Product Develpoment Stratergy

8/8/2019 Product Develpoment Stratergy

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New Product Development andLife-Cycle strategies


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New-ProductDevelopment Strategy

New Product Development The development of original products, product

improvements, product modifications, and newbrands through the firm s own R&D efforts.


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New-Product

Development StrategyNew products can beobtained via acquisitionor development.

New products sufferfrom high failure rates.Several reasons accountfor failure.


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Discussion Question

Think of products you have seen recently instores. Can you think of any that seem doomedto fail?

Why?


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M ajor Stages in New-Product Development


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Stage 1: Idea Generation The systematic search for new product ideas

Internal sources: brainstorming, employees fromall departments, R & D External sources: customers, competitors,

distributors, suppliers, and others

Stages of the New Product DevelopmentProcess


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Intuit, amarketer of

financialsoftware,

asks for newproduct

ideas fromcustomers


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Stage 2: Idea Screening The purpose is to identify good ideas and drop

poor ones to avoid spending any more money ondeveloping them

Criteria used:Usefulness to consumers

Good fit with company objectives and strategiesHave the resourcesAdd value


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Stage 3: Concept Development and Testing Concept development creates a detailed version

of the idea stated in meaningful consumer terms. Concept testing asks target consumers to evaluate

product concepts.


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Stage 4: M arketing Strategy Development1st statement describes the target market, productpositioning, and sales, share, and profit goals for the

first few years.2nd statement outlines the product s price, distribution,and marketing budget for the first year.3rd statement describes the long-run sales and profit

goals, and the marketing mix strategy.


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Stages of the New ProductDevelopment Process

Stage 5: Business Analysis Review of the sales, costs, and profit projections

for a new product to determine if they will satisfy

company objectivesStage 6: Product Development

Developing the product concept into a physicalproduct to ensure that it can be done

Requires large investmentBuilding a prototypeTesting for safety, durability, and acceptability


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Stages of the New ProductDevelopment Process

Stage 8: Commercialization, introducing a newproduct into the market

Large investment required Need to decide on introduction timing and scale

of event M arket rollout or full-scale introduction


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O rganizing forNew-Product Development

Sequential product development: working onone piece of the new product at a time

Simultaneous (team-based) productdevelopment: developing multiple pieces of the product at the same time; today s methoddue to distributed computing


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Stages of the PLC


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Product Life-Cycle Strategies

The product life cycle concept can be appliedto a:

Product class (soft drinks) Product form (diet colas) Brand (Diet Dr. Pepper)

Using the PLC to forecast brand performance or to

develop marketing strategies is problematic


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Introduction Stage Sales start at zero and begin to climb

slowly; profits continue to declinedue to costs of launching the product

The main promotional goal is to

make a big noise to attract attentionand to educate buyers about thenew product concept

M arket pioneers take the most riskbut may reap the biggest rewards,eg. Chrysler minivan

Few product variants, no

competition to speak of Pricing strategy: skimming orpenetration

Distribution: not all outlets coveredas some may not want the risk

Growth Stage Sales of the new product begin to

climb quickly as awareness within thetarget market(s) builds

Profits may become positive asdevelopment and launch costs are

recovered and the company achieveseconomies of scale Competition notices and rushes their

versions into production Product quality can be improved,

extra features and versionsdeveloped to sustain growth anddifferentiate from competition

Distribution increases as the productbecomes more known Pressure on pricing as competition

increases


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Which stage of the

PLC?How do you know?

ProductdevelopmentIntroduction

GrowthM aturityDecline


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Product O ffer a basic productPrice Skimming or penetration pricing

D istribution Build selective distributionAdvertising Build awareness amongearly adopters and dealers/resellers

Sal es Promotion Heavy expenditures tocreate trial

M arketing Strategies:Introduction Stage


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Which stage of the

PLC?How do you know?

ProductdevelopmentIntroduction

GrowthM aturityDecline


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Product O ffer product extensions, service,warranty

Price Penetration pricingD istribution Build intensive distributionAdvertising Build awareness and interest in

the mass marketSal es Promotion Reduce expenditures totake advantage of consumer demand

M arketing Strategies:Growth Stage


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M aturity Stage Sales of the new product

continue to climb and then peakas the majority of the target

market(s) have tried the product Profits continue to grow and stay

positive throughout Competition is most intense at

this stage; many versions andbrands

Strategies to prolong this stage:M odify the marketM odify the productM odify the marketing mix

Decline Sales of the new product drop

quickly as the target market(s)move on to other things

Profits decline as competitivepressures force lower prices andset promotional spending at alevel that maintains the share

Competition has declined asweaker brands have left themarket

Decisions about the productM aintain spending levels to fightit out for what is leftHarvest by cutting spending andriding it outDrop the product and move onto the next thing


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Discussion

How can marketers helpproducts bounce backfrom the decline stage?

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Product Develpoment Stratergy

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