Chapter 10Chapter 10

Strategies for New Products Strategies for New Products and and

the Product Life Cyclethe Product Life Cycle

ObjectivesObjectives

Define “newness”ID elements of successful new productsOverview stages of new product

developmentUnderstand possible reasons for new

product failureIntroduce the product life cycle

Objectives - cont’dObjectives - cont’d

Relate new product diffusion to consumer adoption patterns

ID ways to modify existing productsExplore total quality managementReview product line managementDiscuss ethical considerations of product

strategy

Management Management Perspectives on “New” Perspectives on “New”

ProductsProducts

New-to-the-worldProduct category

extensionsProduct line

extensionsProduct

modifications

Consumers’ Consumers’ Perspectives on “New” Perspectives on “New”

ProductsProducts

DiscontinuousDiscontinuousInnovationInnovation

DiscontinuousDiscontinuousInnovationInnovation

BreakthroughBreakthrough

DynamicallyDynamicallyContinuousContinuousInnovationInnovation

DynamicallyDynamicallyContinuousContinuousInnovationInnovation

Major changeMajor change

ContinuousContinuousInnovationInnovation

ContinuousContinuousInnovationInnovation

Ongoing Ongoing alterationalteration

New Product FailuresNew Product Failures

80%: New Product Ideas80%: New Product IdeasThat FailThat Fail

New ProductsNew ProductsThat FailThat Fail

After IntroductionAfter Introduction

New ProductsNew Products That SucceedThat Succeed

Characteristics of Characteristics of SuccessSuccess

Relative advantageLower costsFasterEasierLonger lastingMore fun

Characteristics of Characteristics of SuccessSuccess

Compatibility with existing habits and behaviors

Characteristics of Characteristics of SuccessSuccess

TrialabilityEasily testedLow risk InexpensiveNo special equipmentFree samples or coupons

Demo days

Sample size

Characteristics of Characteristics of SuccessSuccess

ObservabilityVisible cuesCommunicate hidden

qualities

Characteristics of Characteristics of SuccessSuccess

SimplicityUser friendlyUnderstandableLogical extensionEasy to grasp

New Product New Product DevelopmentDevelopmentIDEA GENERATION

SCREENING

BUSINESS ANALYSIS

DEVELOPMENT

COMMERCIALIZATION

NEW PRODUCT

New Product New Product DevelopmentDevelopment

Idea generationOngoingID target market needsTechnology drivenMarketing researchGlobal vision

New Product New Product DevelopmentDevelopment

ScreeningReasonablePertinentAppropriateReal consumer needMagnitude of potentialCorporate criteria / hurdle

rates

New Product New Product DevelopmentDevelopment

Business analysisQualitative evaluation

FeaturesResource needsBasic marketing plan

Quantitative evaluationMarket demandCostsInvestmentCompetitive activityBreak-even analysis

New Product New Product DevelopmentDevelopment

Product developmentPrototypeTotal product

(packaging, branding, etc.)

Preliminary testingConcept Testing

Present product to potential customers

Test MarketingField testingLaboratory testing

New Product New Product DevelopmentDevelopment

CommercializationLaunch decisionMarketing mixEstablish production capacitySupply chain & partner

relationships

New Product FailureNew Product Failure

Insufficient superiority or uniqueness

Inadequate/inferior planning

Poor execution Technical problems Poor timing

Introduction Growth Maturity Decline

Product Life CycleProduct Life Cycle

Time

Sales

Product Life CycleProduct Life Cycle

IntroductionSlow salesLow revenuePromote to gain awarenessVaried length

Product Life CycleProduct Life Cycle

GrowthIncreasing salesIncreasing profitsIncreasing

competitionProduct refinementProfits peakPromote to create

brand preference

Product Life CycleProduct Life Cycle

MaturitySales from

increase to declineIntense

competitionPrices and profit

margins decreaseProfits often still

high

Product Life CycleProduct Life Cycle

DeclineFalling industry sales

& profitsIndustry shakeout

Stimulating AdoptionStimulating Adoption

AwarenessInterestEvaluationTrialAdoption TIME

Diffusion ProcessDiffusion Process

INNOVATORS (2.5%)VenturesomeInner directedRisk takersYounger, better

educated & financially stable

Buy during introduction stage

Diffusion ProcessDiffusion Process

Early Adapters (13.5%)Similar to innovatorsOften buy during

growth stageOpinion leadersWell educatedImportant

promotional target

BUY X

Early & late majority (68%)mass marketbuying cues from early

adoptersAverage SESFairly risk averse

Diffusion ProcessDiffusion Process

BUY X

OK, we will

buy X

Diffusion ProcessDiffusion Process

LaggardsResist changeConservativeLike tradition

NonadoptersRefuse to change

OK, we will

buy X.If I have to buy it I will.

No way!

Strategies to Modify Strategies to Modify Existing ProductsExisting Products

CostCostReductionsReductions

RepositioningRepositioning Total QualityTotal QualityManagementManagement

Product ModificationProduct Modification

Product Line StrategiesProduct Line Strategies

Full Line StrategyFull Line Strategy

Limited Line StrategyLimited Line Strategy

Single-Product StrategySingle-Product Strategy

Modifying Products for Modifying Products for International MarketsInternational Markets

Globalization Globalization StrategyStrategy•ElectronicsElectronics•McDonaldsMcDonalds

Customization Customization StrategyStrategy•Post-It NotesPost-It Notes•Consumer goodsConsumer goods

StandardizationStandardization AdaptationAdaptation

Right to SafetyRight to SafetyRight to SafetyRight to Safety

Right to beRight to beInformedInformed

Right to beRight to beInformedInformed

Quality of Life and EcologyQuality of Life and EcologyQuality of Life and EcologyQuality of Life and Ecology

ProductProductObsolescenceObsolescenceProductProductObsolescenceObsolescence

ProductProductEthicsEthics

ReviewReview

Define “newness”ID elements of successful new productsOverview stages of new product

developmentUnderstand possible reasons for new

product failureIntroduce the product life cycle

Review - cont’dReview - cont’d

Relate new product diffusion to consumer adoption patterns

ID ways to modify existing productsExplore total quality managementReview product line managementDiscuss ethical considerations of product

strategy