7[1].new product development & product life cycle stages (e)
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New Product DevelopmentNew Product Development
&&
Product LifeProduct Life--CycleCycleStrategiesStrategies
Chapter 7
References:
Marketing by Michael J. Walker, Bruce J. Walker & William J. Stanton ( 13th Edition)
Marketing Management by Philip Kotler (Millennium Edition)
Internet
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Why do new products fail?
Ahigh-level executive pus
hes a favorite ideathrough in spite of negative research findings.
The idea is good, but the market size is
overestimated.
The product is not well designed. The product is incorrectly positioned in the market,
not advertised effectively, or overpriced.
The product fails to gain sufficient distribution
coverage or support.
Development costs are higher than expected.
Competitors fight back harder than expected.
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ProductProduct-- Any offering that can satisfy aneed or want
(Mainly 10 entities which are being marketed)
A firmcanobtainnew productintwoA firmcanobtainnew productintwowaysways
I. Acquisition- By buying a whole company, apatent or a license( franchise) to producesome one elses product.
II. New Product Development- Thedevelopment of original products, productimprovement, product modification, andnew brands through the firms own R&D
efforts.
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Sixcategoriesofnew products
1. New-to-the-world products- New products that createan entirely new market.
2. Imitative products- Products new to particularcompany but not new to market. Allow company to
enter in established market for the 1st time3. Additionstoexisting productlines- in terms of
package size, flavors, colors etc.
4. Improvements/revisionsofexistingproducts/replacingexisting products
5. Repositioning- Targeting new markets or segments
6. Costreductions- new products with similar
performance with lower cost
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MajorStagesinNew Product DevelopmentMajorStagesinNew Product Development
(New Product Development Process)
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1. Idea generation: systematic search for new ideas
Internal sources: brainstorming, Research, Scientists,
engineers, employees, sales force etc.
External sources: customers, competitors, distributors,
suppliers, institutions & environments
2.
Idea screening: identify good ideas and drop poor ones Usefulness to consumers/company
Execution feasibilities
Resources/cost
Market/profit potential
DROP-erroroccurs when company drops good idea
& selects poor idea
GO-erroroccurs when company permits poor idea.
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3. Concept Development and Testing
Product concepts provide detailed versions of new
product ideas stated in meaningful consumer terms. Find
out how attractive each is to customers, and choose the
best one.
Testing new-product concepts with a group of target
consumers to find out if the concept have strong consumer
appeal.
Concept may be presented symbolically or physically.
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4. Marketing strategy: initial strategy for product
concept:
Target market, positioning, and sales, market
share, and profit goals
Price, distribution, and marketing budget
Strategy statement, long-run sales, profit goals,and marketing mix
5. Business analysis: evaluating the business
attractiveness of the proposal, review of sales, costs,
and profit projections to determine if they meetcompany objectives.
Sales history of similar products & survey of market
opinion.
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6. Product development: developing the productconcept into a physical product
Large investment
Building a prototype
Testing for safety, durability, and acceptability
7. Test marketing: testing the product in morerealistic market settings
Assess consumer acceptability, trial, repeatpurchase rate
Design effective media plans Standard test markets
Controlled test markets
Simulated test market
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StandardTest Market
Full marketing campaignin a small number ofrepresentative cities.
StandardTest Market
Full marketing campaignin a small number ofrepresentative cities.
SimulatedTest Market
Test in a simulatedshopping environment
to a sample ofconsumers.
Controlled
Test MarketA few stores that have
agreed to carry newproducts for a fee.
Controlled
Test MarketA few stores that have
agreed to carry newproducts for a fee.
Alpha testingAlpha testing
Beta testingBeta testing
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Commercialization: introducing a new product intothe market.
An organization may commercialize its product threechoices.
11ststentryentry-- launching new to the world product or serviceor at least new to the market as 1st mover. (Pioneer. (Pioneeradvantage)advantage)
Parallel entryParallel entry-- Two or more firms simultaneously enterin market.
Late entryLate entry-- The firm may delay its launch unstill after theThe firm may delay its launch unstill after thecompetitor has enteredcompetitor has entered
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New Product Adopters Groups
1. Innovators- Venturesome, they try new ideas at some risks
2. Earlyadopters- they adopt new ideas early but carefully
3. Earlymajority- Adopt new ideas before average person
4. Latemajority- Adopt new idea after a majority of people tried it.
5. Laggards- people suspicious to changes and adopt new product
when it becomes some thing of a tradition itself (essential part of
life)
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Not all products follow this cycle
Product Life Cycle (PLC)
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Product Life-Cycle Product life cycle (PLC): the course of a products sales and
profits over its life time, involves five distinct stages.
1. Productdevelopment- Begins when company finds anddevelops a new-product idea. During product development sales
are zero
2. Introduction- period of slow sales growth as the product is
introduced in the market.N
egative or minimal profit because ofheavy expenditures.
3. Growth- rapid market acceptance and increasing profit.
Competitor may also enter in this stage
4.M
aturity-
Period of slowing down sales growth because theproduct has achieved acceptance by most potential buyers. Profit
level touches top & then declines because of increased marketing
outlays to defend the product against competition. Although
many products remain unchanged for longer periods by
modifying marketing mix & product
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1. Increase frequency of use bypresent customers
2.Add new users
3.Find new uses4.Enter new markets
5.Win Competitor's customers
6.Change product quality or
packaging, introduce variety
Market Modification
Product
Modification
5. Decline- is the period when sales fall off and profit
drops.
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WINDOWS 95
1991 1995 1996 1997
WINDOWS 3.1
Overlap of Life Cycle forProducts A andBOverlap of Life Cycle forProducts A andB
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Summary ofPLCC ara r I roductio Gro th aturity D cline
Sales Low Rapidly rising sales Peak Declining sales
Costs High cost Average cost Low cost Low costper customer per customer per customer per customer
Profits Negative Rising profits High profits Declining profits
Customers nnovators Early adopters Middle majority Laggards
Com etitors Few Growing number Stable number Declining number
areting o jectives:
Create product Maximize market Maximize profit & Reduce expenditure
awareness and trial share defend market share & milk brand
Strategies:
Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models items
Price se cost-plus Price to penetrate Price to match or Cut price
market best competitors
Distribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outlets
Advertising Build awareness Build awareness & Stress brand differences Reduce to level needed
early adopters/dealers interest mass market and benefits to retain hard-core loyals
Sales romotion Heavy sales promotion Reduce promotion due ncrease to encourage Reduce to minimal
to entice trial to heavy demand brand switching level
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SomeothershapesofPLCSomeothershapesofPLC
Styles, Fashions, and Fads
Not all products follow product life cycle Style: basic and distinctive mode of expression
Fashion: currently accepted or popular style in a given field
Fad: a fash
ion th
at enters quickly, adopted with
great zeal,peaks early, and decline very fast
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a) Grow rapidly after introduction then falls to petrified
level. The petrified level is sustained by late adopters &
early adopters replacing the product.
b) Aggressively new product promotion & when productsstarts declining company gives another promotional push
(usually of smaller magnitude and duration)
c) Here sales passes through a succession of life cycles based
on discovery of new-product characteristics, uses or users.
SomeothershapesofPLCSomeothershapesofPLC