1. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–1 Part 3: The marketing mix Chapter 9: Product management and new-product development Step 5: Design the marketing strategy

2. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–2 When we finish this lecture you should Appreciate how product life cycles affect strategy planning Know what new products are and what is involved in designing new products Understand the new-product development process Appreciate the need for whole company involvement and the importance of research and development (R&D) Recognise the need for product or brand managers Understand the processes used by consumers when adopting new products

3. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–3 Figure 9.1 The life cycle of a typical product

4. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–4 Market introduction stage A stage of the product life cycle when sales are low as a new idea is first introduced to a market Company needs to use informative promotion to advise advantages and uses of the product Takes time for customers to realise the product is available A stage usually marked by losses due to research and development costs, promotion, distribution development and product refinement

5. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–5 Market growth stage Sales grow quickly Industry profits begin to rise and then fall as competition increases Usually marked with the highest profits but many mistakes, as competitors are often ignored until their damage has an impact

6. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–6 Market maturity stage Sales level off and competition increases Industry profits decline as promotion costs rise and some competitors cut prices to attract business Long-run downward spiral on prices New suppliers may enter the market to take market share Promotion is critical—promotion of the persuasive type Some companies join forces to decrease the costs of promotion

7. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–7 Sales decline stage New products replace current offerings Price competition from dying products is more vigorous Companies with strong brands may still make profits Conservative buyers (laggards) might still be buying International expansion is often used to extend the product life cycle (PLC)

8. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–8 Product life cycle variations A life cycle relates to a total product market, not a single brand or one company’s sales Each product market has its own life cycle In general, product life cycles are becoming shorter The length of the product life cycle, and in fact the length of each stage, varies substantially between products

9. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–9 Product life cycle variations—how quickly a new product moves through the cycle Comparative advantage—is the new product really better? The new product is easy for consumers to use Product advantages are easy to communicate The new product is easy to try on a limited basis The new product is compatible with customers' values and experiences

10. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–10 Fashions, fads and styles Fashion – Currently accepted or popular style Fad – An idea that is fashionable only to a certain group of enthusiasts Style – Appearances that come back over time as fashions and fads

11. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–11 Figure 9.2 Patterns of fashion, fad and style cycles for fashion products

12. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–12 Figure 9.3 Typical changes in marketing variables over the product life cycle

13. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–13 Extending product life cycles Managing maturing products Product improvement or new-product development New strategies for different markets Management of declining products

14. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–14 Figure 9.4 Examples of three marketing strategy choices for a company in a mature market

15. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–15 New-product planning New products are critical to survival – Markets change – Competition changes – Product life cycles carry on What is a new product? From a company’s perspective, it’s a product that is unfamiliar in any way

16. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–16 Reasons for new-product failure Failing to offer a unique benefit Underestimating the competition Product design is not as good as it could be Product development costs are higher than expected Incorrectly positioned in the market, not advertised, or over-priced Slow or poor timing in product introduction An over estimated market size

17. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–17 New-product development process New product thinking should be an ongoing effort Top-level support is vital Someone should be ‘in charge’ of the effort Constantly generate many ideas, then narrow down to the best opportunities Need a well-organised new-product development process

18. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–18 Figure 9.5 New-product development process

19. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–19 Figure 9.6 Types of new-product opportunity

20. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–20 Figure 9.7 New-product development success factors

21. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–21 The adoption process Awareness Interest Evaluation Trial Decision Confirmation

22. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–22 Figure 9.8 The adoption curve for a typical successful product 0 5 20 50 90 %

23. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 9–23 What we will be doing in the next chapter In the following chapter we will be discussing managing distribution channels, including – Why organisations use the channels of distribution – Discuss the difference between intensive, selective and exclusive distribution – Appreciate the use of intermediaries