Transcript Marketing Management

Marketing Management
New Product
Development and the
Product Life Cycle
Paul Dishman, Ph.D.
Department of Business Management
Marriott School of Management
Brigham Young University
Lecture 14
Marketing Management
Causes of New Product Failures
• One study estimated that as many as 80% of new consumer packaged
products failed.
• Only about 40% of new consumer products are around 5 years after
introduction.
• Why?
– Overestimation of market size,
– Product design problems,
– Product incorrectly positioned, priced or advertised,
– Product may have been pushed despite poor marketing research
findings,
– Costs of product development, or
– Competitive actions
Paul Dishman, Ph.D.
Marketing Management
Improving New-Product Success
• New product success depends on having a:
– Unique superior product (one with higher quality, features, and
value in use), &
– Well-defined product concept (a defined target market, product
requirements, and benefits).
• To create successful new products, the company must:
– understand its customers, markets and competitors, &
– develop products that deliver superior value to customers.
Paul Dishman, Ph.D.
Marketing Management
Major Stages in New-Product
Development (Fig. 9.1)
Marketing
Strategy
Concept
Development
and Testing
Idea
Screening
Idea
Generation
Business
Analysis
Product
Development
Test
Marketing
Commercialization
Paul Dishman, Ph.D.
Marketing Management
NPD: Idea Screening
• 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.
Paul Dishman, Ph.D.
Marketing Management
NPD: Concept Development
1. Develop New Product Ideas
into Alternative Detailed
Product Concepts
Product Image is
the Way Consumers
Perceive an Actual
or Potential Product
2. Concept Testing - Test the
New Product Concepts with
Groups of Target Customers
3. Choose the One That Has the
Strongest Appeal to Target
Customers
Paul Dishman, Ph.D.
Marketing Management
New Product Development Process
Step 4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Paul Dishman, Ph.D.
Marketing Management
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If No, Eliminate
Product Concept
If Yes, Move to
Product Development
Paul Dishman, Ph.D.
Marketing Management
NPD: Test Marketing
Test Marketing is the Stage Where the Product and Marketing
Program are Introduced into More Realistic Market Settings.
Budget Levels
Packaging
Branding
Pricing
Product
Elements that
May be Test
Marketed by a
Company
Positioning
Advertising
Distribution
Paul Dishman, Ph.D.
Marketing Management
NPD: Test Marketing
Standard
Test Market
Controlled
Test Market
Full marketing campaign
in a small number of
representative cities.
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Paul Dishman, Ph.D.
Marketing Management
NPD: Commercialization
Commercialization is the Introduction of
the New Product into the Marketplace.
When is the
Right Time to
Introduce
Product?
Where to
Launch a
New
Product?
Paul Dishman, Ph.D.
Marketing Management
Product Life Cycle (Fig. 9.2)
Sales and
Profits ($)
Profits
Sales
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and Profits Over the Product’s Life From Inception to Demise
Paul Dishman, Ph.D.
Marketing Management
Applications of the
Product Life Cycle
• The PLC concept can describe a:
– Product class which has the longest life cycles (i.e. gaspowered cars),
– Product form which tend to have the standard PLC shape
(i.e. minivans),
– Brand which can change quickly because of changing
competitive attaches and responses (i.e. Ford Taurus),
– Style which is a basic and distinctive mode of expression,
– Fashion which is a popular style in a given field,
– Fad which is a fashion that enters quickly, is adopted
quickly and declines fast.
Paul Dishman, Ph.D.
Marketing Management
Problems Using the PLC
The PLC Concept Can
Help in Developing Good
Marketing Strategies for
Different Stages of the
Product Life-Cycle,
However Some
Problems Can Arise:
Trouble identifying
Which Stage of the
PLC the Product Is
In
Difficult to Forecast
the Sales Level, the
Length of Each Stage,
and Shape of the PLC
Strategy is Both a
Cause and a Result
of the Product’s Life
Cycle
Paul Dishman, Ph.D.
Marketing Management
Introduction Stage of the PLC
Sales
Low sales
Costs
High cost per customer
Profits
Negative or low
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Usually is high; use cost-plus formula
Distribution
High distribution expenses
Build product awareness among early
adopters and dealers
Advertising
Egg Beaters had to first convince people that they needed an egg
substitute (overcoming a strong negative response to “fake eggs”)
then demonstrate that their product was a perfect solution.
Paul Dishman, Ph.D.
Marketing Management
Growth Stage of the PLC
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Maximize market share
Offer new product features, extensions,
service, and warranty
Price to penetrate market
Product
Price
Distribution
Advertising
Increase number of distribution outlets
Build awareness and interest in the
mass market
Paul Dishman, Ph.D.
Marketing Management
Maturity Stage of the PLC
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits, then lower profits
Product
Maximize profits while defending
market share
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
Marketing Objectives
Paul Dishman, Ph.D.
Marketing Management
Maturity Stage of the PLC
Company tries to increase consumption of
the current product.
Changing characteristics such as quality,
features, or styles to attract new users.
Company tries to improve sales by changing
one or more marketing mix elements.
Paul Dishman, Ph.D.
Marketing Management
Decline Stage of the PLC
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Reduce expenditure and maintain,
reposition, harvest or drop the product
Phase out weak items
Marketing Objectives
Product
Price
Distribution
Advertising
Cut price
Go selective: phase out unprofitable
outlets
Reduce to level needed to retain
hard-core loyal customers
Never t oo Lat e.
Vol kswagon made a comeback when one of i t s
hal l mar k pr oduct s was wel l past t he decl i ne st age.
What ot her compani es have br ought
back pr oduct s f r om t he past ?
Cl i ck or pr ess spacebar t o r et ur n.
Paul Dishman, Ph.D.
Marketing Management
Exercise
• Close your books and forget the
examples
• Get in groups
• Based on the characteristics of each
stage in the PLC, think of four
examples of products in each stage
and defend your answer
• Judge
Paul Dishman, Ph.D.
Marketing Management
Product Examples
• Product Development
• Introduction
• Growth
• Maturity
• Decline
Paul Dishman, Ph.D.