Transcript Essentials of marketing – Chapter 7

Chapter 7
Developing and managing
products
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
Learning objectives (cont.)
3 Explain the concept of product
life cycles
4 Explain the diffusion process
through which new products are
adopted
1
Learning objective 1
Explore the importance of
Define
the term
developing
newmarketing
products
and describe the six
categories of new products
1
New product
A product new to the
world, the market, the
producer, the seller or
some combination of these.
1
Categories of new products
Six categories of new products:
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new-to-the-world
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new product lines
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product line additions
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improvements/revisions
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repositioned products
•
lower-priced products.
Learning objective 2
Describe
marketing
Explain four
the step
in the
management
philosophies.
new-product
development process
2
Successful new-product
development process
New-product success factors:
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long-term commitment
•
new product strategy
•
capitalise on experience
•
establish an environment
2
New-product
development process
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New-product strategy
Idea generation
Idea screening
Business analysis
Development
Test marketing
Commercialisation
New product
2
Idea generation
Sources of new-product ideas:
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customers
employees
distributors
competitors
research and development
consultants
creative thinking.
2
Brainstorming
The process of getting a
group to think of unlimited
ways to vary a product or
solve a problem.
2
Idea screening
The first filter in the product-
development process, which
eliminates ideas that are
inconsistent with the
organisation’s new-product
strategy or are inappropriate
for some other reason.
2
Concept test
A test to evaluate a newproduct idea, usually
before any prototype has
been created.
2
Business analysis
Considerations in business
analysis stage:
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preliminary demand
cost
sales
profitability
2
Development
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Creation of prototype
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Marketing strategy
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Technical production
feasibility
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Final government
approvals if needed
2
Test marketing
The limited introduction of
a product and a
marketing program to
determine the reactions of
potential customers in a
market situation.
2
Choosing a test market
•
Similar to planned distribution
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Relative isolation and free of influences
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Advertising availability; multiple media
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Diversified cross-section
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No atypical purchase habits
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Representative population/income
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Not overly used or easily ‘jammed’
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Year-round sales stability
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Available research/audit and retailers
2
Alternatives to test
marketing
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Single-source research using
supermarket scanner data
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Simulated (laboratory)
market testing
2
Commercialisation
Steps in marketing a new
product:
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production
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inventory buildup
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distribution shipments
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sales training
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trade announcements
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customer advertising.
Learning objective 3
Describe four marketing
Explain the
concept of
management
philosophies.
product life cycles
3
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).
3
Product life cycle (cont.)
Introductory
stage
Growth
stage
Maturity
stage
Decline
stage
Product
category
sales
Product
category
profits
Time
3
Introductory stage
Full-scale launch of new products
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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
Growth stage
Second stage
• Increasing rate of sales
• Entrance of competitors
• Market consolidation
• Initial healthy profits
• Promotion emphasises brand ads
• Goal is wider distribution
• Prices normally fall
• Development costs are recovered
3
Maturity stage
A period during which sales increase
at an decreasing rate
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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
3
Decline stage
A long run drop in sales
• Long-run drop in sales
• Large inventories of unsold
items
• Elimination of all nonessential
marketing expenses
Learning objective 4
Explain the diffusion
process through which
new products are adopted
4
Diffusion
The process by which the
adoption of an innovation
spreads.
Categories of adopters
Categories of adopters in the
diffusion process:
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Innovators
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Early adopters
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Early majority
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Late majority
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Laggards
Categories of adopters (cont.)
Percentage of adopters
4
Innovators
2.5%
Early
adopters
13.5%
Early
majority
34%
Time
Late
majority
34%
Laggards
16%
4
Diffusion process and
product life cycle curve
Sales
Introduction
Growth
Maturity
Decline
Product
life cycle
curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
4
Product characteristics and
the rate of adoption
Product characteristics predict
rate of adoption
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Complexity
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Compatibility
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Relative advantage
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Observability
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Triability
4
Marketing implications of the
adoption process
Communication aids the
diffusion process
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Word-of-mouth
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Direct from marketer