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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Lamb, Hair, McDaniel
CHAPTER 11
Developing and Managing Products
© im
ages
ourc
e/ph
otol
ibra
ry
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
Categories ofNew Products
New-to-the-WorldNew-to-the-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements or RevisionsImprovements or Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced ProductsLO1
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3
The New-Product Development Process
Long-term commitmentLong-term commitment
Company-specific approachCompany-specific approach
Capitalize on experienceCapitalize on experience
Establish an environmentEstablish an environment
New Product Success Factors
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4
LO2
Exhibit 11.1Exhibit 11.1New-Product New-Product Development Development
ProcessProcess
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5
New-Product Strategy
a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.
New-Product Strategy is…
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6
Idea Generation
Customers
Employees
Distributors
Vendors
Competitors
R & D
Consultants
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7
Approaches for New Product Development
LO2
BrainstormingBrainstorming
Focus GroupFocus Group
The process of getting a group to think of umlimited ways to vary a product or solve a problem.
The process of getting a group to think of umlimited ways to vary a product or solve a problem.
The objective of focus group interviews is to stimulate insightful comments through group interaction.
The objective of focus group interviews is to stimulate insightful comments through group interaction.
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8
Idea Screening
LO2
the first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.
Screening is…
a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions.
A Concept Test is…
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9
Business Analysis
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Demand
Cost
Sales
Profitability
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10
Development
Creation of prototype
Sketch marketing strategy
Packaging, branding, labeling
Promotion, price, and distribution strategy
Manufacturing feasibility
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11
Simultaneous Product Development
A new team-oriented approach to new-
product development where all relevant
functional areas and outside suppliers
participate in the development process.
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12
Test Marketing
TestMarketing
TestMarketing
The limited introduction
of a product and a
marketing program to
determine the reactions
of potential customers
in a market situation.
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13
Costs of Test Marketing
• Often take 1 year or more• Can cost over $1 million• Exposes new product to
competitors• Competitors can “jam” testing
programs with their own promotions
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14
Alternatives toTest Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
Online test marketing
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15
Commercialization
LO2
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales Force TrainingSales Force Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
Ordering MaterialsOrdering Materials
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16
New-ProductSuccess Factors
Listening to customers
Producing the best product
Vision of future market
Strong leadership
Commitment to new-product development
Project-based team approach
Getting every aspect right
LO2
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17
Beyo
nd
th
e
BookWhy New Products Fail
NOTE: Supplemental content – not in book.
• No discernible benefits• Poor match between features and customer desires• Overestimation of market size• Incorrect positioning• Price too high or too low• Inadequate distribution• Poor promotion• Inferior product
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18
Diffusion
The process by which the
adoption of an innovation
spreads.
DiffusionDiffusion
LO4
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19
LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
LO4
Categories of Adopters
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20
TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
LO4
Product Characteristics and the Rate of Adoption
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21
Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
LO4
Marketing Implications of the Adoption Process
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22
ProductLife Cycle (PLC)
ProductLife Cycle (PLC)
A concept that provides a way
to trace the stages of a
product’s acceptance, from its
introduction (birth) to its
decline (death).
LO5
Product Life Cycle
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23
LO5
Exhibit 11.2Exhibit 11.2Four Stages of the Four Stages of the Product Life CycleProduct Life Cycle
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24
Introductory Stage
High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and
information Communication challenge is to stimulate
primary demand
LO5
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25
Growth Stage
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the
differences between brands Wider distribution
LO5
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26
Maturity Stage
Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and dealers Marginal competitors drop out Niche marketers emerge
LO5
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27
Decline Stage
Long-run drop in sales Large inventories of
unsold items Elimination of all nonessential
marketing expenses “Organized abandonment”
LO5
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Chapter 11 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28
LO5
Exhibit 11.4Exhibit 11.4Relationships between the Diffusion Process Relationships between the Diffusion Process and the Product Life Cycle and the Product Life Cycle
Productlife cyclecurve
Diffusioncurve