Developing and Managing Products

1. Developing and Managing Products 9 chapter Prepared by Deborah Baker Texas Christian University Chapter 9 Version 3e

2. Learning Objectives 1. Explain the importance of developing new products and describe the six categories of new products. 2. Explain the steps in the new-product development process. 9 chapter Chapter 9 Version 3e

3. Learning Objectives (continued) 3. Explain the diffusion process through which new products are adopted. 4. Explain the concept of product life cycles. 9 chapter Chapter 9 Version 3e

4. 1 Learning Objective Explain the importance of developing new products and describe the six categories of new products. Chapter 9 Version 3e

5. 1 New Product A product new to the world, the market, the producer, the seller, or some combination of these. Chapter 9 Version 3e

6. New-To-The-World New Product Lines Six Categories of New Products Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products 1 Categories of New Products Chapter 9 Version 3e

7. 2 Learning Objective Explain the steps in the new-product development process. Chapter 9 Version 3e

8. New ProductSuccessFactors Long-Term Commitment New Product Strategy Capitalize on Experience Establish an Environment 2 Successful New-Product Development Process Chapter 9 Version 3e

9. New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product 2 New-Product Development Process Chapter 9 Version 3e

10. Customers Sources ofNew-ProductIdeas Employees Distributors Competitors R & D Consultants Creative Thinking 2 Idea Generation Chapter 9 Version 3e

11. 2 Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. Chapter 9 Version 3e

12. 2 Idea Screening The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason. Chapter 9 Version 3e

13. 2 Concept Test A test to evaluate a new-product idea, usually before any prototype has been created. Chapter 9 Version 3e

14. Preliminary Demand Considerations in Business Analysis Stage Cost Sales Profitability 2 Business Analysis Chapter 9 Version 3e

15. 2 Development • Creation of prototype • Marketing strategy • Technical production feasibility • Final government approvals if needed Chapter 9 Version 3e

16. 2 Simultaneous Product Development A new team-oriented approach to new-product development. Chapter 9 Version 3e

17. 2 Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Chapter 9 Version 3e

18. 2 Choosing a Test Market • Similar to planned distribution • Relative isolation and free of influences • Advertising availability; multiple media • Diversified cross section • No atypical purchase habits • Representative population/income • Not overly used or easily “jammed” • Year-round sales stability • Available research/audit and retailers Chapter 9 Version 3e

19. 2 Alternatives to Test Marketing • Single-source research using supermarket scanner data • Simulated (laboratory) market testing Chapter 9 Version 3e

20. Steps in Marketing a New Product Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising 2 Commercialization Chapter 9 Version 3e

21. 3 Learning Objective Explain the diffusion process through which new products are adopted. Chapter 9 Version 3e

22. 3 Diffusion The process by which the adoption of an innovation spreads. Chapter 9 Version 3e

23. Innovators Early Adopters Categories of Adoptersin theDiffusion Process Early Majority Late Majority Laggards 3 Categories of Adopters Chapter 9 Version 3e

24. Percentage of Adopters Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16% Innovators 2.5% Time 3 Categories of Adopters Chapter 9 Version 3e

25. Complexity Compatibility ProductCharacteristics Predict Rate of Adoption Relative Advantage Observability Trialability 3 Product Characteristics and the Rate of Adoption Chapter 9 Version 3e

26. Word of Mouth CommunicationAids theDiffusion Process Direct fromMarketer 3 Marketing Implications of the Adoption Process Chapter 9 Version 3e

27. 4 Learning Objective Explain the concept of product life cycles. Chapter 9 Version 3e

28. 4 Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). PLC Chapter 9 Version 3e

29. Introductory Stage Growth Stage Maturity Stage Decline Stage Product Category Sales Dollars Product Category Profits 0 Time 4 Product Life Cycle Chapter 9 Version 3e

30. 4 Extending the PLC • Change product • Change product use • Change product image • Change product positioning Chapter 9 Version 3e

31. 4 Introductory Stage Full-Scale Launch of New Products • High failure rates • Little competition • Frequent product modification • Limited distribution • High marketing and production costs • Negative profits • Promotion focuses on awareness and information • Intensive personal selling to channels Chapter 9 Version 3e

32. 4 Growth Stage Offered in more sizes, flavors, options • Increasing rate of sales • Entrance of competitors • Market consolidation • Initial healthy profits • Promotion emphasizes brand ads • Goal is wider distribution • Prices normally fall • Development costs are recovered Chapter 9 Version 3e

33. 4 Maturity Stage Many consumer products are in Maturity • Declining sales growth • Saturated markets • Extending product line • Stylistic product changes • Heavy promotions to dealers and consumers • Marginal competitors drop out • Prices and profits fall • Niche marketers emerge Chapter 9 Version 3e

34. 4 Decline Stage Rate of decline depends on change in tastes or adoption of substitute products • Long-run drop in sales • Large inventories of unsold items • Elimination of all nonessential marketing expenses Chapter 9 Version 3e

35. GROWTH MATURITY DECLINE INTRODUCTION Product Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models LimitedWholesale/retail distributors Expanded dealers. Long- term relations Phase out unprofitable outlets Extensive. Margins drop. Shelf space Distribution Strategy Phase outpromotion Advertise. Promote heavily Awareness. Stimulate demand.Sampling Aggressive ads. Stimulatedemand Promotion Strategy Fall as result of competition &efficient produc- tion. Higher/recoupdevelopment costs Pricing Strategy Prices fall (usually). Prices stabilize at low level. 4 Marketing Strategies for PLC Chapter 9 Version 3e

36. Introduction Growth Decline Maturity Product life cycle curve Sales Early majority Late majority Early adopters Innovators Laggards Diffusion curve 4 Diffusion Process and PLC Curve Chapter 9 Version 3e