Transcript Document

Slide 14.1
New-product development and product
life-cycle strategies
Chapter 14
Slide 14.2
Introduction: New products
• New products are the lifeblood of the
organisation but they are extremely vulnerable
and the majority never reach
commercialisation.
• In competitive markets, the best and strongest
firms sustain growth through the introduction
of new products and services to meet the
changing needs of the consumers.
Slide 14.3
Introduction: New products
• All products have a finite life span and this is
influenced by the type of product, its innovativeness,
the management of the product through its life cycle,
as well as the markets in which it is sold.
• All products will eventually decline and need to be
replaced by new ones and companies need to be
adept at adapting marketing strategies to respond to
the dynamics of the environment, so as to manage
the product through its life cycle effectively.
Jfr utvecklingen inom fotoindustrin (bl.a. Hasselblad)
Slide 14.4
Innovation and new product development
• In business, standing still is not an option.
• Unless companies develop new products, their
business will inevitably wane and fade.
• Innovation is a costly and risky activity.
• Some innovations are nothing more than a
modification to an existing product range, while
others are completely new products
– which is the best depends upon the needs of the
market.
• Success in developing new products is mainly about
correctly identifying what those needs are, and
translating them efficiently into new products.
Slide 14.5
Innovation and new product development strategy
• Product innovation covers a range of product
development activities, including product
improvement, development of new products
and extensions to product lines.
• Classifications:
• New to company, new to market.
• New to company, significant innovation to market.
• New to company, minor innovation to market.
Slide 14.6
Product innovations are not to be confused
with inventions
• Innovations
– Ideas, services, technologies and products that
have been developed and marketed to
customers who perceive them as novel or new.
– It is a process of creating and delivering new
product or service values that did not
previously exist in the marketplace.
Slide 14.7
Product innovations are not to be confused
with inventions
• Inventions
– are new technologies or products that may or
may not be commercialised and may or may
not deliver benefits to customers.
Slide 14.8
Product innovations are not to be confused
with inventions
• New product development
– The development of new brands, original
products, product improvements or
modifications, through the efforts of the firm’s
R&D.
Glöm inte bort serviceinnovation!
Slide 14.9
Risks and returns in new-product development
• About 90% of new products developed fail.
• Only 40% of new consumer products that are
brought to market will be around 5 years later.
• Risk management essential.
• Research indicates that success depends
primarily upon the amount of time and effort a
company is prepared to invest in making sure
the new product fits its market.
Slide 14.10
Why do new products fail?
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New product development is too expensive
Unexpected delays and time to market too long
Idea good but market overestimated
Insufficient demand for the product or service
Not as well designed as it should have been
Incorrectly positioned
Incorrectly priced
Competitors fight back more aggressively than
expected.
Slide 14.11
What influences new product success?
• Development of a unique superior product
– Better quality, new features and greater value
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Clearly defined market and product concept
Meeting market needs
Senior management commitment
Relentless pursuit of innovation
New product planning
Systematic new product development process
Slide 14.12
9 Steps of new product development
Figure 14.1 Steps in new product development
Slide 14.13
1. Idea generation
• Systematic search for new-product ideas.
• In pharmaceutical companies it can take 6000-8000 ideas to
produce one commercial success.
• Generally only 1 out of 100 new-product ideas will reach their
objectives.
• Internal sources
• Customers
• Competitors
• Observing the competition is an excellent source of newproduct ideas.
• Distributors, suppliers and others
Slide 14.14
DaimlerChrysler’s task is to develop its fuel-cell powered electric car into alternative
product concepts, find out how attractive each is to customers and choose the best one.
Source: © DaimlerChrysler/Liaison Agency. Reproduced with permission.
Slide 14.15
2. Idea screening
• Process of screening the new-product ideas in
order to spot good ideas and drop poor ones
as soon as possible.
• Rigorous evaluation is necessary.
Slide 14.16
3. Concept development and testing
• Product idea converted into a product concept
• Converted into meaningful consumer terms of a
product image
• How the consumers will perceive the product.
• Concept testing is essential to judge the
robustness of the new-product concept and
ascertain if it will have commercial appeal.
• Consumers may like the idea but would they be
prepared to pay for it?
Slide 14.17
Concept development
Slide 14.18
4. Marketing strategy development
• Develop the appropriate marketing strategy
• based on the marketing logic by which the business
unit hopes to achieve its marketing objectives
• outlining the intended target market, product
positioning and sales, market and profit share for
the first 3-5 years.
Slide 14.19
5. Business analysis
• Review of the sales, costs and profit
projections.
• Establish the viability of the project and
whether it will satisfy the company’s
objectives.
• Explore strategic fit with entire business.
Slide 14.20
6. Product development
• Entails developing the product concept into a
physical product in order to ensure that the
product idea can be turned into a workable
product.
Slide 14.21
7. Test Marketing
• New product tested in realistic market settings:
– Standard test markets
• Small number of representative test cities / markets, Pilot study
• Competitors are able to monitor the project
– Controlled test markets
• Conducted in conjunction with research firm, Controlled parameters
• Competitors are able to monitor the project
– Simulated test markets
• Simulated environment
• Provides measure of trial and commercial effectiveness against
competitors
– Test marketing new industrial products
• Product-use tests, Trade shows
• Standard or controlled test market
• Distributor and dealer display rooms
Slide 14.22
8. Commercialisation
• If having met the rigours of the prior analysis,
the product is then brought to
commercialisation, the company needs to
decide the following:
– When?
– Where?
– To Whom?
– How?
Slide 14.23
9. Organising for new-product development
• Sequential product development slow and
many companies encourage the concept of
simultaneous product development:
– departments work together, overlapping the
steps in the product development process so
as to save time and increase effectiveness.
• Successful new-product development is based
upon an entrenched ethos of innovation within
the company that is supported from senior
management downwards.
Slide 14.24
Product life-cycle strategies
• Following the launch of the new product, the
challenge to management is ensuring that the
product achieves its potential over its
projected life span.
– This involves understanding the product lifecycle and developing appropriate marketing
strategies and interventions.
Slide 14.25
The product life-cycle
• The product life-cycle (PLC) is the course of a
product’s sales and profits over its lifetime. It
involves five stages:
• Product development
• Introduction
• Growth
• Maturity
• Decline
Slide 14.26
The product life cycle
Förklarar även varför många företag väljer att
kopiera.
Figure 14.2 Sales and profits over the product’s life from inception to demise
Slide 14.27
The PLC as an effective marketing tool
• The PLC can be applied to product classes as
well as styles, fashions and fads.
• The PLC will reflect these aspects in the
length and type of PLC as illustrated:
Slide 14.28
The PLC as an illustrator
Ex: nordisk (ljust
trä)
Ex:Kostym
Ex:Platåskor
Figure 14.3 Marketers need to understand and predict style, fashion and fad
Slide 14.29
Product / concept development stage
• Product concept converted into meaningful
consumer terms of a product image.
• Concept tested to ascertain commercial
appeal.
Slide 14.30
Introduction stage
– The phase where the new product is
distributed and made available for purchase.
– The market pioneer has much responsibility
when devising the appropriate strategy as it
sets the stage for the product’s introduction to
the consumer.
– Characterised by high promotional costs.
Slide 14.31
Introduction stage strategies
– Strategies are based upon the product and the
dynamics of the market
• Skim the market slowly using high price and
relatively low promotional activity.
• Skim rapidly by using a high price and high
promotion strategy if the market is price insensitive.
Slide 14.32
Growth stage
– The product sales begin to increase rapidly.
– Profit is generated as a result of effective
promotional activity and the spread of costs
over larger volume of sales.
Slide 14.33
Maturity stage
– The phase where sales growth slows or levels
off.
– Marketers then seek to resuscitate or extend
the life of the brand by the following methods;
• New market development
– New usage and application
• Product development and modification
• Marketing innovation
Slide 14.34
Decline stage
– Sales decline.
– Marketers need to determine the value of
retaining the product versus the cost of
divesting from the product.
– This is weighed up against the market
dynamics.
Slide 14.35
Table 14.2 Summary of product life-cycle characteristics, objectives and strategies
Source: Philip Kotler, Marketing Management: Analysis, planning, implementation, and control, 11th edn,
© 2003, p. 340. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.