9-1 9-1 PRINCIPLES OF MARKETING Chapter Chapter 99 New

9-1 9-1 PRINCIPLES OF MARKETING Chapter Chapter 99 New Product Development and Product Life-Cycle Strategies

Causes Causes of of New New Product Product Failures Failures Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: – understand it’s customers, markets and competitors – develop products that deliver superior value to customers. 9-2 9-2

9-3 9-3 New New Product Product Development Development Process Process Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization

New New Product Product Development Development Process Process Step Step 1. 1. Idea Idea Generation Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers 9-4 9-4

New New Product Product Development Development Process Process Step Step 2. 2. Idea Idea Screening Screening Process to spot good ideas and drop poor ones Criteria – – – – – Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return 9-5 9-5

New New Product Product Development Development Process Process Step Step 3. 3. Concept Concept Development Development & & Testing Testing 1. 1. Develop DevelopProduct ProductIdeas Ideasinto into Alternative Alternative Product ProductConcepts Concepts 2. 2. Concept ConceptTesting Testing--Test Testthe the Product ProductConcepts Conceptswith withGroups Groups of ofTarget TargetCustomers Customers 3. 3. Choose Choosethe theBest BestOne One 9-6 9-6

New New Product Product Development Development Process Process Step Step 4. 4. Marketing Marketing Strategy Strategy Development Development Marketing Strategy Statement Formulation Part Part One One -- Overall: Overall: Target Target Market Market Planned Planned Product Product Positioning Positioning Sales Sales & & Profit Profit Goals Goals Market Market Share Share Part Part Two Two -- Short-Term: Short-Term: Product’s Product’s Planned Planned Price Price Distribution Distribution Marketing Marketing Budget Budget Part Part Three Three -- Long-Term: Long-Term: Sales Sales & & Profit Profit Goals Goals Marketing Marketing Mix Mix Strategy Strategy 9-7 9-7

New New Product Product Development Development Process Process Step Step 5. 5. Business Business Analysis Analysis Step Step 6. 6. Product Product Development Development Business Business Analysis Analysis Review Review of of Product Product Sales, Sales, Costs, Costs, and and Profits Profits Projections Projections to to See See ifif They They Meet Meet Company Company Objectives Objectives IfIf No, No, Eliminate Eliminate Product Product Concept Concept IfIf Yes, Yes, Move Move to to Product Product Development Development 9-8 9-8

New New Product Product Development Development Process Process Step Step 7. 7. Test Test Marketing Marketing Standard Standard Test Test Market Market Controlled Controlled Test Test Market Market Full Fullmarketing marketingcampaign campaign in inaasmall smallnumber numberof of representative representativecities. cities. AAfew fewstores storesthat thathave have agreed agreedto tocarry carrynew new products productsfor foraafee. fee. Simulated Simulated Test Test Market Market Test Testin inaasimulated simulated shopping shoppingenvironment environment to toaasample sampleof of consumers. consumers. 9-9 9-9

9-10 9-10 Product Product Life Life Cycle Cycle Sales and Profits ( ) Sales Profits Time Product Development Losses/ Investments ( ) Introduction Growth Maturity Decline

Introduction Introduction Stage Stage of of the the PLC PLC Sales Sales Low Low sales sales Costs Costs High High cost cost per per customer customer Profits Profits Product Product Negative Negative Create Create product product awareness awareness and and trial trial Offer Offer aa basic basic product product Price Price Use Use cost-plus cost-plus Distribution Distribution Build Build selective selective distribution distribution Build Build product product awareness awareness among among early early adopters adopters and and dealers dealers Marketing Marketing Objectives Objectives Advertising Advertising 9-11 9-11

Growth Growth Stage Stage of of the the PLC PLC Sales Sales Rapidly Rapidly rising rising sales sales Costs Costs Average Average cost cost per per customer customer Profits Profits Rising Rising profits profits Marketing Marketing Objectives Objectives Maximize Maximize market market share share Offer Offer product product extensions, extensions, service, service, warranty warranty Price Price to to penetrate penetrate market market Product Product Price Price Distribution Distribution Advertising Advertising Build Build intensive intensive distribution distribution Build Build awareness awareness and and interest interest in in the the mass mass market market 9-12 9-12

Maturity Maturity Stage Stage of of the the PLC PLC Sales Sales Peak Peak sales sales Costs Costs Low Low cost cost per per customer customer Profits Profits High High profits profits Maximize Maximize profit profit while while defending defending market market share share Diversify Diversify brand brand and and models models Price Price to to match match or or best best competitors competitors Build Build more more intensive intensive distribution distribution Stress Stress brand brand differences differences and and benefits benefits Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising 9-13 9-13

Decline Decline Stage Stage of of the the PLC PLC Sales Sales Declining Declining sales sales Costs Costs Low Low cost cost per per customer customer Profits Profits Declining Declining profits profits Reduce Reduce expenditure expenditure and and milk milk the the brand brand Phase Phase out out weak weak items items Marketing Marketing Objectives Objectives Product Product Price Price Distribution Distribution Advertising Advertising Cut Cut price price Go Go selective: selective: phase phase out out unprofitable unprofitable outlets outlets Reduce Reduce to to level level needed needed to to retain retain hard-core hard-core loyal loyal customers customers 9-14 9-14