Chapter 6 : Developing and Managing

Products

1
 Learning Outcomes

LO1 Explain the steps in the new-product

development process

LO2 Explain the concept of product life cycles

2
 New Product

A product new
to the world, the market, the
producer, the seller, or some
combination of these.

3
 New Product Advantages

Being first on the market has numerous

advantages:

Increased sales through longer sales life

Increased margins
Increased product loyalty
More resale opportunities
Greater market responsiveness
A sustained leadership position

4
Categories of New Products
New-to-the-World

New Product Lines

Product Line Additions

Improvements or Revisions

Repositioned Products

Lower-Priced Products
5
Developing New Products

6
The New Product Development Process

LO1
Explain the steps
in the new-product
development process.

7
New-Product Development Process
The New-Product Development Process

New Product Success Factors

Long-term commitment

Company-specific approach

Capitalize on experience

Establish an environment

9
New-Product Development Process

New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product

10
 Idea Generation

Customers

Employees

Distributors

Vendors

Sources of Competitors
New-Product
Ideas R&D

Consultants
11
 Brainstorming

The process of getting a group

to think of unlimited ways to
vary a product or
solve a problem.

12
 Idea Screening

The first filter in the product

development process, which
eliminates ideas that are
inconsistent with the organizations
new product strategy or are
inappropriate for some other reason.

13
 Concept Test

A test to evaluate a
new-product idea,
usually before any prototype
has been created.

14
 Business Analysis

Demand

Considerations Cost
in
Business
Analysis Stage
Sales

Profitability

15
 Development
Creation of prototype
Marketing strategy
Packaging, branding,
labeling
Promotion, price, and
distribution strategy
Manufacturing feasibility
Final government approvals
if needed

16
Simultaneous Product Development

A team-oriented approach
to new-product development.

17
 Test Marketing

The limited introduction of a

product and a marketing
program to determine
the reactions of
potential customers in a
market situation.

18
Alternatives to Test Marketing

Single-source research using

supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

19
Commercialization

Production

Inventory Buildup

Distribution Shipments

Sales Training

Trade Announcements

Customer Advertising

20
 Why New Products Fail
No discernible benefits
Poor match between features and customer
desires
Overestimation of market size
Incorrect positioning
Price too high or too low
Inadequate distribution
Poor promotion
Inferior product

21
 Success Factors
Factors in Successful
New Products

Match between product and market needs

Different from substitute products

Benefit to large number of people

22
 Success Factors

Listening to customers Strong leadership

Producing the best Commitment to new-

product product development

Project-based team
Vision of future market
approach

Willingness to fail
Getting every aspect right
occasionally

23
Why Products Succeed or Fail

24
 Global Issues

Develop product for potential worldwide

distribution

Build in unique market

requirements

Design products to meet regulations and

key market requirements

25
Global Issues in New-Product Development

Single product worldwide

Modification of products

Multiple products in
multiple countries

26
 Diffusion

The process by
which the adoption of an
innovation spreads.

27
Categories of Adopters
Innovators

Early Adopters

Early Majority

Late Majority

Laggards

28
 Product Characteristics and
the Rate of Adoption
Complexity

Compatibility

Relative Advantage

Observability

Trialability

29
 Marketing Implications
of the Adoption Process

Word of Mouth

Communication
Aids the
Diffusion Process

Direct from
Marketer

30
Review Learning Outcome
Diffusion Process for New Products

31
Product Life Cycles

LO2

Explain the concept of

product life cycle.

32
 Product Life Cycle

A biological metaphor that

traces the stages of a products
acceptance, from its
introduction (birth) to
its decline (death).

33
 Product Life Cycle
Introductory Growth Maturity Decline
Stage Stage Stage Stage
Sales
Dollars

Profits

Time 34
 Product Life Cycles for
Styles, Fashions, and Fads

35
 Introductory Stage
High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits with slow sales increases
Promotion focuses on awareness and information
Communication challenge is to stimulate primary
demand

36
 Growth Stage
Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the
differences between brands
Wider distribution

37
 Maturity Stage
Sales increase at a decreasing rate
Saturated markets
Annual models appear
Lengthened product lines
Service and repair assume important roles
Heavy promotions to consumers and dealers
Marginal competitors drop out
Niche marketers emerge

38
 Decline Stage
Long-run drop in sales
Large inventories of
unsold items
Elimination of all nonessential
marketing expenses
Organized abandonment

39
Diffusion Process and PLC Curve

Introduction Growth Maturity Decline

Product
life cycle
Sales

curve
Early majority
Late majority
Early adopters

Innovators
Laggards
Diffusion
curve

40
 Product Life Cycles

INTRODUCTION GROWTH MATURITY DECLINE

Product Limited models; More models; Large number Eliminate

Strategy Frequent Frequent of models unprofitable
changes changes models

Limited Expanded Extensive; Phase out

Sales

Distribution
Wholesale/ dealers; Long- Margins drop; unprofitable
Strategy retail distributors term relations Shelf space outlets

Awareness; Aggressive ads. Advertise; Phase out

Promotion Stimulate demand; Stimulate Promote promotion
Strategy Sampling demand heavily

High to recoup Fall as result of Prices fall Prices

Pricing development competition & (usually) stabilize at
costs efficient low level
Strategy
production
Time
41