NPD N PLC

New-Product Development
New-Product Development: The development of original products, product improvements, product modifications, and new brands through the firms own R&D efforts.
New-Product Development Strategy
Strategies for Obtaining New-Products

Acquisition of:
Companies
New Products:
Original Products
Patents
Licenses
Improvements
Modifications
2
New-Product Failures
Only 10% of new products are still on the market and profitable after 3 years. Failure rate for industrial products is as high as 30%. Why?
Overestimation of market size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Development costs Competition
3
Major Stages in New-Product Development
Idea Generation
Company Employees
Customers Competitors
Distributors Suppliers
5
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 bottles special nozzle also emits a thin stream so they can autograph their burgers.
6
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.
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.
GMs Electric Car
The companys task is to develop new product into alternative product concepts, find out how attractive each is to customers, and choose the best one. Concept 1:An inexpensive second family car ideal for loading groceries.. Concept 2: Medium cost medium size all purpose family car Concept 3;Medium cost sporty car appealing to young people Concept 4: Inexpensive appealing to people who want basic transportation, low fuel cost, and low pollution. 9
Concept testing
Testing newproduct concepts with a group of target consumers to find out if the concept has strong consumer appeal.
10
Marketing Strategy Development

Part One Describes:
The Target Market Planned Product Positioning Sales, Market Share, & Profit Goals
Part Two Outlines the First-Years:

Products Planned Price Distribution Marketing Budget
Part Three Describes Long-Run:

Sales & Profit Goals Marketing Mix Strategy
11
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.
12
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
13
Test Marketing
Product and program introduced in more realistic market setting. Not needed for all products. Can be expensive and time consuming, but better than making major marketing mistake.
14
Test Marketing
Nokia test-marketed its new N-Gage cell phone/mobile game player extensively before introducing it worldwide.
15
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 rollout plan.
16
Organizing New-Product Development
Sequential Approach: each stage completed before moving to next phase of the project. Simultaneous Approach: Cross-functional teams work through overlapping steps to save time and increase effectiveness.
17
Product Life Cycle
18
Product Life Cycle

Sales and Profits (Rs.) Profits Time Decline Sales
Product Development
Introduction
Growth
Maturity
Losses/ Investments (Rs.)
Sales and Profits Over the Products Lifetime

19
The Product Life Cycle
Recognizes distinct stages in the sales history of products
20
The Product Life Cycle

Four stages: 1. Introduction 2. Growth 3. Maturity 4. Decline
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Customer Types
22
Stage I: Introduction
Slow
sales growth Few competitors Innovative customers Nonexistent profit
23
Stage I: Introduction
Strategic Focus
Expand
market Increase product awareness
24
Stage II: Growth

Rapid
market acceptance Substantial profit improvement Increasing competition Mass Market Profits Peak?
25
Stage II: Growth

Strategic Focus
Market
penetration Build brand preference
26
Stage III: Maturity

Slow
down in sales growth Profit peaks (if didnt in growth) Mass market Many competitors
27
Stage III: Maturity

Strategic Focus
Defend
market share! Retain brand loyalty Product differentiation
28
Stage IV: Decline
Sales decline May be fast or slow Low profits Customers are laggards Competitors decline
29
Extending the PLC
Increase frequency of use by present customers Find new uses Increase number of users Change package size/label Encourage trial
30
31
Practical Problems of PLC

Hard to identify which stage of the PLC the product is in Hard to identify factors that affect products movement through stages Hard to pinpoint when the product moves to next stage
Hard to forecast sales level, length of each stage, and shape of PLC
Strategy is both a cause and result of the PLC

32
Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales Low
Costs
Profits Marketing Objectives
High cost per customer

Negative Create product awareness and trial
Product
Price Distribution
Offer a basic product

Use cost-plus formula Build selective distribution Heavy to entice product trial
33
Promotion
Growth Stage of the PLC

Sales Costs Profits Marketing Objectives Rapidly rising Average cost per customer Rising Maximize market share
Product
Price Distribution Promotion
Offer extension, service, warranty

Penetration strategy Build intensive distribution
Reduce to take advantage of demand

34
Maturity Stage of the PLC

Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Peak Low cost per customer High Maximize profits while defending market share Diversify brand and models Match or beat competitors Build more intensive distribution Increase to encourage brand switching
35
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 fastergrowing segment Look for ways to increase usage among present customers
36
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
37
Modifying the Product
Crayola has added a steady stream of new colors, forms, and packages
38
Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements. How?

Cut prices Launch a better ad campaign

New ads and promotions to reposition and revitalize mature product.
Move into larger market channels Offer new or improved services to buyers
39
Decline Stage of the PLC

Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Declining Low cost per customer Declining
Reduce expenditures and milk the brand
Phase out weak items Cut price

Selective: phase out unprofitable outlets Reduce to minimum level
40

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New-Product Development

New-Product Development Strategy

Strategies for Obtaining New-Products

Major Stages in New-Product Development

Concept Development and Testing

GMs Electric Car

Marketing Strategy Development

Part Two Outlines the First-Years:

Part Three Describes Long-Run:

Organizing New-Product Development

Product Life Cycle

Product Life Cycle

Losses/ Investments (Rs.)

Sales and Profits Over the Products Lifetime

The Product Life Cycle

Recognizes distinct stages in the sales history of products

The Product Life Cycle

sales growth Few competitors Innovative customers Nonexistent profit

market Increase product awareness

Stage II: Growth

Stage II: Growth

penetration Build brand preference

Stage III: Maturity

Stage III: Maturity

market share! Retain brand loyalty Product differentiation

Stage IV: Decline

Extending the PLC

Practical Problems of PLC

Strategy is both a cause and result of the PLC

Introduction Stage of the PLC

High cost per customer

Offer a basic product

Growth Stage of the PLC

Offer extension, service, warranty

Reduce to take advantage of demand

Maturity Stage of the PLC

Maturity Stage of the PLC

Maturity Stage of the PLC

Modifying the Product

Maturity Stage of the PLC

Cut prices Launch a better ad campaign

Decline Stage of the PLC

Phase out weak items Cut price

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