New Pdt Plc
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New Product Development and Product Life-Cycle Strategies
New-Product Development Strategies Strategies for Obtaining New Product Ideas Acquired Companies Acquired Patents Acquired Licenses
Six categories of New Products New-to-the-world
product New product lines Additions to the existing product lines Improvements of existing products Repositioning Cost reductions
New Product Development
companies must be constantly modifying existing products/services and developing new ones; the marketplace demands it how new is new? most new products are modifications of or extensions to existing ones the introduction of a new product is a strategic decision which should be guided by the company’s goals and a new product introduction strategy
Criteria for New Products
there must be adequate market demand: necessary but not sufficient for success must satisfy key financial criteria must be compatible with environmental standards must fit with the company’s marketing structure should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives
Causes of New Product 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.
Factors which Hinder New Product Development Shortage
of important ideas in certain areas Fragmented markets Social and governmental constraints Cost of development Capital shortage Faster required development time Shorter product life cycle
New Product Development Process Marketing Strategy
Concept Development and Testing Idea Screening Idea Generation
Business Analysis
Product Developmen
Test Marketing Commercialization
New Product Development Process Step 1. Idea Generation Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:
C U S T O M E R S
C O M P E T I T O R S
D I S T R I B U T O R S
S U P P L I E R S
Idea Generation- Creativity Techniques
Attribute
Listings Forced relationship Morphological analysis Reverse assumption analysis New contexts Mind mapping Lateral marketing
New Product Development Process Step 2. 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.
New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
Concept Development Who
will use this product? What primary benefit should this product provide? When will people use this product?
Concept Testing
Communicability & believability Need level Gap level Perceived value Purchase intention User targets, purchase occasions, purchasing frequency Conjoint Analysis
New Product Development Process Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation Part One Describes Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two Describes Short-Term: Product’s Planned Price Distribution Marketing Budget
Part Three Describes Long-Term: Sales & Profit Goals Marketing Mix Strategy
New Product Development Process 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
New Product Development Process Step 7. Test Marketing Standard Test Market Full marketing campaign in a small number of representative cities.
Controlled Test Market 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.
New Product Development Process Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When?
Where?
To Whom?
How?
Product Life SalesCycle and Profits Over the Product’s Life From Introduction to Decline
Sales and Profits ($) Sales
Profits
Time Product Develop ment Losses/ Investments ($)
Introduction
Growth
Maturity
Decline
Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Low sales
Costs
High cost per customer
Profits
Negative
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Use cost-plus
Distribution
Build selective distribution
Advertising
Build product awareness among early adopters and dealers
Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Maximize market share
Product Price
Offer product extensions, service, warranty Price to penetrate market
Distribution
Build intensive distribution Build awareness and interest in
Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits
Marketing Objectives
Maximize profit while defending market share
Product Price Distribution
Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and
Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Marketing Objectives
Reduce expenditure and milk the brand
Product
Phase out weak items
Price
Cut price
Distribution
Go selective: phase out unprofitable outlets
Product Life Cycle Variations
Managing the Life Cycle
successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage when to consider entering the market how to manage to capitalize on growth it is possible to develop strategies that will extend the maturity stage; modify the product, devise new uses, or design new appeals greatest challenge comes at the decline
Consumer Adoption Process
Adopters of new products move through five stages: awareness: customer is exposed to the product interest: interest and information seeking evaluation: assessment of the advantages and disadvantages of the new product trial: customer tries the product in lowrisk situation; may be a sample or test drive adoption: customer decides to buy the product
Consumer Adoption Process People
adopt new products at different rates – – – – –
Innovators Early adopters Early majority Late majority Laggards
Consumer Adoption Process Five
product characteristics influence the rate of adoption: – – – – –
Degree of relative advantage Degree of compatibility Degree of complexity Degree of divisibility (trialability) Degree of communicability
New-Product Development Strategies Strategies for Obtaining New Product Ideas Acquired Companies Acquired Patents Acquired Licenses
Six categories of New Products New-to-the-world
product New product lines Additions to the existing product lines Improvements of existing products Repositioning Cost reductions
New Product Development
companies must be constantly modifying existing products/services and developing new ones; the marketplace demands it how new is new? most new products are modifications of or extensions to existing ones the introduction of a new product is a strategic decision which should be guided by the company’s goals and a new product introduction strategy
Criteria for New Products
there must be adequate market demand: necessary but not sufficient for success must satisfy key financial criteria must be compatible with environmental standards must fit with the company’s marketing structure should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives
Causes of New Product 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.
Factors which Hinder New Product Development Shortage
of important ideas in certain areas Fragmented markets Social and governmental constraints Cost of development Capital shortage Faster required development time Shorter product life cycle
New Product Development Process Marketing Strategy
Concept Development and Testing Idea Screening Idea Generation
Business Analysis
Product Developmen
Test Marketing Commercialization
New Product Development Process Step 1. Idea Generation Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:
C U S T O M E R S
C O M P E T I T O R S
D I S T R I B U T O R S
S U P P L I E R S
Idea Generation- Creativity Techniques
Attribute
Listings Forced relationship Morphological analysis Reverse assumption analysis New contexts Mind mapping Lateral marketing
New Product Development Process Step 2. 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.
New Product Development Process Step 3. Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
Concept Development Who
will use this product? What primary benefit should this product provide? When will people use this product?
Concept Testing
Communicability & believability Need level Gap level Perceived value Purchase intention User targets, purchase occasions, purchasing frequency Conjoint Analysis
New Product Development Process Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation Part One Describes Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two Describes Short-Term: Product’s Planned Price Distribution Marketing Budget
Part Three Describes Long-Term: Sales & Profit Goals Marketing Mix Strategy
New Product Development Process 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
New Product Development Process Step 7. Test Marketing Standard Test Market Full marketing campaign in a small number of representative cities.
Controlled Test Market 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.
New Product Development Process Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When?
Where?
To Whom?
How?
Product Life SalesCycle and Profits Over the Product’s Life From Introduction to Decline
Sales and Profits ($) Sales
Profits
Time Product Develop ment Losses/ Investments ($)
Introduction
Growth
Maturity
Decline
Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Low sales
Costs
High cost per customer
Profits
Negative
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Use cost-plus
Distribution
Build selective distribution
Advertising
Build product awareness among early adopters and dealers
Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Maximize market share
Product Price
Offer product extensions, service, warranty Price to penetrate market
Distribution
Build intensive distribution Build awareness and interest in
Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits
Marketing Objectives
Maximize profit while defending market share
Product Price Distribution
Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and
Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Marketing Objectives
Reduce expenditure and milk the brand
Product
Phase out weak items
Price
Cut price
Distribution
Go selective: phase out unprofitable outlets
Product Life Cycle Variations
Managing the Life Cycle
successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage when to consider entering the market how to manage to capitalize on growth it is possible to develop strategies that will extend the maturity stage; modify the product, devise new uses, or design new appeals greatest challenge comes at the decline
Consumer Adoption Process
Adopters of new products move through five stages: awareness: customer is exposed to the product interest: interest and information seeking evaluation: assessment of the advantages and disadvantages of the new product trial: customer tries the product in lowrisk situation; may be a sample or test drive adoption: customer decides to buy the product
Consumer Adoption Process People
adopt new products at different rates – – – – –
Innovators Early adopters Early majority Late majority Laggards
Consumer Adoption Process Five
product characteristics influence the rate of adoption: – – – – –
Degree of relative advantage Degree of compatibility Degree of complexity Degree of divisibility (trialability) Degree of communicability
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