Chapter 8: New-Product Development and Life-Cycle Strategies

New-Product Development Strategies: Acquisition
(3) Acquired Companies, Acquired Patents, Acquired Licenses
New-Product Development Strategies: New Product Development Effort
(4) Original Products, Product Improvements, Product Modifications, New Brands
Define New Product Development
The development of original products, product improvements, product modificaKons, and new brands through the firm’s own product development efforts
What are Major Stages in New-Product Development steps?
Idea Generation to Idea Screening to Concept Development & Testing to Marketing Strategy Development to Business Analysis to Product Development to Test Marketing to Commercialization
Define Idea Generation
To Analyze customer quesKons and complaints to find new products that be_er solve consumer problems. Among that, it Invite customers to share suggesKons and ideas
What are the Internal Source of Idea Generation
There is (2) internal source,

~the traditional R&D process
~Intrapreneurs within the company.

What are the External Source of Idea Generation
There is (4) internal source,

the Distributors and suppliers
• Competitors and their
products
• Trade magazines and shows
• Customers

Define Crowdsourcing
Invites customers, employees, independent
scienKsts and researchers, and even the public at large, into the new-product innovaKon process
Define Idea Screening
The Idea Screening is a new-product ideas to spot good ideas and drop poor ones as soon as possible
Define Concept Development & Testing
To develop a new product into alternative product
concepts, find out how a ractive each concept is to customers, and choose the best one
Define Product Idea
An idea for a possible product that the company can see itself offering to the market
Define Product Concept
A detailed version of the new-product idea stated in meaningful consumer terms
Define Product Image
The way consumers perceive an actual or potenKal product
Define Concept Testing
Testing new-product concepts with a group of target consumers to find out if the concepts
have strong consumer appeal

• Using a description, picture or model of the product
• Asking consumers about their reactions

Define Marketing Strategy Development
Designing an initial marketing strategy for a new product based on the product concept
What is the Marketing Strategy Statement?
They have 3 statement:

Part 1: Describes the target market, planned value proposition, sales, market share, and profit goals

• Part 2: Outlines the product’s planned price, distribution, and marketing budget

• Part 3: Describes the planned long-run sales and profit goals, marketing mix strategy

Define Business Analysis
A review of the sales, costs, and profit projections for a new product to find out whether these
factors satisfy the company’s objective
Define Product Development
Developing the product concept into a physical product to ensure that the product idea can be
turned into a workable market offering

• Prototypes are made
• Consumer tests are conducted

Define Test Marketing
Introducing the product and marketing program in realistic market settings

• Not for all products
• Can be expensive and time consuming, but better than making a major marketing mistake

Standard test markets are usually extensive and costly to use

Define Simulated Test Markets
Researchers measure consumer responses to in laboratory stores or simulated online shopping
environments
Define Controlled Test Markets
New products and tacKcs are tested among controlled panels of shoppers and stores
What is Commercialization?
Introducing a new product into the market

• Companies must decide:
– When to introduce the product
– Where to introduce the product
– Single location, state, region, nationally,
internaKonally

Define New-Product Failures
• Overestimation of market size
• Design problems
• Incorrect pricing or positioning
• High development costs
• Competitor reaction
What is Managing New-Product Development
Companies must take a holistic approach to new product development

• This requires:
~Customer-centered new-product development ~Team-based new-product development
~ Systematic new-product development

Define Customer-Centered New-Product Development
New-product development that focuses on
finding new ways to solve customer problems and create more customer-satisfying experiences
What is Team-Based New-Product Development
Various company departments work closely together, overlapping the steps in the product
development process to save time and increase effectiveness

• Cross functional teams lead to fast and flexible
development
• Causes more organizational tension and confusion than the sequential approach

What is a Systematic New-Product Development?
The new-product development process should be holistic and systematic. Innovation management systems can help companies collect, review, evaluate, and manage new-product ideas. Because they help create an innovaKon-oriented company
culture. They yield a larger number of new-product idea
What is Marketing at Work?
Faced with falling sales, LEGO began new-product development by listening to customers and including them in the design process
Define Product Life Cycle (PLC)
The course of a product’s sales and profits over its lifetime. All products do not follow all five stages of the PLC. Marketers can apply the PLC as a framework for describing how products and
markets work.
Describe Applying the Product Life-Cycle Concepts
The PLC concept can describe a product class, a product form , or a brand. The PLC concept also can be applied to what are known as styles, fashions, and fads.

• Product class has the longest life cycle
• Product form tends to the standard PLC shape
• PLCs for brands can change quickly because of
changing competitive attacks and response

Define Style
A basic and distinctive mode of expression
Define Fashion
A currently accepted or popular style in a given field
Define Fad
A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity
What are the steps of “Introduction Stage Characteristic”?
• Sales: Low
• Costs: High cost per customer
• Profits: Negative or low
• Customers: Innovators
• Competitors: Few
• Marketing objective: Create product awareness and trial
• Product: Offer a basic product
• Price: Use cost-plus pricing
• Distribution: Build selective distribution
• Advertising: Build product awareness among early adopters and dealers
• Promotion: Use heavy promotion to entice product trial
What are steps of “Maturity Stage Characteristics”?
• Sales: Peak sales
• Costs: Low cost per customer
• Profits: High profits
• Customers: Middle majority
• CompeKtors: Stable number beginning to decline
• Marketing objective: Maximize profits while defending market share
What are some Maturity Stage Strategies?
– 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

Steps to Maturity Stage Strategies?
• Modifying the product
– Changing characteristics such as quality, features, style or packaging to attract new users and inspire more
usage

• How?
– Improve durability, reliability, speed, taste
– Improve styling and attractiveness
– Add new features

Extra Steps to Maturity Stage Strategies?
• Modifying the markeKng mix
– Improving sales by changing one or more marketing mix elements

• How?
– Offer new or improved services
– Cut prices
– Launch a better ad campaign
– Move into new market channels

What are Decline Stage Characteristics
• Sales: Declining sales
• Costs: Low cost per customer
• Profits: Declining profits
• Customers: Laggards
• Competition: Declining number
• Marketing objective: Reduce expenditures and milk the brand
What are Decline Stage Strategies
• Product: Phase out weak items
• Price: Cut price
• Distribution: Go selective—phase out unprofitable outlets
• Advertising: Reduce to level needed to retain hard-core loyals
• Promotion: Reduce to minimal level