Developing New Products and Managing the Product Life-Cycle

Chapter 8

Rest Stop: Previewing the Concepts

Explain how companies find and develop
new-product ideas List and define the steps in the new-product development process and the major considerations in managing this process Describe the stages of the product life cycle and how marketing strategies change during the products life cycle
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Rest Stop: Previewing the Concepts

Discuss two additional product and services
issues: socially responsible product decisions and international product and services marketing

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First Stop: GoogleNew-Product Innovation at the Speed of Light

New product planning looks ahead only four to five months Engineers spend 20% of time developing their own new ideas New applications are launched on Google Labs; users test them and provide feedback

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New-product development
The development of original products, product improvements, product modifications, and new brands through the firms own product development efforts

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New-Product Failures
Overestimation of market size Design problems Incorrect pricing or positioning High development costs Competitor reaction

Each product failure represents squandered dollars and hopes

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Figure 8.1 - Major Stages in New-Product Development

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Idea Generation
Internal sources
The traditional R&D process Intrapreneurs within the company

External sources
Distributors and suppliers Competitors and their products Trade magazines and shows Customers

Crowdsourcing
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Idea Generation
Analyze customer questions and complaints to find new products that better solve consumer problems Invite customers to share suggestions and ideas

To harness customer new-product input, 3M has opened customer innovation centers, which generate customer-driven new-product ideas and help 3M establish longterm customer relationships

Crowdsourcing
Invites customers, employees, independent scientists and researchers, and even the public at large, into the newproduct innovation process

When Netflix wanted ideas for improving the accuracy of its online recommendation system, it decided to open it up to the world, promising a $1 million prize for the best solution

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Idea screening
Screening new-product ideas to spot good ideas and drop poor ones as soon as possible

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Concept Development and Testing

Product idea: An idea for a possible product that the company can see itself offering to the market Product concept: A detailed version of the new-product idea stated in meaningful consumer terms Product image: The way consumers perceive an actual or potential product
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Concept Development
To develop a new product into alternative product concepts, find out how attractive each concept is to customers, and choose the best one

Teslas initial all-electric roadster, will be followed by moreaffordable mass-market models

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Concept Testing
Testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal
Using a description, picture or model of the product Asking consumers about their reactions

Marketing strategy development

Designing an initial marketing strategy for a new product based on the product concept

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Marketing Strategy Statement

Describes the target market, planned value proposition, sales, market share, and profit goals Outlines the products planned price, distribution, and marketing budget Describes the planned long-run sales and profit goals, marketing mix strategy

Business Analysis
A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the companys objectives

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Product Development
Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering
Prototypes are made Consumer tests are conducted

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Test Marketing
Introducing the product and marketing program in realistic market settings
Starbucks spent 20 years developing Starbucks VIA instant Coffee and several months testing the product in Starbucks shops in Chicago and Seattle before releasing the product nationally

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Test Marketing
Standard test markets are usually extensive and costly to use Simulated test markets
Researchers measure consumer responses to in laboratory stores or simulated online shopping environments

Controlled test markets

New products and tactics are tested among controlled panels of shoppers and stores

Commercialization
Introducing a new product into the market Companies must decide:
When to introduce the product Where to introduce the product
Single location, state, region, nationally, internationally

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Managing New-Product Development

Companies must take a holistic approach to new product development This requires:
Customer-centered new-product development Team-based new-product development Systematic new-product development

Customer-Centered New-Product Development

New-product development that focuses on finding new ways to solve customer problems and create more customer-satisfying experiences

Customers are urged to submit their own ideas for new products and services on P&Gs crowdsourcing site Connect + Develop
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Team-Based New-Product Development

Various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness
Cross-functional teams lead to fast and flexible development Causes more organizational tension and confusion than the sequential approach

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Systematic New-Product Development

The new-product development process should be holistic and systematic Innovation management systems can help companies collect, review, evaluate, and manage new-product ideas
They help create an innovation-oriented company culture They yield a larger number of new-product ideas

Marketing at Work
Faced with falling sales, LEGO began new-product development by listening to customers and including them in the design process

LEGOs Design By Me site lets customers download 3D design software, create a LEGO toy, and then order the kit to build it

Product life cycle

The course of a products sales and profits over its lifetime

Figure 8.2 - Sales and Profits Over the Products Life From Inception to Decline

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The Product Life Cycle

All products do not follow all five stages of the PLC Marketers can apply the PLC as a framework for describing how products and markets work

Some products die quickly, while others stay in the mature stage for a long, long time like TABASCO sauce

Applying the Product Life-Cycle Concept

The PLC concept can describe a product class, a product form , or a brand
Product class has the longest life cycle Product form tends to the standard PLC shape PLCs for brands can change quickly because of changing competitive attacks and responses

The PLC concept also can be applied to what are known as styles, fashions, and fads
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Style A basic and distinctive mode of expression Fashion A currently accepted or popular style in a given field Fad

A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity

Figure 8.3 - Styles, Fashions, and Fads

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Introduction Stage Characteristics

Sales: Low Costs: High cost per customer Profits: Negative or low Customers: Innovators Competitors: Few Marketing objective: Create product awareness and trial
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Introduction Stage Strategies

Product: Offer a basic product Price: Use cost-plus pricing Distribution: Build selective distribution Advertising: Build product awareness among early adopters and dealers Promotion: Use heavy promotion to entice product trial

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Growth Stage Characteristics

Sales: Rapidly rising Costs: Average cost per customer Profits: Rising profits Customers: Early adopters Competitors: Growing number Marketing objective: Maximize market share

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Growth Stage Strategies

Product: Offer product extensions, service, warranty Price: Price to penetrate the market Distribution: Build intensive distribution Advertising: Build awareness and interest in the mass market Promotion: Reduce to take advantage of heavy consumer demand
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Maturity Stage Characteristics

Sales: Peak sales Costs: Low cost per customer Profits: High profits Customers: Middle majority Competitors: Stable number beginning to decline Marketing objective: Maximize profits while defending market share
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Maturity Stage Strategies

Product: Diversify brand and models Price: Match or beat competitors Distribution: Build more intensive distribution Advertising: Stress brand differences and benefits Promotion: Increase to encourage brand switching

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Maturity Stage Strategies

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 faster-growing segment Look for ways to increase usage among present customers
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Maturity Stage Strategies

Modifying the product
Changing characteristics such as quality, features, style or packaging to attract new users and inspire more usage

How?
Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features
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Maturity Stage Strategies

Modifying the marketing mix
Improving sales by changing one or more marketing mix elements

How?
Offer new or improved services Cut prices Launch a better ad campaign Move into new market channels
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Maturity Stage Strategies

Reinvigorating a mature brand: Kellogg kept its 55year-old Special K brand growing by turning it into a healthful, slimming lifestyle brand
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Decline Stage Characteristics

Sales: Declining sales Costs: Low cost per customer Profits: Declining profits Customers: Laggards Competition: Declining number Marketing objective: Reduce expenditures and milk the brand
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Decline Stage Strategies

Product: Phase out weak items Price: Cut price Distribution: Go selectivephase out unprofitable outlets Advertising: Reduce to level needed to retain hard-core loyals Promotion: Reduce to minimal level

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Marketing at Work
Over its 79-year history, the Zippo brand has evolved to meet changing market needs Broadened its focus from just selling lighters to selling all things flame

Product Decisions and Social Responsibility

Companies must consider
Public policy issues Regulations regarding acquiring or dropping products Patent protection Product quality and safety, and warranties

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International Product and Services Marketing Companies face

challenges in the international market They can

Standardize products across markets Adapt products to local tastes

Kit Kat benefits from a coincidental similarity between the bars name and the Japanese phrase, kitto katsu, which roughly translates to Surely you win!
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Rest Stop: Reviewing the Concepts

Explain how companies find and develop
new-product ideas List and define the steps in the new-product development process and the major considerations in managing this process Describe the stages of the product life cycle and how marketing strategies change during the products life cycle
8 - 48

Rest Stop: Reviewing the Concepts

Discuss two additional product and services
issues: socially responsible product decisions and international product and services marketing

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Copyright 2013 Pearson Education, Inc. Publishing as Prentice Hall

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