Chapter 10: New-Product Development and Product Life-Cycle Strategies


Objectives

  • •Understand how companies find and develop new-product ideas.
  • •Learn the steps in the new-product development process.
  • •Know the stages of the product life cycle.
  • •Understand how marketing strategies change during the product’s life cycle.
 

 


Please Open The Following Figures In Different Windows and Leave Them Open:

Animated Figure 10-1 , Animated Figure 10-2 .

 


Case Study

Microsoft

  • •$50 billion in profits over 27 years
  • •Early new-product development relied heavily on copying the competition
  • •$4.2 billion annually invested in R & D
 

 

  • •Innovation is critical to Microsoft’s future success
  • •Much of R & D efforts are Internet related
  • •Many new products and services are in development 
 

 


Definitions

  • •New Product Development
  • §Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.
 
 

 


New Product Development Strategy

  • •New products can be obtained via acquisition or development.
  • •New products suffer from high failure rates.
  • •Several reasons account for failure.
 
 

 


New Product Development Strategy

  • •New Product Development Process:
  • §Stage 1:  Idea Generation
  •  Internal idea sources: 
–         R & D
  • v External idea sources:
–        Customers, competitors, distributors, suppliers
 
 

 


New Product Development Strategy

  • New Product Development Process:
  • §Stage 2:  Idea Screening
  • v Product development costs increase
     substantially in later stages.
  •  Ideas are evaluated against criteria; most are eliminated.

 


New Product Development Strategy

  • New Product Development Process:
  • §Stage 3:  Concept Development and Testing
  • v Product concepts provide detailed
     versions of new product ideas.
  • v Concept tests ask target consumers to
     evaluate product concepts.

 


New Product Development Strategy

  • New Product Development Process:
  • §Stage 4:  Marketing Strategy Development
  • v Strategy statements describe:
  • –The target market, product positioning, and sales, share, and profit goals for the first few years.
  • –Product price, distribution, and marketing budget for the first year.
  • –Long-run sales and profit goals and the marketing mix strategy.
 

 


New Product Development Strategy

  • New Product Development Process:
  • §Stage 5: Business Analysis
  • v Sales, cost, and profit projections
  • §Stage 6: Product Development
  • v Prototype development and testing

 

 


New Product Development Strategy

  • New Product Development Process:
  • §Stage 7: Test Marketing
  • v Standard test markets
  • v Controlled test markets
  • v Simulated test markets
  • §Stage 8: Commercialization
 

 


Product Life-Cycle Strategies

  • •The Typical Product Life Cycle (PLC) Has Five Stages
  • §Product Development, Introduction, Growth, Maturity, Decline
  • §Not all products follow this cycle: 
  •  Fads
  • v Styles
  • v Fashions
 
 

 


Product Life-Cycle Strategies

  • •The product life cycle concept can be applied to 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
 

 


Product Life-Cycle Strategies

PLC Stages


  • •Product development
  • •Introduction
  • •Growth
  • •Maturity
  • •Decline
 
  • •Begins when the company develops a new-product idea
  • •Sales are zero
  • •Investment costs are high
  • •Profits are negative

 

 


Product Life-Cycle Strategies

PLC Stages


  • •Product development
  • •Introduction
  • •Growth
  • •Maturity
  • •Decline
 
  • •Low sales
  • •High cost per customer acquired
  • •Negative profits
  • •Innovators are targeted
  • •Little competition

 

 


Marketing Strategies: Introduction Stage

  • •Product – Offer a basic product
  • •Price – Use cost-plus basis to set
  • •Distribution – Build selective distribution
  • •Advertising – Build awareness among early adopters and dealers/resellers
  • •Sales Promotion – Heavy expenditures to create trial
 

 


Product Life-Cycle Strategies

PLC Stages


  • •Product development
  • •Introduction
  • •Growth
  • •Maturity
  • •Decline
 
  • •Rapidly rising sales
  • •Average cost per customer
  • •Rising profits
  • •Early adopters are targeted
  • •Growing competition

 

 


Marketing Strategies:
Growth Stage

  • •Product – Offer product extensions, service, warranty
  • •Price – Penetration pricing
  • •Distribution – Build intensive distribution
  • •Advertising – Build awareness and interest in the mass market
  • •Sales Promotion – Reduce expenditures to take advantage of consumer demand
 

 


Product Life-Cycle Strategies

PLC Stages


  • •Product development
  • •Introduction
  • •Growth
  • •Maturity
  • •Decline
 
  • •Sales peak
  • •Low cost per customer
  • •High profits
  • •Middle majority are targeted
  • •Competition begins to decline
 

 

 


Marketing Strategies:
Maturity Stage

  • •Product – Diversify brand and models
  • •Price – Set to match or beat competition
  • •Distribution – Build more intensive distribution
  • •Advertising – Stress brand differences and benefits
  • •Sales Promotion – Increase to encourage brand switching
 

 


Product Life-Cycle Strategies

PLC Stages


  • •Product development
  • •Introduction
  • •Growth
  • •Maturity
  • •Decline
 
  • •Declining sales
  • •Low cost per customer
  • •Declining profits
  • •Laggards are targeted
  • •Declining competition

 

 


Marketing Strategies: Decline Stage

  • •Product – Phase out weak items
  • •Price – Cut price
  • •Distribution – Use selective distribution: phase out unprofitable outlets
  • •Advertising – Reduce to level needed to retain hard-core loyalists
  • •Sales Promotion – Reduce to minimal level
 
 

 

Chapter 10: New-Product Development and Product Life-Cycle Strategies

 


  • Concepts Check

 


  • Concepts Challenge

 


 
  • Chapter Outline

 


 
  • Video Case

 


 
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Chapter 10: New-Product Development and Product Life-Cycle Strategies

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