product develpoment stratergy
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New Product Development andLife-Cycle strategies
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New-ProductDevelopment Strategy
New Product Development The development of original products, product
improvements, product modifications, and newbrands through the firm s own R&D efforts.
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New-Product
Development StrategyNew products can beobtained via acquisitionor development.
New products sufferfrom high failure rates.Several reasons accountfor failure.
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Discussion Question
Think of products you have seen recently instores. Can you think of any that seem doomedto fail?
Why?
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M ajor Stages in New-Product Development
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Stage 1: Idea Generation The systematic search for new product ideas
Internal sources: brainstorming, employees fromall departments, R & D External sources: customers, competitors,
distributors, suppliers, and others
Stages of the New Product DevelopmentProcess
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Intuit, amarketer of
financialsoftware,
asks for newproduct
ideas fromcustomers
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Stages of the New Product DevelopmentProcess
Stage 2: Idea Screening The purpose is to identify good ideas and drop
poor ones to avoid spending any more money ondeveloping them
Criteria used:Usefulness to consumers
Good fit with company objectives and strategiesHave the resourcesAdd value
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Stages of the New Product DevelopmentProcess
Stage 3: Concept Development and Testing Concept development creates a detailed version
of the idea stated in meaningful consumer terms. Concept testing asks target consumers to evaluate
product concepts.
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Stages of the New Product DevelopmentProcess
Stage 4: M arketing Strategy Development1st statement describes the target market, productpositioning, and sales, share, and profit goals for the
first few years.2nd statement outlines the product s price, distribution,and marketing budget for the first year.3rd statement describes the long-run sales and profit
goals, and the marketing mix strategy.
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Stages of the New ProductDevelopment Process
Stage 5: Business Analysis Review of the sales, costs, and profit projections
for a new product to determine if they will satisfy
company objectivesStage 6: Product Development
Developing the product concept into a physicalproduct to ensure that it can be done
Requires large investmentBuilding a prototypeTesting for safety, durability, and acceptability
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Stages of the New ProductDevelopment Process
Stage 8: Commercialization, introducing a newproduct into the market
Large investment required Need to decide on introduction timing and scale
of event M arket rollout or full-scale introduction
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O rganizing forNew-Product Development
Sequential product development: working onone piece of the new product at a time
Simultaneous (team-based) productdevelopment: developing multiple pieces of the product at the same time; today s methoddue to distributed computing
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Stages of the PLC
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Product Life-Cycle Strategies
The product life cycle concept can be appliedto a:
Product class (soft drinks) Product form (diet colas) Brand (Diet Dr. Pepper)
Using the PLC to forecast brand performance or to
develop marketing strategies is problematic
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Product Life-Cycle Strategies
Introduction Stage Sales start at zero and begin to climb
slowly; profits continue to declinedue to costs of launching the product
The main promotional goal is to
make a big noise to attract attentionand to educate buyers about thenew product concept
M arket pioneers take the most riskbut may reap the biggest rewards,eg. Chrysler minivan
Few product variants, no
competition to speak of Pricing strategy: skimming orpenetration
Distribution: not all outlets coveredas some may not want the risk
Growth Stage Sales of the new product begin to
climb quickly as awareness within thetarget market(s) builds
Profits may become positive asdevelopment and launch costs are
recovered and the company achieveseconomies of scale Competition notices and rushes their
versions into production Product quality can be improved,
extra features and versionsdeveloped to sustain growth anddifferentiate from competition
Distribution increases as the productbecomes more known Pressure on pricing as competition
increases
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Which stage of the
PLC?How do you know?
ProductdevelopmentIntroduction
GrowthM aturityDecline
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Product O ffer a basic productPrice Skimming or penetration pricing
D istribution Build selective distributionAdvertising Build awareness amongearly adopters and dealers/resellers
Sal es Promotion Heavy expenditures tocreate trial
M arketing Strategies:Introduction Stage
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Which stage of the
PLC?How do you know?
ProductdevelopmentIntroduction
GrowthM aturityDecline
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Product O ffer product extensions, service,warranty
Price Penetration pricingD istribution Build intensive distributionAdvertising Build awareness and interest in
the mass marketSal es Promotion Reduce expenditures totake advantage of consumer demand
M arketing Strategies:Growth Stage
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Product Life-Cycle Strategies
M aturity Stage Sales of the new product
continue to climb and then peakas the majority of the target
market(s) have tried the product Profits continue to grow and stay
positive throughout Competition is most intense at
this stage; many versions andbrands
Strategies to prolong this stage:M odify the marketM odify the productM odify the marketing mix
Decline Sales of the new product drop
quickly as the target market(s)move on to other things
Profits decline as competitivepressures force lower prices andset promotional spending at alevel that maintains the share
Competition has declined asweaker brands have left themarket
Decisions about the productM aintain spending levels to fightit out for what is leftHarvest by cutting spending andriding it outDrop the product and move onto the next thing
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Discussion
How can marketers helpproducts bounce backfrom the decline stage?