Chapter 9

New-Product Development and

Product Life-Cycle Strategies

9-1
Road Map: Previewing the Concepts
Explain how companies find and develop
new-product ideas.
List and define the steps in the new-
product development process.
Describe the stages of the product life
cycle.
Explain how marketing strategies
change during the product’s life cycle.
9-2
New-Product Development
Strategy
Strategies for Obtaining New-Product
Ideas Original
Acquired
Acquired Original
Companies
Companies Products
Products
Acquired
Acquired Product
Product
Patents
Patents Improvements
Improvements
Acquired
Acquired Product
Product
Licenses
Licenses Modifications
Modifications
New
New
Brands
Brands 9-3
Causes of New-Product Failures
One study estimated that as many as 80% of
new consumer packaged products fail.
Only about 40% of new consumer products are
around 5 years after introduction.
Why?
Overestimation of market size,
Product design problems,
Product incorrectly positioned, priced, or advertised,
Product may have been pushed despite poor
marketing research findings,
Costs of product development, or
Competitive actions.
9-4
Improving New-Product Success
New-product success
depends on having a:
Unique superior product
(one with higher quality,
features, and value in use),
and a
Well-defined product
concept (a defined target
market, product
requirements, and
benefits).
To create successful
new products, the
company must:
understand its
consumers, markets,
and competitors, and
develop products that
deliver superior value
to customers.
9-5
Major Stages in New-Product
Development (Fig. 9-1)

9-6
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas
Obtained From Employees and Also
From:

Customers Competitors Distributors Suppliers

9-7
New Product Development Process
Step 2. Idea Screening
Helps spot good ideas and drop poor ones
as soon as possible.
Many companies have systems for rating
and screening ideas which estimate:
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Then, the idea is evaluated against a set of
general company criteria.
9-8
New Product Development Process
Step 3. Concept Development
1. Develop New Product Ideas Product Image is
into Alternative Detailed the Way
Product Concepts
Consumers
Perceive an Actual
2. Concept Testing - Test theor Potential
New-Product Concepts with Product
Groups of Target Customers

3. Choose the One That Has the

Strongest Appeal to Target
Customers
9-9
DaimlerChrysler’s Electric Car
The company’s task is
to develop its fuel-cell
powered electric car
into alternative
product concepts, find
out how attractive
each is to customers,
and choose the best
one.

9-10
New Product Development Process
Step 4. Marketing Strategy
Part
Part One
One Describes
Describes Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales,
Sales, Market
Market Share,
Share, && Profit
Profit Goals
Goals

Part
Part Two
Two Describes
Describes First-Year:
First-Year:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget
Part
Part Three
Three Describes
Describes Long-Run:
Long-Run:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy 9-11
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits
Projections to See if They Satisfy Company Objectives

If No, Eliminate
Product Concept

If Yes, Move to
Product Development
9-12
New Product Development Process
Step 7. Test Marketing
Product and Test the following:
marketing Positioning
program are strategy,
introduced into Advertising,
more realistic Distribution,
market settings. Pricing,
Can be very Branding,
expensive and Packaging,
time consuming. Budget levels.

9-13
New Product Development Process
Step 8. Commercialization
Introducing the New Product into the
Market

When is the
Right Time to Where to
Introduce Launch a
Product? New
Product?

9-14
Form students into groups of three to five.
Each group should read the opening vignette to
the chapter about Microsoft and the software
industry. Each group should then answer the
following questions:
Comment on Microsoft’s ability to bring new
products to the marketplace.
What lies ahead for Microsoft?
What secrets has Microsoft learned?

9-15
Speeding Up New-Product
Development Simultaneous (Team-Based)
Sequential

Step 1
Step 1

Step 2
Step 2

Step 3
Step 3

Step 4 Step 4
9-16
 Product Life Cycle (Fig. 9-2)
Sales and
Profits ($) Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment
Losses/
Investments ($)

Sales and Profits Over the Product’s Life From Inception

to Demise 9-17
Applications of the Product Life
Cycle
Product class which has the longest life cycles (i.e.
gas-powered cars),
Product form which tends to have the standard PLC
shape (i.e. minivans),
Brand which can change quickly because of
changing competitive attacks and responses (i.e.
Ford Taurus),
Style which is a basic and distinctive mode of
expression (formal clothing),
Fashion which is a popular style in a given field
(business casual),
Fad which is a fashion that enters quickly, is
adopted quickly, and declines fast (pet rocks).
9-18
Problems Using the PLC
The PLC Concept can Trouble
be applied by identifying Which
marketers for Stage of the PLC
describing how the Product Is In
products and markets Difficult to Forecast
work, but may also the Sales Level, the
Length of Each
present some Stage, and Shape
problems: Strategy is Both
of the
a PLC
Cause and a
Result of the
Product’s Life
9-19
Cycle
Introduction Stage of the PLC
Summary of Characteristics, Objectives, &
Sales
Sales
Strategies
Low
Low sales
sales
Costs
Costs High
High cost
cost per
per customer
customer
Profits
Profits Negative
Negative or
or low
low
Marketing
Marketing Objectives
Objectives Create
Create product
product awareness
awareness and
and
trial
trial
Product
Product Offer
Offer aa basic
basic product
product
Price
Price Usually
Usually is
is high
high
Distribution
Distribution High
High distribution
distribution expenses
expenses
Advertising
Advertising Spending
Spending is
is high
high to
to inform
inform
consumers
consumers 9-20
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Product
Product Offer
Offer new
new product
product features
features andand
models
models
Price
Price Remain
Remain where they
where they are
are or
or fall
fall
slightly
slightly
Distribution
Distribution Increase
Increase number
number of
of distribution
distribution
outlets
outlets
Advertising
Advertising Educating
Educating consumers
consumers and and
meeting
meeting competition
competition 9-21
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales Begin
Begin to
to slow
slow
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits
High
High profits,
profits, then
then lower
lower profits
profits
Marketing Maximize profits while defending
Maximize profits while defending
Marketing Objectives
Objectives
market
market share
share
Product
Product May
May modify
modify product
product
Price
Price May
May decline
decline
Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution
Advertising
Advertising Stress
Stress brand
brand differences
differences and
and
benefits
benefits 9-22
Maturity Stage of the PLC
Company tries to increase
consumption of the current product

Changing characteristics such as

quality, features, or styles to attract
new users

Company tries to improve sales by

changing one or more marketing mix
elements
9-23
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure andand maintain,
maintain,
harvest,
harvest, or
or drop
drop the
the product
product
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Distribution
Distribution Selective:
Selective: phase
phase out
out unprofitable
unprofitable
outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers 9-24
Pick a soft drink, car, or food
product, and trace the product’s
life cycle.
Project when the product might
enter a decline stage and discuss
strategies to reverse the decline.

9-25
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.
Describe the stages of the product life
cycle.
Explain how marketing strategies
change during the product’s life cycle.
9-26