essentials of marketing chapter 9 product management and new–product development mcgraw-hill/irwin...
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Chapter 9Product Management and New–Product Development
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
At the end of this presentation, you should be able to:
1. Understand how product life cycles affect strategy planning.
2. Know what is involved in designing new products and what “new products” really are.
3. Understand the new-product development process.
4. See why product liability must be considered in screening new products.
5. Understand the need for product or brand managers.
6. Understand how total quality management can improve goods and services.
7. Understand important new terms.9–2
Product Decisions for Marketing Strategy Planning (Exhibit 9-1)
9–3
New Product Development
• 5 Step Process• Success factors
New Product Development
• 5 Step Process• Success factors
The Role of Product Management and New-Product Development in Marketing Strategy (Exhibit 9-1)
Chapter 8: Elements of Product Planning
for Goods & Services
Chapter 8: Elements of Product Planning
for Goods & Services
Managing brands• Product
managers• Managing product
quality
Managing brands• Product
managers• Managing product
quality
The Product Life Cycle Development
• Stages• Strategy planning
for stages
The Product Life Cycle Development
• Stages• Strategy planning
for stages
Chapter 9: Product Management & New-
Product Development
Chapter 9: Product Management & New-
Product Development
9–4
Typical Life Cycle of a New Product Concept (Exhibit 9-2)
Total industry Total industry profit (initially loss)profit (initially loss)
Total industry Total industry salessales
9–5
Market Introduction—Investing in the Future
9–6
Market Growth Stage—Profits Go Up and Down
Monopolistic Competition Develops
Monopolistic Competition Develops
Innovation Attracts Competition
Innovation Attracts Competition
Profits Peak and Then Decline
Profits Peak and Then Decline
Don’t Ignore Long-Term Competitive Trends!
9–7
Market Maturity Stage—Sales Level Off, Profits Continue Down
Persuasive, More Costly Promotion
Persuasive, More Costly Promotion
Brands Are More SimilarBrands Are More Similar
Greater Price Competition/Price Sensitivity
Greater Price Competition/Price Sensitivity
Maturity May Last a Long Time
Maturity May Last a Long Time
9–8
Sales Decline —A Time of Replacement
9–9
Which Stage of PLC?
9–10
Checking Your Knowledge
Kodak announced that it would no longer produce 35 millimeter film cameras, but would manufacture digital cameras exclusively. Sales of digital cameras have grown steadily and have far outpaced the sale of 35 mm cameras in recent years, even among professional photographers. Kodak’s decision indicates that 35 mm cameras are probably in the ________ stage of the product life cycle.
A. Market introductionB. Market growthC. Sales declineD. Market maturity
9–11
Product Life Cycles Should Be Related to Specific Markets
ANDAND
IndividualBrands
IndividualBrands
• May not follow the classic pattern
• May be introduced in market growth or maturity
• Not all brands are equally strong
MarketDefinitions
MarketDefinitions
• Should be carefully developed
• Different markets, different stages
• Contribute to the length of the cycle
9–12
Product Life Cycles Vary in Length
Can Be TriedCan Be Tried
Easy to Communicate
Easy to CommunicateCompatibleCompatible
Some ProductsMove Fast
Comparative Advantage
Comparative Advantage Easy to UseEasy to Use
9–13
Interactive Exercise: Adoption
9–14
Other Issues in Product Life Cycle Length
The Early Bird Usually Makes Profits
The Early Bird Usually Makes Profits
Product Life Cycles Are Getting Shorter
Product Life Cycles Are Getting Shorter
Fashions and FadsFashions and Fads
9–15
Planning for Different Stages of the Product Life Cycle
Competitors May Help Adoption
Competitors May Help Adoption
Anticipate Speed of
Movement
Anticipate Speed of
Movement
Consider all Four Ps
Consider all Four Ps
Allocate Sufficient
Money
Allocate Sufficient
Money
MarketIntroduction& GrowthBe FlexibleBe Flexible
9–16
Managing Mature Products
9–17
Are Product Modifications Really New Products?
Courtesy of The Procter & Gamble Company.
9–18
Phasing Out Dying Products
Don’t Pull the Plug So Quickly
Don’t Pull the Plug So Quickly
Phase-out May Be Necessary
Phase-out May Be Necessary
ProfitabilityProduct LineCustomer
SupportSales Decline Can
Be ProfitableSales Decline Can
Be Profitable
9–19
New Product Planning
What Is a New Product?What Is a New Product?
FTC Rule: 6 MonthsFTC Rule: 6 Months
Ethical Dilemmas ExistEthical Dilemmas Exist
9–20
New Product
9–21
New-Product Development Process(Exhibit 9-4)
1. Idea generation
1. Idea generation
9–22
Step 1: Idea Generation
1. Idea generation
1. Idea generation
2. Screening2. Screening
3. Idea evaluation
3. Idea evaluation
4.Development4.Development
5. Commercial-ization
5. Commercial-ization
Ideas from:• Customers and users• Marketing research• Competitors• Other markets• Company people,
intermediaries, etc.
Ideas from:• Customers and users• Marketing research• Competitors• Other markets• Company people,
intermediaries, etc.
1. Idea generation1. Idea generation
9–23
Step 2: Screening
1. Idea generation
1. Idea generation
2. Screening2. Screening
3. Idea evaluation
3. Idea evaluation
4.Development4.Development
5. Commercial-ization
5. Commercial-ization
• Strengths and weaknesses
• Fit with objectives• Market trends• Rough ROI estimate
• Strengths and weaknesses
• Fit with objectives• Market trends• Rough ROI estimate
2. Screening2. Screening
9–24
Step 3: Idea evaluation
1. Idea generation
1. Idea generation
2. Screening2. Screening
3. Idea evaluation
3. Idea evaluation
4.Development4.Development
5. Commercial-ization
5. Commercial-ization
9–25
Step 4: Development
1. Idea generation
1. Idea generation
2. Screening2. Screening
3. Idea evaluation
3. Idea evaluation
4.Development4.Development
5. Commercial-ization
5. Commercial-ization
9–26
Step 5: Commercialization
1. Idea generation
1. Idea generation
2. Screening2. Screening
3. Idea evaluation
3. Idea evaluation
4.Development4.Development
5. Commercial-ization
5. Commercial-ization
• Finalize product and marketing plan
• Start production and marketing
• “Roll out” in select markets
• Final ROI estimate
• Finalize product and marketing plan
• Start production and marketing
• “Roll out” in select markets
• Final ROI estimate
5. Commercialization5. Commercialization
9–27
Checking Your Knowledge
Top management of a large company recently approached the dean of a major business school about starting a specialized MBA program for the company’s employees. After further discussions, the dean decided that the program did not fit well with the objectives and resources of the school, so the program was put on the “back burner” until conditions changed. The proposed MBA program was at what stage of the new-product development process when it was shelved?
A. Idea generationB. ScreeningC. Idea evaluationD. DevelopmentE. Commercialization
9–28
New Product Development: A Total Company Effort (Exhibit 9-5)
A basis for superior customer
value
A basis for superior customer
value
New-product success
New-product success
Effective transition to
regular operations
Effective transition to
regular operations
Complete marketing plan
Complete marketing plan
Effective design
Effective design
Organized new-product
development process
Organized new-product
development process
9–29
New Product Development: A Total Company Effort (Exhibit 9-5)
Organized new-product development processOrganized new-product development process
Top management
support
Top management
support
Culture of innovationCulture of innovation
Product champion with
authority
Product champion with
authority
Cross-functional team
Cross-functional team
Clear understanding of customer needs
Clear understanding of customer needs
Cost management
(costs add value)
Cost management
(costs add value)
Timely development
cycle
Timely development
cycle
9–30
Checking Your Knowledge
Which of the following statements about new-product development are true?
A. The process should be informal to encourage innovation.B. The greatest number of product ideas is in the idea
evaluation stage.C. The best criteria for evaluating new product ideas in the
early stages is return on investment (ROI).D. The process should have top management support.E. All of the above statements are true.
9–31
Need for Product Managers
Common in Large Companies
Common in Large Companies
Product/Brand ManagersProduct/Brand Managers
Some Are “Product Champions”
Some Are “Product Champions”
9–32
Managing Product Quality
9–33
Building Quality into Services
Training Is CrucialTraining Is Crucial
Server Is Linked To the Service
Server Is Linked To the Service
Empowerment WorksEmpowerment Works
9–34
Other Issues in Quality Implementation Efforts
Specify Jobs and Measure Performance
Specify Jobs and Measure Performance
Get a Return on QualityGet a Return on Quality
Managers Lead the EffortManagers Lead the Effort
9–35
You should now be able to:
1. Understand how product life cycles affect strategy planning.
2. Know what is involved in designing new products and what “new products” really are.
3. Understand the new-product development process.
4. See why product liability must be considered in screening new products.
5. Understand the need for product or brand managers.
6. Understand how total quality management can improve goods and services.
7. Understand important new terms.9–36
Key Terms
Product life cycle Market introduction Market growth Market maturity Sales decline Fashion Fad New product Federal Trade
Commission (FTC) Consumer Product
Safety Act
Product liability Concept testing Product managers Brand managers Total quality
management (TQM) Continuous
improvement Empowerment
9–37