life cycle and its total industry sales and total industry profit

4. How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

5. CHARTING THE PRODUCT LIFE CYCLE INTRODUCTION STAGE  Primary Demand  Selective Demand  Skimming Strategy  Penetration Pricing

6. Product life cycle for the stand-alone fax machine for business use: 1970-2012

7. CHARTING THE PRODUCT LIFE CYCLE GROWTH STAGE  Rapid Sales Growth  Repeat Purchasers  New Features  Broad Distribution  More Competitors

8. CHARTING THE PRODUCT LIFE CYCLE MATURITY STAGE  Product Differentiation  Fewer Competitors  Industry/Product Sales Slow  Profit Declines

9. CHARTING THE PRODUCT LIFE CYCLE DECLINE STAGE  Deletion  Harvesting  Environmental Changes  Industry/Product Sales Drop

10. CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS  Length of the Product Life Cycle  Shape of the Product Life Cycle Generalized Life Cycle High-Learning Product Fashion Product Fad Product Low-Learning product

11. Alternative product life cycle curves based on product types

12.  The Product Level: Class and Form Product Class Product Form CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS

13. Prerecorded music product life cycles by product form

14.  The Life Cycle and Consumers Diffusion of Innovation  Innovators  Early Adopters  Early Majority  Late Majority  Laggards CHARTING THE PRODUCT LIFE CYCLE FOUR ASPECTS

15. Five categories and profiles of product adopters (diffusion of innovation)

16. MANAGING THE PRODUCT LIFE CYCLE ROLE OF A PRODUCT MANAGER  Product/Brand Manager Responsibilities Product Life Cycle Marketing Program Implementation New Product Development Data Analysis  CDI  BDI 11-16

17. MANAGING THE PRODUCT LIFE CYCLE MODIFYING THE PRODUCT OR MARKET  Product Modification Product Bundling New Characteristics  Market Modification Finding New Customers Increasing a Product’s Use Creating a New Use Situation 11-17

18. The Milk Processor Education Program What factor triggered its repositioning? 11-18

19.  Changing the Value Offered Trading Up Trading Down Downsizing MANAGING THE PRODUCT LIFE CYCLE REPOSITIONING THE PRODUCT 11-19

20.  Branding  Brand Name Logotype (Logo) Product Counterfeiting BRANDING AND BRAND MANAGEMENT  Trade Name  Trademark ® ™ 11-20

21.  Brand Personality  Brand Equity BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY Provides a Competitive Advantage Consumers Willing to Pay a Premium 11-21

22. GATORADE: QUENCHING THE ACTIVE THIRST WITHIN YOU

23. Göt2b Hair Products and Degree Deodorant What are their brand personalities?

24. The customer-based brand equity pyramid

25. BRANDING AND BRAND MANAGEMENT BRAND PERSONALITY AND BRAND EQUITY  Valuing Brand Equity Provides a Financial Advantage Brand Licensing

26. BRANDING AND BRAND MANAGEMENT PICKING A GOOD BRAND NAME  Should Suggest Product Benefits  Should Fit the Company or Product Image  Should Be Memorable and Positive  Should Have No Legal or Regulatory Restrictions  Should Be Simple and Emotional

27. ALTERNATIVE BRANDING STRATEGIES

28. BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES  Multiproduct Branding (Family or Corporate Branding) Product Line Extensions Subbranding Brand Extension Co-Branding

29. BRANDING AND BRAND MANAGEMENT BRANDING STRATEGIES  Multibranding Fighting Brands  Private Branding (Private Labeling or Reseller Branding)  Mixed Branding

30. Kimberly-Clark’s Huggies What branding strategy is used?

31. Black & Decker and DeWalt Tools What branding strategy does each use?

32. “?” and Heinz Ketchup What are the packaging benefits for each?

33. Lay’s STAX, Pringles and Celestial Seasonings What are the packaging benefits for each?

34. PACKAGING AND LABELING PRODUCTS PACKAGING AND LABELING CHALLENGES AND RESPONSES  Environmental Concerns  Health, Safety, and Security Issues  Cost Reduction  Connecting with Customers Shelf Life

35. What Is A New Product?  New to the world  New to the company  Flankers –Line extensions –Brand extensions  Repositioning  Model changes Dyson Products Swiffer Products

36. 9 New product development is the most important strategic activity of any firm  However, it is the most risky venture Most new products fail! NEW PRODUCT DEVELOPMENT?

37.  Failure rates –“…no more than 10% of all new products or services are successful -- that is, still on the market and profitable after three years” - Marketing Management (2003) –95% of new consumer products in US fail;90% of new consumer products in Europe fail - Nielsen BASES and Ernst & Young study (2002)  Costs –Introducing a new national brand can cost $20 million – Marketing Management –New Product News – “It probably costs $100 million to introduce a truly new soft drink nationally and it costs $ 10,000 to introduce a new flavor of ice cream in Minneapolis. Somewhere in between is a worthless 'average' cost to introduce a new product” THE RISKS OF NEW PRODUCTS?

38.  Study by Assoc. of National Advertisers (2004) --across all types of industries –27% of line extensions failed –31% of new brands introduced in categories where company already had a product failed –46% of new products introduced to new categories failed  Only 1 in 7 new product ideas are carried to the commercialization phase THE RISKS OF NEW PRODUCTS?

39. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Product Line Extension Significant Jump in Innovation True Innovation  Newness: The Organization’s Perspective 10-39

40. Purina Elegant Medleys What are the potential benefits and dangers of incremental innovation? 10-40

41.  Poor planning and strategy –Market is not attractive  Poor concept  Poor execution  Poor use of research  Poor technology  Poor timing –Changes in tastes/environment  Bad support from channel WHY NEW PRODUCTS FAIL

42.  Top-management commitment  Start with the consumer -- not the factory  Intelligent use of research  Find a competitive advantage  Move quickly  Know when to get out  Accept, but manage risk WHY NEW PRODUCTS SUCCEED

43. LO3  Newness: The Consumer’s Perspective Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation 10-43 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

44. The degree of “newness” in a new product affects the amount of learning effort consumers exert to use the product 10-44

45. WHAT SEPARATES NEW-PRODUCT WINNERS AND LOSERS

46. How a consumer product is classified affects which products consumers buy and the marketing strategies used

47. New Product Success Factors 4 Be close to the market 4 Set a strategic direction 4 Play to your strengths 4 Strong organizational support 4 Speed to market

48. THE SEVEN STAGES IN NEW-PRODUCT DEVELOPMENT

49. THE NEW-PRODUCT PROCESS STAGE 1: NEW-PRODUCT STRATEGY DEVELOPMENT  New-Product Process SWOT Analysis Conducted  New-Product Strategy Development Type of Strategy to Utilize Strategic Role Identified Protocol Defined

50. STRATEGIC ROLES OF MOST SUCCESSFUL NEW PRODUCTS

51. THE NEW-PRODUCT PROCESS STAGE 2: IDEA GENERATION  Idea Generation  Employee and Co-Worker Suggestions  Customer and Supplier Suggestions  Research and Development Laboratories  Competitive Products  Universities, Inventors, and Small Tech Firms Open Innovation

52. Volvo’s YCC How are new-product ideas generated?

53. THE NEW-PRODUCT PROCESS STAGE 3: SCREENING AND EVALUATION  External Approach  Internal Approach Customer Experience Management (CEM) Concept Tests

54. New Product Development Process CONCEPT TESTING  Goal –Use primary market information to better define the product, forecast likely demand, and clarify target buyer  Common tools –Focus Groups –Conjoint Analysis

55. THE NEW-PRODUCT PROCESS STAGE 4: BUSINESS ANALYSIS  Prototype  Business Fit  Capacity Management  Off-Peak Pricing

56. New Product Development Process BUSINESS ANALYSIS Review Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives Review Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives If Yes, Move to Product Development If Yes, Move to Product Development If No, Eliminate Product Concept If No, Eliminate Product Concept Source: Prentice Hall

57. THE NEW-PRODUCT PROCESS STAGE 5: DEVELOPMENT  Service Encounters  Brainstorming  Safety Tests

58. Product Development TESTING NEW PRODUCTS  Advertising testing  Product quality testing  Laboratory tests  Expert evaluation  Customer tests –Single-product evaluation –Blind tests –Experimental variations

59. Standard Test Market Full marketing campaign in a small number of representative cities. Standard Test Market Full marketing campaign in a small number of representative cities. Simulated Test Market Test in a simulated shopping environment to a sample of consumers Simulated Test Market Test in a simulated shopping environment to a sample of consumers Controlled Test Market A few stores that have agreed to carry new products for a fee Controlled Test Market A few stores that have agreed to carry new products for a fee Source: Prentice Hall THE NEW-PRODUCT PROCESS STAGE 6: MARKET TESTING

60. SIX IMPORTANT TEST MARKETS – THE WINNER IS WICHITA FALLS, TX

61. THE NEW-PRODUCT PROCESS STAGE 7: COMMERCIALIZATION  Burger King’s French Fries  Risks with Grocery Products Slotting Fees Failure Fee Regional Rollouts

62.  Speed as a Factor in New-Product Success Time to Market (TtM) Parallel Development Fast Prototyping THE NEW-PRODUCT PROCESS STAGE 7: COMMERCIALIZATION

63. Why Speed to Market?  Markets are getting more specialized  Intensified competition  Changing technology  Changing tastes  Rampant copying  Gaining shelf space early

64. Business Analysis WHEN TO STOP A BAD IDEA  Rule 1: Remember the sunk cost fallacy  Rule 2: Set benchmarks for success beforehand and stick to them  Rule 3: Be sure to plan research so that it will allow you to diagnose the cause of problems

65. General Mills Fingos Why did this product fail?

66. Thirsty Dog! and Thirsty Cat! Why did these products fail?

67. Avert and Hey! There’s a Monster in My Room Why did these products fail?