CHAPTER 8

New Product Development

and Product Life Cycle
Strategies

New Product Development

OBJECTIVES
1. Explain how companies find and develop new product
ideas.
2. List and define the steps in the new product
development process.
3. Describe the stages of the product life-cycle
4. Describe how marketing strategies change during the
products life cycle.

Product Life-Cycle
The two major challenges:

New Product Development Strategy

A firm can obtain new products in two ways:
Acquisition
Acquired
companies
Acquired Patents
and Licenses

New Product
Development
Original Product
Product Improvements,
Product Modification& New
brands

CAUSES OF NEW PRODUCT FAILURES

1. One study estimated that as many as 80% of
new products failed. Most of these are line
extensions.
2. Only about 40% of new products are still
around after 5 years past their introduction.
Failure rates for new industrial product may be
as high as 30 %.

Overestimation of market size

Product designer problem

WHY?

Product incorrectly positioned,

priced, or advertise
Product may have been pushed
despite poor marketing research
findings
Costs of product development
Competitive actions

Improving New Product Success

MAJOR STAGES IN NEW PRODUCT

DEVELOPMENT

IDEA GENERATION
Idea generation is the systematic search
for new product ideas.
SOURCES

IDEA SCREENING
Helps spot good ideas and drop poor ones as soon as
possible.
Apply systems for rating and screening ideas which
estimates:
Market size
Product size
Develop time and cost
Manufacturing cost
Rate of returns

CONCEPT DEVELOPMENT AND TESTING

Concepts may take on several forms:
PRODUCT IDEA

Idea for a possible product that the

company can see itself in the market

PRODUCT CONCEPT

Detailed version of the new product idea

stated in meaningful consumer terms

PRODUCT IMAGE

Way consumers perceive an actual or

potential product

 Concept Development
It involves developing product ideas into some
alternative product concept, finding out how attractive
each concept is to consumers, and choosing the best
one.

Concept Testing
It involves testing the concepts with a group of target
consumers to find out if the concepts have strong
consumer appeal.

MARKETING STRATEGY DEVELOPMENT

Marketing Strategy Development

It involves designing an initial marketing strategy for
a new product based on the product concept.

Marketing Strategy Statement

This is a statement of the planned strategy for a new
product.

Marketing Strategy Statement

BUSINESS ANALYSIS

PRODUCT DEVELOPMENT
Product Development
It involves developing the product concept into a
physical product in order to ensure that the product
idea can be turned into a workable product.

TEST MARKETING
Product and marketing
program are introduced
into more realistic
marketing settings.
This process can be very
expensive and time
consuming

Test the following:

Positioning strategy
Advertising
Distribution
Pricing
Branding
Packaging
Budget levels

COMMERCIALIZATION
Commercialization
This step is introducing a new product into the
market.

PRODUCT LIFE-STRATEGIES

PRODUCT LIFE CYCLE

PLC is the course of a products sales and profits over its
time.
PRODUCT DEVELOPMENT
STAGE

It begins when the company find and develops

anew product idea.

INTRODUCTION STAGE

It is the period of slow sales growth as the

product is being introduced in the market.

GROWTH STAGE

It is the period of rapid market acceptance and

increasing profits.

MATURITY STAGE

It is the period of slowdown in sales growth

because the product has achieved
acceptance by most potential buyers.

DECLINE STAGE

It is the period when the sales fall off and

profits drop.

APPLICATIONS OF THE PRODUCT LIFE CYCLE

PRODUCT CLASSES

Longest life cycles

PRODUCT FORMS

Standard PLC shape

BRAND

Change quickly because of changing competitive

attacks and responses

STYLE

Basic and distinctive mode of expression

FASHION

Popular style in a given field

FAD

A fashion that enters quickly, is adapted quickly, and

declines fast.

PROBLEMS THAT MAY ARISE WHEN

USING PLC

INTRODUCTION STAGE
SALES

Low sales

COSTS

High cost per customer

PROFITS

Negative or low

MARKETING OBJECTIVES

Create product awareness and trial

PRODUCT

Offer a basic product

PRICE

Usually is high

DISTRIBUTION

High distribution expenses

ADVERTISING

Spending is high to inform consumers

MARKET PIONEER must launch its product with a strategy that

is consistent with along-term focus on the market rather than a
quick profit gain.

GROWTH STAGE
SALES

Rapidly rising sales

COSTS

Average cost per customer

PROFITS

Rising Profits

MARKETING OBJECTIVES

Maximize market share

PRODUCT

Offer new product features

PRICE

Remain where they are or fall

slightly

DISTRIBUTION

Increase number of distribution

outlets

ADVERTISING

Educating consumers and

meeting competition

MATURITY STAGE
Market Modification
is an approach in which the company tries to
increase the consumption of the current product.
Product Modification
is an approach to change product characteristics.
Marketing Mix Modification
Is an approach in which the product manager tries to improve
sales by changing one or more marketing mix elements.

SALES

Begin to slow

COSTS

Low cost per customer

PROFITS

High profits, then lower profits

MARKETING OBJECTIVES

Maximize while defending market

share

PRODUCT

May modify product

PRICE

May decline

DISTRIBUTION

Build more intensive distribution

ADVERTISING

Stress brand differences and benefits

DECLINE STAGE
1. Technological advances
2. Shifts in consumer tastes
3. Increase competition

SALES

Declining sales

COSTS

Low cost per customer

PROFITS

Declining profits

MARKETING OBJECTIVES

Reduce expenditure and maintain

harvest, or drop the product

PRODUCT

Phase out weak items

PRICE

Cut price

DISTRIBUTION

Selective; phase out unprofitable

outlets

ADVERTISING

Reduce to level needed to retain hardcore loyal customers