POM Lecture 7-b BBA 2K10-A

Managing

New-Product Development Product Life Cycle Strategies Other Product Considerations

Successful new-product development should be: Customer centered Team centered Systematic

New-Product Development Strategies

Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer satisfying experiences Begins and ends with solving customer problems

Sequential new-product development is a development approach where company departments work closely together individually to complete each stage of the process before passing along to the next department or stage

Increased control in risky or complex projects Slow

Team-based new-product development is a development approach where company departments work closely together in cross-functional teams, overlapping in the product-development process to save time and increase effectiveness

New-Product Development Strategies

Team-based versus sequential new-product development Team based can increase tension and confusion Team based is faster and more flexible

Systematic new-product development is an innovative development approach that collects, reviews, evaluates, and manages new-product ideas

Creates an innovation-oriented culture Yields a large number of new-product ideas

Product life cycle (PLC) is the course that a products sales and profits take over its lifetime

Product development Introduction Growth Maturity Decline

Product Life Cycle

Product life cycle (PLC) describes: Product class Product form Brand

Product class has the longest life cycle (e.g., gaspowered cars). Product form tends to have the standard PLC shape (e.g., sports cars). Brand can change quickly because of changing competitive attacks and responses. Style is a basic and distinctive mode of expression (e.g., formal clothing, Danish modern furniture) Fashion is a popular style in a given field (e.g., business casual). Fads result in a temporary period of unusually high sales driven by consumer enthusiasm. Fads decline quickly.

 In

practice, it is difficult to:

Identify which stage of the PLC the product is in. Pinpoint when the product moves to the next stage. Identify factors that affect products movement through stages. Forecast sales level, length of each stage, and shape of PLC. Develop marketing strategy because strategy is both a cause and result of the PLC.

Introduction stage is when the new product is first launched Sales: Low Costs: High cost per customer Profits: Negative or low Marketing objective: Create product awareness and trial Product: Offer a basic product Price: Use cost-plus formula Distribution: Build selective distribution Promotion: Heavy to entice product trial

Growth stage is when the new product satisfies the market and sales increase
Sales:

Rapidly rising Costs: Average cost per customer Profits: Rising Marketing objective: Maximize market share Product: Offer extension, service, warranty Price: Penetration strategy Distribution: Build intensive distribution Promotion: Reduce to take advantage of demand

Maturity stage is a long-lasting stage of a product that has gained consumer acceptance
Sales:

Peak but slowing down sales Costs: Low cost per customer Profits: High Marketing objective: Maximize profits while defending market share Product: Diversify brand and models Price: Match or best competitors Distribution: Build more intensive distribution Promotion: Increase to encourage brand switching Competition: Many substitute products

Strategies used to manage the PLC during maturity include Modifying Strategies

Market modifying Product modifying Marketing mix modifying

Strategies used to manage the PLC during maturity include Market modifying strategy is when a company tries to increase consumption of the current product New users Increased usage of existing users New market segments

 Modifying

the market:

Increase the consumption of the current product.

How?

Look for new users and market segments. Reposition the brand to appeal to larger or fastergrowing segment. Look for ways to increase usage among present customers.

 Modifying

the product:

Changing characteristics such as quality, features, or style to attract new users and to inspire more usage.

How?

Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience

 Modifying

the marketing mix:

Improving sales by changing one or more marketing mix elements. Cut prices Launch a better ad campaign Move into larger market channels

How?

Decline stage is when sales decline or level off for an extended time, creating a weak product
Sales: Declining Costs: Low cost per customer Profits: Declining Marketing objective: Reduce expenditures

take maximum out of the brand Product: Phase out weak items. Price: Cut price Distribution: selectivephase out unprofitable outlets Promotion: Reduce to minimal level

and

Introduction

Growth

Maturity

Decline

Sales

Early majority Early adopters

Product life cycle curve

Late majority

Innovators

Laggards

Diffusion curve

Product Decisions and Social Responsibility

Public policy and regulations regarding developing and dropping products, patents, quality, and safety

 International

product and service marketing

Must determine which products and services to introduce in which countries, and how much to standardize or adapt the offering.