Transcript Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel

Developing and Managing Products
Chapter 9
Prepared by
Deborah Baker
Texas Christian University
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Learning Objectives
1. Explain the importance of developing new
products and describe the six categories
of new products.
2. Explain the steps in the new-product
development process.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Learning Objectives (continued)
4. Explain the diffusion process through
which new products are adopted.
5. Explain the concept of product life cycles.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Learning Objective
On Line
http://www.chrysler.com
Explain the
importance of
developing new
products and
describe the six
categories of new
products.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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New Product
A product new to the world,
the market, the producer,
the seller, or some
combination of these.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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On Line
http://www.newproductworks.com
New Product Introductions,
1964-2000
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Categories of New Products
New-To-The-World
New Product Lines
Six
Categories
of
New
Products
Product Line Additions
Improvements/Revisions
Repositioned Products
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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Lower-Priced Products
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Learning Objective
Explain the steps
in the new-product
development
process.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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The New-Product
Development Process
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Long-Term Commitment
New Product Strategy
Capitalize on Experience
New Product
Success
Factors
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
Establish an Environment
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New-Product
Development Process
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New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Idea Generation
On Line
http://www.ideo.com
Customers
Employees
Distributors
Competitors
Sources of
New-Product
Ideas
R&D
Consultants
Creative Thinking
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Brainstorming
The process of getting a
group to think of unlimited
ways to vary a product or
solve a problem.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Idea Screening
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.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Concept Test
A test to evaluate a
new-product idea, usually
before any prototype has
been created.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Business Analysis
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
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Development
 Creation of prototype
 Marketing strategy
 Packaging, branding, labeling
 Manufacturing feasibility
 Final government approvals if needed
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Simultaneous
Product Development
2
A new team-oriented
approach to new-product
development.
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Test Marketing
On Line
http://www.google.com
The limited introduction of
a product and a marketing
program to determine the
reactions of potential
customers in a market
situation.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Checklist for Selecting
Test Markets
2
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Alternatives to Test Marketing
 Single-source research using supermarket
scanner data
 Simulated (laboratory) market
testing
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Commercialization
Production
Inventory Buildup
Distribution Shipments
Sales Training
Steps in
Marketing a
New Product
Trade Announcements
Customer Advertising
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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Learning Objective
Explain the diffusion
process through
which new products
are adopted.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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Diffusion
The process by which the
adoption of an innovation
spreads.
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Categories of Adopters
Innovators
Early Adopters
Categories of
Adopters
in the
Diffusion Process
Early Majority
Late Majority
Laggards
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Diffusion of Three Familiar Products
among U.S. Households
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Percentage of Adopters
Categories of Adopters
Early
Innovators Adopters
2.5%
13.5%
Early
Majority
34%
Late
Majority
34%
Laggards
16%
Time
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On Line
http://www.electronicgadgetdepot.com
Product Characteristics and
the Rate of Adoption
Complexity
Compatibility
Product
Characteristics
Predict Rate of
Adoption
Relative Advantage
Observability
Trialability
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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Marketing Implications
of the Adoption Process
3
Word of Mouth
Communication
Aids the
Diffusion Process
Direct from
Marketer
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Learning Objective
Explain the concept
of product life
cycles.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
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Product Life Cycle
A concept that provides a
way to trace the stages of a
product’s acceptance, from
its introduction (birth)
to its decline (death).
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Product Life Cycle
Introductory Growth
Stage
Stage
Maturity
Stage
Decline
Stage Product
Dollars
Category
Sales
Product
Category
Profits
0
Time
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Product Life Cycles for
Styles, Fashions, and Fads
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Extending the PLC
 Change product
 Change product use
 Change product
image
 Change product
positioning
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Introductory Stage
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Full-Scale Launch
of New Products
High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and
production costs
Negative profits
Promotion focuses on
awareness and information
Intensive personal selling to
channels
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Growth Stage
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Offered in more
Increasing rate of sales
sizes,
Entrance of competitors
flavors, options
Market consolidation
Initial healthy profits
Promotion emphasizes brand ads
Goal is wider distribution
Prices normally fall
Development costs are recovered
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Maturity Stage
On Line
http://www.mcdonalds.com
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Many consumer
products are in
Maturity Stage
Declining sales growth
Saturated markets
Extending product line
Stylistic product changes
Heavy promotions to dealers and
consumers
 Marginal competitors drop out
 Prices and profits fall
 Niche marketers emerge
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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Decline Stage
 Long-run drop in sales
 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
Rate of decline depends on
change in tastes or
adoption of substitute products
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©2005 South-Western/Thomson Learning
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Marketing Strategies for PLC
INTRODUCTION
Product
Strategy
Limited models
Frequent
changes
GROWTH
More models
Frequent
changes.
Distribution
Strategy
Limited
Expanded
Wholesale/
dealers. Longretail distributors term relations
Promotion
Strategy
Awareness.
Aggressive ads.
Stimulate
Stimulate
demand.Sampling
demand
Pricing
Strategy
Higher/recoup
development
costs
Fall as result of
competition &
efficient production.
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
MATURITY
DECLINE
Large number
Eliminate
of models.
unprofitable
models
Extensive.
Margins drop.
Shelf space
Advertise.
Promote
heavily
Prices fall
(usually).
Phase out
unprofitable
outlets
Phase out
promotion
Prices
stabilize at
low level.
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Diffusion Process and PLC Curve
Introduction
Growth
Decline
Maturity
Sales
Product
life cycle
curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
Chapter 9 Essentials of Marketing 4e Lamb Hair McDaniel
©2005 South-Western/Thomson Learning
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