Description
BBA III new product develpment
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.
10- 1
Microsoft c
$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
10- 2
Definition
New Product Development
? Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.
10- 3
New-Product Development Strategies
Strategies for Obtaining New Product Ideas
Acquired Companies Acquired Patents Acquired Licenses Original Products Product Improvements Product Modifications New Brands
10- 4
New Product Development Process
Marketing Strategy Concept Development and Testing Idea Screening Idea Generation Business Analysis Product Development
Test Marketing Commercialization
10- 5
New Product Development Strategy
New Product Development Process:
? Stage 1: Idea Generation
?
Internal idea sources:
• R&D
?
External idea sources:
• Customers, competitors, distributors, suppliers
10- 6
3M’s corporate culture encourages, supports, and rewards new product ideas and innovation
10- 7
Using the Web to Solicit Product Ideas
Procter and Gamble
To see how P&G solicits ideas from customers, visit the Procter and Gamble home page, click on the Resources and Offers button, then select the Share Your Thoughts listing.
Procter & Gamble
10- 8
New Product Development Process
Step 2. Idea Screening
Many companies have systems for rating and screening ideas which estimate: Process to spot good ideas and drop poor ones as soon as possible. ? Market Size ? Product Price ? Development Time & Costs ? Manufacturing Costs ? Rate of Return Then, the idea is evaluated against a set of general company criteria.
10- 9
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
10- 10
New Product Development Process
Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two Describes Short-Term:
Product’s Planned Price Distribution Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals Marketing Mix Strategy
10- 11
New Product Development Process
Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If No, Eliminate Product Concept
If Yes, Move to Product Development
10- 12
BusinessNow
Computer modeling is being used to aid in product design
10- 13
Daimler is currently road-testing its prototype NECAR 5 (New Electric Car)
10- 14
New Product Development Strategy
IRI BehaviorScan provides an in-market laboratory for testing
new products and marketing programs
10- 15
New Product Development Process
Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Packaging Product Positioning
Branding Pricing
Elements that May be Test Marketed by a Company
Advertising Distribution
10- 16
New Product Development Process
Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry new products for a fee.
Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.
10- 17
Where is a good test market?
I. Factors to consider
- Size - Demographics - Isolation from other cities - Media availability and cost - Retailer support 2. Popular cities - Big cities: Banglore, Hydrabad, Mumbai - Small cities: Guwahati, Bhopal, Pune
10- 18
New Product Development Process
Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When?
Where?
To Whom?
How?
10- 19
LIFE IS SHORT AND THEN YOU INTRODUCE A NEW PRODUCT
Product lifetimes are shrinking, as competitors pressure innovators by offering imitations of successful, high-margin products. Panasonic now replaces electronic consumer products on a 90-day cycle (with older models going to discounters) the big Japanese car makers are aiming to offer new models every two years. (from the New York Times)
Speeding Up Development
Sequential Simultaneous
Step 1
Step 1 Step 3
Step 4
10- 21
Step 2
Step 3
Step 4
Step 2
Discussion Question
Why do products fail?
See if you can identify the fatal flaw in the brands?
10- 22
Causes of New Product Failures
Overestimation of Market Size Product Design Problems ? Insignificant difference Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions No access to the market Bad timing To create successful new products, the company must: ? understand it’s customers, markets and competitors ? develop products that deliver superior value to customers.
10- 23
Alternatives to Development:
Acquire new Products Develop "me-too" products. Revive old products
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 ? Styles ? Fashions
?
10- 25
Figure 10-2:
Sales and Profits Over A Product’s Life
10- 26
Product Life Cycle
length style - comes, goes, comes back fashion - come, goes away slowly fad - comes and goes way quickly
Figure 10-3:
Styles, Fashions, and Fads
10- 28
Companies want their products to enjoy a long life cycle. Hershey’s actively promotes the fact that it has been “unchanged since 1899”
10- 29
Product Life-Cycle Strategies
Additional marketing investments can move a product back into the growth stage, as in the case of
10- 30
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
10- 31
Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC
Strategy is Both a Cause and a Result of the Product’s Life Cycle
10- 32
Product Life-Cycle Strategies
PLC Stages Product development Introduction Growth Maturity Decline
Begins when the company develops a newproduct idea Sales are zero Investment costs are high Profits are negative
10- 33
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
10- 34
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
10- 35
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
10- 36
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
10- 37
doc_271307765.pptx
BBA III new product develpment
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.
10- 1
Microsoft c
$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
10- 2
Definition
New Product Development
? Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts.
10- 3
New-Product Development Strategies
Strategies for Obtaining New Product Ideas
Acquired Companies Acquired Patents Acquired Licenses Original Products Product Improvements Product Modifications New Brands
10- 4
New Product Development Process
Marketing Strategy Concept Development and Testing Idea Screening Idea Generation Business Analysis Product Development
Test Marketing Commercialization
10- 5
New Product Development Strategy
New Product Development Process:
? Stage 1: Idea Generation
?
Internal idea sources:
• R&D
?
External idea sources:
• Customers, competitors, distributors, suppliers
10- 6
3M’s corporate culture encourages, supports, and rewards new product ideas and innovation
10- 7
Using the Web to Solicit Product Ideas
Procter and Gamble
To see how P&G solicits ideas from customers, visit the Procter and Gamble home page, click on the Resources and Offers button, then select the Share Your Thoughts listing.
Procter & Gamble
10- 8
New Product Development Process
Step 2. Idea Screening
Many companies have systems for rating and screening ideas which estimate: Process to spot good ideas and drop poor ones as soon as possible. ? Market Size ? Product Price ? Development Time & Costs ? Manufacturing Costs ? Rate of Return Then, the idea is evaluated against a set of general company criteria.
10- 9
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One
10- 10
New Product Development Process
Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two Describes Short-Term:
Product’s Planned Price Distribution Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals Marketing Mix Strategy
10- 11
New Product Development Process
Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If No, Eliminate Product Concept
If Yes, Move to Product Development
10- 12
BusinessNow
Computer modeling is being used to aid in product design
10- 13
Daimler is currently road-testing its prototype NECAR 5 (New Electric Car)
10- 14
New Product Development Strategy
IRI BehaviorScan provides an in-market laboratory for testing
new products and marketing programs
10- 15
New Product Development Process
Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Packaging Product Positioning
Branding Pricing
Elements that May be Test Marketed by a Company
Advertising Distribution
10- 16
New Product Development Process
Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry new products for a fee.
Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.
10- 17
Where is a good test market?
I. Factors to consider
- Size - Demographics - Isolation from other cities - Media availability and cost - Retailer support 2. Popular cities - Big cities: Banglore, Hydrabad, Mumbai - Small cities: Guwahati, Bhopal, Pune
10- 18
New Product Development Process
Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
When?
Where?
To Whom?
How?
10- 19
LIFE IS SHORT AND THEN YOU INTRODUCE A NEW PRODUCT
Product lifetimes are shrinking, as competitors pressure innovators by offering imitations of successful, high-margin products. Panasonic now replaces electronic consumer products on a 90-day cycle (with older models going to discounters) the big Japanese car makers are aiming to offer new models every two years. (from the New York Times)
Speeding Up Development
Sequential Simultaneous
Step 1
Step 1 Step 3
Step 4
10- 21
Step 2
Step 3
Step 4
Step 2
Discussion Question
Why do products fail?
See if you can identify the fatal flaw in the brands?
10- 22
Causes of New Product Failures
Overestimation of Market Size Product Design Problems ? Insignificant difference Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions No access to the market Bad timing To create successful new products, the company must: ? understand it’s customers, markets and competitors ? develop products that deliver superior value to customers.
10- 23
Alternatives to Development:
Acquire new Products Develop "me-too" products. Revive old products
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 ? Styles ? Fashions
?
10- 25
Figure 10-2:
Sales and Profits Over A Product’s Life
10- 26
Product Life Cycle
length style - comes, goes, comes back fashion - come, goes away slowly fad - comes and goes way quickly
Figure 10-3:
Styles, Fashions, and Fads
10- 28
Companies want their products to enjoy a long life cycle. Hershey’s actively promotes the fact that it has been “unchanged since 1899”
10- 29
Product Life-Cycle Strategies
Additional marketing investments can move a product back into the growth stage, as in the case of
10- 30
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
10- 31
Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC
Strategy is Both a Cause and a Result of the Product’s Life Cycle
10- 32
Product Life-Cycle Strategies
PLC Stages Product development Introduction Growth Maturity Decline
Begins when the company develops a newproduct idea Sales are zero Investment costs are high Profits are negative
10- 33
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
10- 34
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
10- 35
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
10- 36
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
10- 37
doc_271307765.pptx