chapter 11: developing and managing products prepared by amit shah, frostburg state university...
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Chapter 11: Developing and Managing Products
Prepared by Amit Shah, Frostburg State University
Designed by Eric Brengle, B-books, Ltd.
Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1
Learning Outcomes
2
Explain the importance of developing new products and describe the six categories of new products
Explain the steps in the new-product development process
Explain why some products succeed and others fail
LO1
LO2
LO3
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Learning Outcomes
3
Discuss global issues in new-product development
Explain the diffusion process through which new products are adopted
Explain the concept of product life cycles
LO5
LO6
LO4
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The Importance of New Products
4
Explain the importance of developing new products
and describe the six categories of new products.
LO1
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New Product
5
A product newto the world, the market, theproducer, the seller, or some
combination of these.
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New Product Advantages
6
Being first on the market has numerous advantages:
•Increased sales through longer sales life•Increased margins•Increased product loyalty•More resale opportunities•Greater market responsiveness•A sustained leadership position
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Categories of New Products
7
New-to-the-WorldNew-to-the-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements or RevisionsImprovements or Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced Products
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Review Learning OutcomeDeveloping New Products
8
LO1
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The New Product Development Process
9
Explain the steps
in the new-product
development process.
LO2
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The New-Product Development Process
10
Long-term commitmentLong-term commitment
Company-specific approachCompany-specific approach
Capitalize on experienceCapitalize on experience
Establish an environmentEstablish an environment
New Product Success Factors
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New-Product Development Process
11
New-Product StrategyNew-Product Strategy
Idea GenerationIdea Generation
Idea ScreeningIdea Screening
Business AnalysisBusiness Analysis
DevelopmentDevelopment
Test MarketingTest Marketing
CommercializationCommercialization
New ProductNew Product
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Idea Generation
12
Customers
Employees
Distributors
Vendors
Competitors
R & D
Consultants
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
Online
http://www.ideo.com
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Brainstorming
13
The process of getting a group
to think of unlimited ways to
vary a product or
solve a problem.
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Idea Screening
14
The first filter in the product
development process, which
eliminates ideas that are
inconsistent with the organization’s
new product strategy or are
inappropriate for some other reason.
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Concept Test
15
A test to evaluate a
new-product idea,
usually before any prototype
has been created.
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Business Analysis
16
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Demand
Cost
Sales
Profitability
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Development
17
Creation of prototype
Marketing strategy
Packaging, branding, labeling
Promotion, price, and distribution strategy
Manufacturing feasibility
Final government approvals if needed
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Simultaneous Product Development
18
A team-oriented approach
to new-product development.
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Test Marketing
19
The limited introduction of a product and a marketing
program to determine the reactions of
potential customers in a market situation.
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Alternatives to Test Marketing
• Single-source research using supermarket scanner data
• Simulated (laboratory) market testing
• Online test marketing
20
Online
http://www.newproductworks.com
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Commercialization
21
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales TrainingSales Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
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Review Learning OutcomeNew-Product Development Process
22
LO2
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Why Some Products Succeed and Others Fail
23
Explain why some products succeed and others fail.
LO3
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Why New Products Fail
• No discernible benefits
• Poor match between features and customer desires
• Overestimation of market size
• Incorrect positioning
• Price too high or too low
• Inadequate distribution
• Poor promotion
• Inferior product
24Copyright 2010 by Cengage Learning Inc. All Rights Reserved
Success Factors
25
Match between product and market needs
Different from substitute products
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
Benefit to large number of people
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Success Factors
26
Listening to customers
Producing the best product
Vision of future market
Strong leadership
Commitment to new-product development
Project-based team approach
Getting every aspect right Willingness to fail occasionally
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Review Learning OutcomeWhy Products Succeed or Fail
27
LO3
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Global Issues in New-Product Development
28
Discuss global issues in
new-product development.
LO4
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Global Issues
29
Develop product for potential worldwide distribution
Build in unique market requirements
Design products to meet regulations and key market requirements
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Review Learning OutcomeGlobal Issues in New-Product Development
30
LO4
Single product worldwideSingle product worldwide
Modification of productsModification of products
Multiple products in multiple countriesMultiple products in multiple countries
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The Spread of New Products
31
Explain the diffusion process through which
new products are adopted.
LO5
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Diffusion
32
The process bywhich the adoption of an
innovation spreads.
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Categories of Adopters
33
LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
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Product Characteristics and the Rate of Adoption
34
TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
Online
http://www.electronicgadgetdepot.com
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Sales of New Audio Products
35Copyright 2010 by Cengage Learning Inc. All Rights Reserved
Marketing Implications of the Adoption Process
36
Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
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Review Learning OutcomeDiffusion Process for New Products
37
LO5
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Product Life Cycles
38
Explain the concept of
product life cycle.
LO6
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Product Life Cycle
39
A biological metaphor that
traces the stages of a product’s
acceptance, from its
introduction (birth) to
its decline (death).
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Product Life Cycle
40Time
Do
llar
s
Profits
SalesSales
IntroductoryIntroductoryStageStage
GrowthGrowthStageStage
MaturityMaturityStageStage
DeclineDeclineStageStage
0
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Product Life Cycles for Styles, Fashions, and Fads
41Copyright 2010 by Cengage Learning Inc. All Rights Reserved
U.S. Sales of Widgets
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Introductory Stage
• High failure rates
• Little competition
• Frequent product modification
• Limited distribution
• High marketing and production costs
• Negative profits with slow sales increases
• Promotion focuses on awareness and information
• Communication challenge is to stimulate primary demand
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Growth Stage
• Increasing rate of sales
• Entrance of competitors
• Market consolidation
• Initial healthy profits
• Aggressive advertising of the differences between brands
• Wider distribution
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Maturity Stage
• Sales increase at a decreasing rate
• Saturated markets
• Annual models appear
• Lengthened product lines
• Service and repair assume important roles
• Heavy promotions to consumers and dealers
• Marginal competitors drop out
• Niche marketers emerge
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Decline Stage
• Long-run drop in sales
• Large inventories of unsold items
• Elimination of all nonessential marketing expenses
• “Organized abandonment”
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Diffusion Process and PLC Curve
47
Innovators
Early adopters
Early majorityLate majority
Laggards
ProductProductlife cyclelife cyclecurvecurve
DiffusionDiffusioncurvecurve
Introduction Growth Maturity Decline
Sal
es
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Review Learning Outcome
48
LO6
Product Life Cycles
Time
INTRODUCTION GROWTH MATURITY DECLINE
ProductStrategy
DistributionStrategy
PromotionStrategy
PricingStrategy
Limited models;Frequent changes
More models;Frequent changes
Large number of models
Eliminate unprofitable
models
LimitedWholesale/
retail distributors
Expanded dealers; Long-term relations
Extensive;Margins drop;Shelf space
Phase out unprofitable
outlets
Awareness; Stimulate demand;
Sampling
Aggressive ads.Stimulatedemand
Advertise; Promote heavily
Phase outpromotion
High to recoupdevelopment
costs
Fall as result ofcompetition &
efficient production
Prices fall (usually)
Prices stabilize at
low level
Sal
es
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