npd & plc
TRANSCRIPT
New Product Development
Causes of New Product Failures
Causes of New Product Failures
• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned,
Priced or Advertised• Costs of Product Development• Competitive Actions
What stops NPD ?
• Lack of ideas
• Social and govt. constraints
• Technological constraints
• High developmental costs
• Capital shortage
• Faster time required from idea to product
• Shorter PLC
Criteria for NPD
• Specific time frame
• Optimum potential market and growth rate
• Min. return on sales and ROIs
• Should lead to mkt leadership position
To create successful new products, the company must
• understand it’s customers, markets and competitors
• develop products that deliver superior value to customers.
New Product Development Process
• Idea Generation and Screening
• Concept Development and Testing
• Marketing Strategy
• Business Analysis
• Product Development
• Test Marketing
• Commercialization
New Product Development ProcessStep 1. Idea Generation
New Product Development ProcessStep 1. Idea Generation
Systematic Search for New Product Ideas
Information Exchange interaction – Int./Ext. sources – Customers, Competitors, Distributors, Suppliers
Creativity techniques – attribute listing, mind mapping
• Process to spot good ideas and drop poor ones
• Criteria– Market Size– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return
New Product Development ProcessStep 2. Idea Screening
New Product Development ProcessStep 2. Idea Screening
Idea Screening
Overall Probability of success =
Prob. Of technical completion * probability of commercialization given tech. completion * probability of economic success given commercialization
New Product Development ProcessStep 3. Concept Development & Testing
New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas into Alternative
Product Concepts
1. Develop Product Ideas into Alternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One3. Choose the Best One
New Product Development ProcessStep 4. Marketing Strategy Development
New Product Development ProcessStep 4. Marketing Strategy Development
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Two - Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Three - Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
Part One - Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If Yes, Move to Product Development
If No, Eliminate Product Concept
If No, Eliminate Product Concept
New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Commercialization
• Timing – First entry– Parallel entry– Late Entry
• Geographic strategy – where to ?
• Who are target market - To whom ?
• Introductory mktg strategy – how to ?
Product Life CycleProduct Life Cycle
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
Introduction Stage of the PLC
Introduction Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awareness and trial
Create product awareness and trial
Offer a basic productOffer a basic product
Use cost-plus Use cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
AdvertisingAdvertising Build product awareness among early adopters and dealers
Build product awareness among early adopters and dealers
Growth Stage of the PLCGrowth Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer product extensions, service, warranty
Offer product extensions, service, warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Build intensive distributionBuild intensive distribution
AdvertisingAdvertising Build awareness and interest in the mass market
Build awareness and interest in the mass market
Maturity Stage of the PLCMaturity Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitors
Price to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress brand differences and benefits
Decline Stage of the PLCDecline Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profits
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outlets
Go selective: phase out unprofitable outlets
AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
The time at each stage varies greatly
DVD
Mini-discElectric cars
VR*
*= virtual reality
Digital cameras
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
The seller tries to stimulate demand
Promotion campaigns to get increase public awareness
Explain how the product is used,
• Features Advantages Benefits
You will lose money, but you expect to make profits in the future
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Introduction
•Sales are low, and profits are below the line because your costs are greater than the amount of money you make
•you have “negative” profit
•Need to spend a lot of money on promotion
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
A lot is sold - The seller tries to sell as much as possible
Other competitor companies watch, and decide about joining in with a competitor product
“success breeds imitation” (Text)
Growth will continue until too many competitors in the market - and the market is saturated
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Growth
•At the end of the growth stage, profits start to decline when competition means you have to spend more money on promotion to keep sales going.
•Spending money on promotion cuts into your profit
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Maturity
Many competitors have joined - the market is saturated
The only way to sell is to begin to lower the price - and profits decrease
It is difficult to tell the different between products since most have the same F.A.B. - Features, Advantages & Benefits
Competition can get “Nasty” and commercials are intense
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Maturity
“Persuasive Promotion” becomes more important during this stage
That is to say, you have commercials almost begging the customer to still buy your product because you still make it just as good.
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
Newer products are now more attractive - even a low low price does not make consumers want to buy.
Profit margin declines - and so the only way to make money is to sell a high volume
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
Decline
To increase volume you try to
1. Increase the number of customers - get new customers
2. Increase the amount each customer uses
Extending the
Product Life
Cycle
1. Increase frequency of use by present customers
2. Add new users
3. Find new uses
4. Change product quality or packaging
Extending the Product Life Cycle
Market Modification
Product Modification
Purpose: to sell more product and cover original investment
Extending the product Cycle
• to prevent the product going into to prevent the product going into decline you modify the marketdecline you modify the market
MARKET MODIFICATIONMARKET MODIFICATION • you look for new consumers by
changing the product so it has new users - and then new customers( So So Soft , vaseline)Soft , vaseline)
Extending the product Cycle
• MARKET MODIFICATIONMARKET MODIFICATION
examples
Mortein
Ease –Bang for cleaning ceramics
Lemons for hair colouring
Different usage – dettol drops in water
gym bag, sports’ bag etc.
• to prevent the product going into to prevent the product going into decline you modify the productdecline you modify the product PRODUCT MODIFICATIONPRODUCT MODIFICATION
• adding new features, variations, model varieties will change the consumer reaction - create more demand
• therefore you attract more users
Extending the product Cycle
• PRODUCT MODIFICATIONPRODUCT MODIFICATION
• examples
• soaps - colours, features
• CD players
• chip flavours - many kinds
• flavoured tongue depressors
• couples seats at movie theatre
Extending the product Cycle
• PRODUCT MODIFICATIONPRODUCT MODIFICATION
• examples continued
• digital sound at theatres
Extending the product Cycle
Overlap of Life Cycle for Products A and B
WINDOWS 95
1991 1995 1996 1997
WINDOWS 3.1
Length of Cycle Stages
• Products move through the cycle at different speeds
• sometimes introduction is very long, or very short, depending on how easy it is for the public to understand the F.A.B.
• Not all products follow the same pattern
Life Cycle Length
• Some products move very fast because they are new and have no competition so the intro stage is short, and they go direct to growth stage.
Life Cycle Length
Because of• technology and• globalization• the introduction stage is getting very
short• some cycles more quickly to maturity,
then have many product modifications so the decline stage drags on and on
Speed of the PLC• Since the Intro Stage is getting shorter,
and sometimes the Growth Stage doesn’t last too long (because competitors move in) companies must continually come up with new products
• You can tell when they are in the growth stage because this is when they introduce new model variations, and some improvements to the product
Alternative Product Life Cycles
TamagachiPocket pagers
Failures that do not go through the 4 steps
• Fashions - currently popular products that tend to follow recurring life cycleseg. Wide lapels, 3 button suits, high heels vs. wedge heel
• “the currently acceptable style”
• Fads - Fashions with abbreviated life cycles - only popular with certain groups
• - music
• - fast food
• - children’s toys
• - “adult toys”
Eg. Watches w red straps
Product Life Cycle Considerations in Marketing Strategy
• Understand that profits have a predictable pattern
• in the early stages, focus is on product information
• in the later stages, focus is on brand promotion
• use market segmentation in maturity stage to maintain strong core customer basis
Stages in the Product Life Cycle
Introduction Growth Maturity Decline
The time at each stage varies greatly
Mini-discElectric cars
*= virtual reality
Digital cameras
Monopoly Monopolistic Oligopoly Pure Competition