Transcript ch08 - Surej P John

New-Product
Development and Product
Life-Cycle Strategies
Chapter Eight
8-1
Important topics
• Explain how companies find and
develop new-product ideas.
• List and define the steps in the newproduct development process.
• Describe the stages of the product life
cycle.
• Describe how marketing strategies
change during the product’s life cycle.
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
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New-Product Development Strategy
Strategies for Obtaining New-Product Ideas
Acquisition of:
New Products:
Companies
Original Products
Patents
Improvements
Licenses
Modifications
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New-Product Failures
• Only 10% of new products are still on the market
and profitable after 3 years.
• Texas instruments lost $660 million in home
computer business
• New coke ( coca cola company)
• Zap mail-email ( FedEx company)
• Arch Delux sandwitches ( Mc Donald's)
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New-Product Failures
• Failure rate for industrial products is as high as
30%.Why?
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Overestimation of market size
Design problems
Incorrectly positioned, priced, or advertised
Pushed despite poor marketing research findings
Development costs
Competition
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Major Stages in New-Product
Development
Figure 8.1
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Idea Generation
Company Employees
Customers
Competitors
Distributors
Suppliers
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Idea Generation
When Heinz asked kids what
would make the product more
fun, they said, “Change the
color!” so, Heinz developed and
launched EZ Squirt, now in a
variety of colors targeted at kids.
The EZ Squirt bottle’s special
nozzle also emits a thin stream
so tykes can autograph their
burgers.
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Marketing : An Introduction
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Idea Screening
• Process to spot good ideas and drop poor
ones.
• Develop system to estimate: market size,
product price, development time and
costs, manufacturing costs, and rate of
return.
• Evaluate these findings against set of
company criteria for new products.
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Concept Development and Testing
• Product Idea: idea for a
possible product that the
company can see itself
offering.
• Product Concept: detailed
version of the idea stated
in meaningful consumer
terms.
• Product Image: the way
consumers perceive an
actual or potential
product.
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New product concept and Image
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Concept testing
• Testing new product concepts with a
group of target consumers.
• The concept may be presented to the
customers symbolically or physically.
• Customers may be asked many questions
regarding their perception towards the new
product.
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DiamlerChrysler’s Fuel-Cell-Powered
Electric Car
• The company’s task
is to develop its fuelcell-powered electric
car into alternative
product concepts, find
out how attractive
each is to customers,
and choose the best
one.
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Concept testing
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Marketing Strategy Development
Part One Describes:
The Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
Part Two Outlines the First-Year’s:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy
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Business Analysis
• Involves a review of
the sales, costs, and
profit projections to
assess fit with
company objectives.
• If yes, move to the
product development
phase.
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Product Development
• Develop concept into
physical product
• Calls for large jump in
investment
• Prototypes are made
• Prototype must have
correct physical
features and convey
psychological
characteristics
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Test Marketing
• Product and program
introduced in more
realistic market
setting.
• Not needed for all
products.
• Can be expensive
and time consuming,
After test marketing the “Go Active”
but better than
meal (an adult happy meal) in 150
making major
markets in Indiana, McDonald’s
marketing mistake.
decided to sell it across the U.S.
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Commercialization
• Must decide on timing (i.e., when to
introduce the product).
• Must decide on where to introduce the
product (e.g., single location, state, region,
nationally, internationally).
• Must develop a market plan.
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Product Life Cycle
• Product Life Cycle (PLC) is the course of a products
sales and profits over its lifetime.
• It involves five distinct stages: product development,
introduction, growth, maturity and decline.
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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The Product Life Cycle Applied to the Digital
Video Market
Figure 8.4
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Practical Problems of PLC
Hard to identify
which stage of the
PLC the product is in
Hard to pinpoint
when the product
moves to next stage
Hard to identify
factors that affect
product’s movement
through stages
Hard to forecast
sales level, length of
each stage, and
shape of PLC
© Armstrong, Kotler & da Silva
Strategy is both a
cause and result of
the PLC
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Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Low
Costs
High cost per customer
Profits
Negative
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Use cost-plus formula
Distribution
Build selective distribution
Promotion
Heavy to entice product trial
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising
Costs
Average cost per customer
Profits
Rising
Marketing Objectives
Maximize market share
Product
Offer extension, service, warranty
Price
Penetration strategy
Distribution
Build intensive distribution
Promotion
Reduce to take advantage of demand
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Peak
Costs
Low cost per customer
Profits
High
Marketing Objectives
Maximize profits while defending market share
Product
Diversify brand and models
Price
Match or best competitors
Distribution
Build more intensive distribution
Promotion
Increase to encourage brand switching
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Maturity Stage of the PLC
• Modifying the Market: Increase the
consumption of the current product.
• How?
– Look for new users and market segments
– Reposition the brand to appeal to larger or
faster-growing segment
– Look for ways to increase usage among
present customers
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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Maturity Stage of the PLC
• Modifying the Product: Changing
characteristics such as quality, features, or
style to attract new users and to inspire
more usage.
• How?
– Improve durability, reliability, speed, taste
– Improve styling and attractiveness
– Add new features
– Expand usefulness, safety, convenience
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
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Maturity Stage of the PLC
• Modifying the Marketing Mix: Improving
sales by changing one or more marketing
mix elements.
• How?
– Cut prices
– Launch a better ad campaign
– Move into larger market channels
– Offer new or improved services to buyers
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
8-28
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Declining
Costs
Low cost per customer
Profits
Declining
Marketing Objectives
Reduce expenditures and milk the brand
Product
Phase out weak items
Price
Cut price
Distribution
Selective: phase out unprofitable outlets
Promotion
Reduce to minimum level
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
8-30
© Armstrong, Kotler & da Silva
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Figure 8.6
Successful and
Failed PLC
Management
Strategies
© Armstrong, Kotler & da Silva
Marketing : An Introduction
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8-32
Rest Stop: Reviewing the Concepts
• Explain how companies find and
develop new-product ideas.
• List and define the steps in the newproduct development process.
• Describe the stages of the product life
cycle.
© Armstrong, Kotler & da Silva
Marketing : An Introduction
An Asian Perspective
8-33