npd strategies

Copyright 1999 Prentice Hall

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Chapter 9

Chapter 9

New Product Development

and

Product Life-Cycle Strategies

PRINCIPLES OF MARKETINGEighth Edition

Philip Kotler and Gary Armstrong


9-29-2New-Product DevelopmentStrategiesNew-Product DevelopmentStrategies

Original Products

Original Products

ProductImprovements

ProductImprovements

ProductModifications

ProductModifications

NewBrands

NewBrands

AcquiredCompanies

AcquiredCompanies

Acquired Patents

Acquired Patents

AcquiredLicenses

AcquiredLicenses

Strategies for Obtaining New Product Ideas


9-39-3Causes of New Product FailuresCauses of New Product Failures

• Overestimation of Market Size

• Product Design Problems

• Product Incorrectly Positioned, Priced or Advertised

• Costs of Product Development

• Competitive Actions

• To create successful new products, the company must:– understand it’s customers, markets and

competitors

– develop products that deliver superior value to customers.


9-49-4New Product Development ProcessNew Product Development Process

IdeaGeneration

IdeaScreening

ConceptDevelopmentand Testing

MarketingStrategy

BusinessAnalysis

ProductDevelopment

TestMarketing

Commercialization


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CUSTOMERS

CUSTOMERS

COMPETITORS

COMPETITORS

DISTRIBUTORS

DISTRIBUTORS

SUPPLIERS

SUPPLIERS

New Product Development ProcessStep 1. Idea Generation

New Product Development ProcessStep 1. Idea Generation

Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:


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• Process to spot good ideas and drop poor ones as soon as possible.

• Many companies have systems for rating and screening ideas which estimate:– Market Size

– Product Price

– Development Time & Costs

– Manufacturing Costs

– Rate of Return

• Then, the idea is evaluated against a set of general company criteria.

New Product Development ProcessStep 2. Idea Screening

New Product Development ProcessStep 2. Idea Screening


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New Product Development ProcessStep 3. Concept Development & Testing

New Product Development ProcessStep 3. Concept Development & Testing

1. Develop Product Ideas into Alternative

Product Concepts

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One3. Choose the Best One


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New Product Development ProcessStep 4. Marketing Strategy Development

New Product Development ProcessStep 4. Marketing Strategy Development

Part Two Describes Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Two Describes Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Three Describes Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Three Describes Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share


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New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development

New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business Analysis

Review of 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


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New Product Development ProcessStep 7. Test Marketing

New Product Development ProcessStep 7. Test Marketing

StandardTest Market

Full marketing campaignin a small number of representative cities.

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.


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New Product Development ProcessStep 8. Commercialization

New Product Development ProcessStep 8. Commercialization

When?When? Where?Where? To Whom?

To Whom? How?How?

Commercialization is the Introduction of the New Product

into the Marketplace.


9-129-12Speeding Up DevelopmentSpeeding Up Development

Step 1Step 1

Step 2Step 2

Step 3Step 3

Step 4Step 4S

tep

1

Ste

p 2

Step 3

Step 4

Sequential Simultaneous


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Product Life CycleProduct Life Cycle

Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Sales and Profits Over the Product’s Life From Introduction to Decline


9-149-14Introduction Stage of the PLCIntroduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low sales Low sales

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trial

Create product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus Use cost-plus

DistributionDistribution Build selective distributionBuild selective distribution

AdvertisingAdvertising Build product awareness among early adopters and dealers

Build product awareness among early adopters and dealers


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Growth Stage of the PLCGrowth Stage of the PLC


SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Rapidly rising sales Rapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profits

Maximize market shareMaximize market share

Offer product extensions, service, warranty

Offer product extensions, service, warranty

Price to penetrate marketPrice to penetrate market

DistributionDistribution Build intensive distributionBuild intensive distribution

AdvertisingAdvertising Build awareness and interest in the mass market

Build awareness and interest in the mass market


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Maturity Stage of the PLCMaturity Stage of the PLC


SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Peak salesPeak sales

Low cost per customerLow cost per customer

High profitsHigh profits

Maximize profit while defending market share

Maximize profit while defending market share

Diversify brand and modelsDiversify brand and models

Price to match or best competitors

Price to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefits

Stress brand differences and benefits


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Decline Stage of the PLCDecline Stage of the PLC


SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profits

Reduce expenditure and milk the brand

Reduce expenditure and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers