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New-Product Development and Life-Cycle Strategies.ppt
- 2. 9 - 1 Learning Goals 1. Learn how companies find and develop new-product ideas 2. Understand the steps in the new- product development process 3. Know the stages of the product life cycle 4. Realize how marketing strategies change during the product’s life cycle
- 3. 9 - 2 Focus on Innovation • Names its culture of continuous innovation “renewal” • Organizes into autonomous units that help foster innovation • Large R&D budget of $3 billion with 40% of employees involved in R&D Corporate Results • Annual sales of $36 billion across 130 countries • Global market share of 38%, greater than that of its nearest three rivals combined Case Study Nokia
- 4. 9 - 3 Definition • New Product Development Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts. Goal 1: Learn how companies find & develop new-product ideas
- 5. 9 - 4 New Product Development Strategy • New products can be obtained via acquisition or development. • New products suffer from high failure rates. • Several reasons account for failure. Goal 1: Learn how companies find & develop new-product ideas
- 6. 9 - 5 Stages of the New Product Development Process • Stage 1: Idea Generation Internal idea sources: • R & D External idea sources: • Customers, competitors, distributors, suppliers Goal 2: Understand steps in the new-product development process
- 7. 9 - 6 Stages of the New Product Development Process • Stage 2: Idea Screening Product development costs increase substantially in later stages so poor ideas must be dropped Ideas are evaluated against criteria; most are eliminated Goal 2: Understand steps in the new-product development process
- 8. 9 - 7 Stages of the New Product Development Process • 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. Goal 2: Understand steps in the new-product development process
- 9. 9 - 8 Stages of the New Product Development Process • Stage 4: Marketing Strategy Development • The target market, product positioning, and sales, share, and profit goals for the first few years. • Product price, distribution, and marketing budget for the first year. • Long-run sales and profit goals and the marketing mix strategy. Goal 2: Understand steps in the new-product development process
- 10. 9 - 9 Stages of the New Product Development Process • Stage 5: Business Analysis Sales, cost, and profit projections • Stage 6: Product Development Prototype development and testing Goal 2: Understand steps in the new-product development process
- 11. 9 - 10 Stages of the New Product Development Process • Stage 7: Test Marketing Standard test markets Controlled test markets Simulated test markets • Stage 8: Commercialization Goal 2: Understand steps in the new-product development process
- 12. 9 - 11 Product Life-Cycle Strategies • The Product Life Cycle (PLC) has Five Stages Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle: • Fads • Styles • Fashions Goal 3: Know the stages of the product life cycle process
- 13. 9 - 12 Product Life-Cycle Strategies • The product life cycle concept can be applied to 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 Goal 3: Know the stages of the product life cycle process
- 14. 9 - 13 Product Life-Cycle Strategies • Product development • Introduction • Growth • Maturity • Decline • Begins when the company develops a new-product idea • Sales are zero • Investment costs are high • Profits are negative PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle
- 15. 9 - 14 Product Life-Cycle Strategies • Product development • Introduction • Growth • Maturity • Decline • Low sales • High cost per customer acquired • Negative profits • Innovators are targeted • Little competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle
- 16. 9 - 15 Marketing Strategies: Introduction Stage • Product – Offer a basic product • Price – Use cost-plus basis to set • Distribution – Build selective distribution • Advertising – Build awareness among early adopters and dealers/resellers • Sales Promotion – Heavy expenditures to create trial Goal 4: Realize how marketing strategies change during the product life cycle
- 17. 9 - 16 Product Life-Cycle Strategies • Product development • Introduction • Growth • Maturity • Decline • Rapidly rising sales • Average cost per customer • Rising profits • Early adopters are targeted • Growing competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle
- 18. 9 - 17 Marketing Strategies: Growth Stage • Product – Offer product extensions, service, warranty • Price – Penetration pricing • Distribution – Build intensive distribution • Advertising – Build awareness and interest in the mass market • Sales Promotion – Reduce expenditures to take advantage of consumer demand Goal 4: Realize how marketing strategies change during the product life cycle
- 19. 9 - 18 Product Life-Cycle Strategies • Product development • Introduction • Growth • Maturity • Decline • Sales peak • Low cost per customer • High profits • Middle majority are targeted • Competition begins to decline PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle
- 20. 9 - 19 Marketing Strategies: Maturity Stage • Product – Diversify brand and models • Price – Set to match or beat competition • Distribution – Build more intensive distribution • Advertising – Stress brand differences and benefits • Sales Promotion – Increase to encourage brand switching Goal 4: Realize how marketing strategies change during the product life cycle
- 21. 9 - 20 Product Life-Cycle Strategies • Product development • Introduction • Growth • Maturity • Decline • Declining sales • Low cost per customer • Declining profits • Laggards are targeted • Declining competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle
- 22. 9 - 21 Marketing Strategies: Decline Stage • Product – Phase out weak items • Price – Cut price • Distribution – Use selective distribution: phase out unprofitable outlets • Advertising – Reduce to level needed to retain hard-core loyalists • Sales Promotion – Reduce to minimal level Goal 4: Realize how marketing strategies change during the product life cycle