What’s Happening? http://

www.youtube.com/watch?v=AH5R56jILag

The Product Lifecycle and New Product Development

Chapter 10

New Product Development

Definition - the development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts.

New products can also come from acquisition of other companies, patents, or licenses – e.g. trap-ease .

Consumers’ perspectives on Newness (Exhibit 10-1)

DiscontinuousInnovation

Breakthrough

DynamicallyContinuousInnovation

Major change

ContinuousInnovation

Ongoing alteration

New Product Development

Importance of New Product Development:

Follow changing market demands To remain competitive Keep up with changing technology Replace dying/old products Diversify product offerings to reduce

risks

Characteristics of Successful New Products

and Services Relative Advantage Compatibility with existing

consumption patterns Trialability – The Opportunity for buyer

testing Observability – The Chance to see the

newness Simplicity of Usage

Exercise Form groups of 3-4 students. Pick a

new product that is less than a 1 year old. How has it become successful/unsuccessful? What was it’s marketing approach?

New Product Development

Successful new products: Offer a unique superior product,

such as higher quality, new features, or higher value in use

Have a well-defined (and tested) product concept, before development investment is madeNew products fail at a high rate

due to: Market size may have been

overestimated Poor quality or design Incorrect positioning, pricing, or

promotion (i.e., trap-ease)

New Product Development

Generally a five step process:1. Idea generation2. Screening of ideas3. Business analysis4. Prototype development5. Commercialization

The Product Lifecycle

Understanding the Product Lifecycle

Product life cycle (PLC): the course of a product’s sales and profits over its lifetime

Interesting idea, developed in the 1950’s, still here!

The product lifecycle has four stages: Introduction Growth Maturity Decline

Product Life-Cycle Strategies

Introduction: slow sales growth, profits still negative due to high costs of development and product launch

Growth: rapid sales growth and profits Maturity: sales slow down, profits

decline due to competition Decline: sales and profits fall as product

is replaced by new alternatives

Product Life-Cycle - Illustrated

Profits

Sales

Development Introduction Growth Maturity Decline

SalesProfit($)

Loss($)

VCRs

TideDetergent

HybridVehicles

VideoPhones

Maturity Stage Strategy Modifying the product.

Changing characteristics such as quality, features or style to attract new users and to inspire more usage.

How? Improve durability, reliability, speed,

taste. Improve styling and attractiveness. Add new features. Expand usefulness, safety,

convenience.

Maturity Stage Strategy Modifying the market.

Increase the consumption of the current product.

How? Look for new users and market

segments. Reposition the brand to appeal to larger

or faster-growing segment. Look for ways to increase usage among

present customers.

Modifying the marketing mix. Improving sales by changing one or

more marketing mix elements. How?

Cut prices. Launch a better ad campaign. Move into larger market channels

(distribution). Offer new or improved services to

buyers.

Discussion Question – page 282, Question #2

Special Life Cycles Styles:

Basic and distinctive mode of expression

Once accepted, popularity will vary over time

Fashion: A currently accepted or popular

style Gains acceptance, peaks, then

declines Tend to go in cycles with

generations Fads:

Gain rapid acceptance, peak early, and decline quickly

Tend to attract limited market Products that are novel and do not

address basic needs

Length of the Product Life Cycle

Ranges from a few weeks to decades.

Length of individual stages varies from one product category to the next (Hershey chocolate).

Stages of any given life cycle usually last for different periods.

Some products make several different entrances and exits through the Product Life Cycle – examples?.

Adoption processes Awareness Interest Evaluation Trial Adoption

TIME

The Diffusion Process (Exhibit 10-7)

Expansion Strategies Product line extension

Item added to an existing product line Product category extension

New item or new line of items in a product category

Cannibalize To eat into the sales revenues of

another product item in the same line