Innovation, Product Development, and the Product Life Cycle

1. Innovation, Product Development, and the Product Life Cycle “It’s so new we don’t know what it does, but nobody else has it so we’re selling the hell out of it!”

2. 64 ideas Ideas 1 idea Testing time Marketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace • 10% of ideas reach the test market stage • 50% of new products fail in test marketing • 50% of those fail on national launch • only 2.5% ever enter the marketplace • 1 entrant for every 64 ideas • the average new product that fails costs about $50 million • some product failures have losses of over $100 million for some companies

3. The Four Ps Product Price • Product variety • Quality • Design • Features • Accessories • Brand name • Packaging • Sizes • Services • Warranties • Returns, repairs & support • List price • Wholesale pricing • Seasonal pricing • Discounts • Price flexibility • Allowances • Payment period • Payment methods • Credit terms • Product bundling Target Market Place Promotion • Distribution channels • Coverage • Assortments • Locations • Inventory management • Warehousing availability • Order processing • Transportation costs • Sales promotion • Personal selling • Advertising • Sales force • Public relations • Direct marketing

5. $

9. Fairchild Semiconductor Product Lifecycle

11. Team activity: Construct a product life cycle diagram for one of the companies in your team What’s your product lifecycle mix?

12. Boston Consulting Group (BCG) positions throughout the lifecycle

13. Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogs High growth business strong in competitive market; high point share & ideal business; promote question marks & support R&D Low relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestment Low growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars

14. Relative market share • Profit margins • Ability to compete on price & quality • Knowledge of customer & market • Competitive strengths & weaknesses • Technological capability • Caliber of management The GE/McKinsey Matrix Business Strengths High Medium Low Invest in, growth strategy • Market size & growth • Industry profit margins • Competitive intensity • Seasonality • Cyclicity • Economies of scale • Technology • Social, environmental, legal, & human impacts Monitor performance, selective strategy Industry Attractiveness High Medium Low No growth or investment, consider divestment or liquidation

16. Ansoff’s Product/Market Matrix Existing products New Products • Market Penetration: • Increase product purchase in existing markets (withdrawal, do nothing, consolidate, retrenchment) • Revitalize brand image • Coordinate advertising and sales training • Adapt to market change • Increase market share • Increase consumer usage (frequency, quantity, new application) • Product Development: • Introduce new products into existing markets; can be risky & expensive • Product launch • Add product features & refinements • Develop new products for same market Existing Markets • Market Development: • Explore new markets for existing products; when distinctive competencies rest with product not market • Expanding geographic distribution • Targeting new customer segments • Diversification: • introduce new products into new markets; horizontal, vertical, conglomerate • Acquisition/merger • New business venture New Markets

17. Conclusions about marketing matrix models-- • There is a risk of using matrix models is misclassifying businesses • Use multiple models to ensure better coverage • Know the strengths and limits of each model; when to use and avoid them • Integrate the information from matrices with other sources of information and comparison • Don't let the matrix make decisions-- people make decisions!

18. Market Team Formation • Form team, acquainted, communication & schedules • Team name & member names • Decide on preference for team presentations (pro/con) • Bottled Water • Marketing to Kids • Data Mining, RFID, & Privacy • Social Media Marketing

19. Next Week: Market S-e-g-m-e-n-t-a-t-i-o-n • Be able to describe yourself using segmentation concepts • Be able to discuss how your company uses (or can use) segmentation • Explore a market segment for your company and how that might add value to your business