plc & new product dev. rg
TRANSCRIPT
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9-1
New Product Development
and
Product Life-Cycle Strategies
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9-2Causes of New Product FailuresCauses of New Product Failures
Overestimation of Market Size Product Design Problems
Product Incorrectly Positioned, Priced orAdvertised
Costs of Product Development Competitive Actions
To create successful new products, the
company must: understand its customers, markets and
competitors
develop products that deliver superior value tocustomers.
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9-3
New Product Development
Process
New Product Development
Process
Idea Generation and Screening
Idea Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development Test Marketing
Commercialization
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9-4
CUSTOMERS
COMPETITORS
DISTRI
BUTORS
SUPPLIERS
Idea Generation is the SystematicSearch for New Product IdeasObtained Internally and From:
New Product Development ProcessStep 1. Idea Generation
New Product Development ProcessStep 1. Idea Generation
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9-5
Process to spot good ideas and droppoor 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
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9-6New Product Development ProcessStep 3. Concept Development & Testing
New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas intoAlternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One
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9-8
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See ifThey Meet Company Objectives
If Yes, Move to
Product Development
If No, Eliminate
Product Concept
New Product Development ProcessStep 5. Business Analysis
Step 6. Product Development
New Product Development ProcessStep 5. Business Analysis
Step 6. Product Development
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9-9New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaign
in a small number ofrepresentative cities.
StandardTest Market
Full marketing campaign
in a small number ofrepresentative cities.
SimulatedTest Market
Test in a simulatedshopping environment
to a sample ofconsumers.
SimulatedTest Market
Test in a simulatedshopping environment
to a sample ofconsumers.
ControlledTest Market
A few stores that have
agreed to carry newproducts for a fee.
ControlledTest Market
A few stores that have
agreed to carry newproducts for a fee.
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9-10
When? Where? ToWhom? How?
Commercialization is theIntroduction of the New Product
into the Marketplace.
New Product Development ProcessStep 8. Commercialization
New Product Development ProcessStep 8. Commercialization
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PRODUCT LIFE CYCLEPRODUCT LIFE CYCLE
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
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Product Life Cycle Nothingoffers benefits
which last forever
Product Life Cycle Nothingoffers benefits
which last forever
Introduction
Growth Maturity &
saturation
Decline
Market
value/users
time
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9-13Introduction Stage of the
PLC
Introduction Stage of the
PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low salesLow sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awarenessand trial
Create product awarenessand trial
Offer a basic productOffer a basic product
Use cost-plusUse cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
AdvertisingAdvertising Build product awareness amongearly adopters and dealers
Build product awareness amongearly adopters and dealers
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INTRODUCTION STAGEINTRODUCTION STAGE
The seller tries to stimulate demand
Promotion campaigns increases to get public awareness
Explain how the product is used,
Features Advantages Benefits
You will lose money, but you expect to make profits in the future
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
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9-15Growth Stage of the PLCGrowth Stage of the PLC
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising salesRapidly 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 inthe mass market
Build awareness and interest inthe mass market
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9-16
A lot is sold - The seller tries to sell as much as possible
Other competitor companies watch, and decide about joining inwith a competitor product
Growth will continue until too many competitors in the market -and the market is saturated
At the end of the growth stage, profits start to decline whencompetition means you have to spend more money onpromotion to keep sales going.
Spending money on promotion cuts into your profit
GROWTH STAGEGROWTH STAGE
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9-17Maturity 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 defendingmarket share
Maximize profit while defendingmarket share
Diversify brand and modelsDiversify brand and models
Price to match or bestcompetitors
Price to match or bestcompetitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences andbenefits
Stress brand differences andbenefits
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Many competitors have joined - the market is saturated
The only way to sell is to begin to lower the price - and profitsdecrease
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
Persuasive Promotion becomes more important during this
stage
That is to say, you have commercials almost begging thecustomer to still buy your product because you still make it justas good.
MATURITY STAGEMATURITY STAGE
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9-19Decline 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 thebrand
Reduce expenditure and milk thebrand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase outunprofitable outlets
Go selective: phase outunprofitable outlets
AdvertisingAdvertising Reduce to level needed to retainhard-core loyal customers
Reduce to level needed to retainhard-core loyal customers
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9-20
Newer products are now more attractive - even a low lowprice does not make consumers want to buy.
Profit margin declines - and so the only way to make money is
to sell a high volume
To increase volume you try to
1. Increase the number of customers - get new customers
2. Increase the amount each customer uses
DECLINE STAGEDECLINE STAGE
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1. Increase frequency of use
by present customers
2. Add new users
3. Find new uses
4. Change product quality orpackaging
Extending the Product Life Cycle
Market
Modification
ProductModification
Purpose: to sell more product and cover original
investment
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Overlap of Life Cycle for Products A and B
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