Chapter 10 Developing and Managing Products

1. Chapter 10Developing and Managing Products

2. Types of innovations • Continuous innovations - normal upgrading, no change in user behaviors. • New to the market • New to seller • New to producer • Discontinuous innovations – require users to change behaviors. New-to-the-world products.

3. NPD Process 4. Development 5. Test marketing 6. Commercialization 3. Business Analysis Physical product, $$$ Alternative versions, describe in consumer terms 2. Idea Screening Reduce # quickly 1. Idea Generation Many -- employees, customers, suppliers, distributors, competitors

4. New Product Development 2. Idea Screening (what do we have? +/-) • In pharmacy, 1 of 5,000 new drug ideas is common • In autos, 1 of 20 new car concepts is made to prototype • Point? Brainstorm, then cut via research • Short and long run $ performance • Social issues: • Consumer welfare (Ben and Jerry’s) • Safety ( Marlboro cigarettes) – liability (McDonald’s hot coffee)

5. New Product Development 3. Business Analysis • Examine consumer perceptions (Coors banquet beer) • Consider view of retailers and wholesaler (Frito Lay) 4. Development (can go hand-in-hand with analysis) • Product tests (New Coke, movies) • Risky: (leaks, skewed results) • Virtual product development: examine without construction • Prototype product and marketing strategy • Longest process (Minute Rice took 18 years!)

6. A test to evaluate a new-product idea, usually before any prototype has been created. Concept Test Concept Test

7. Test Marketing Standard Test Market +Costs +Brand Equity -Jamming -Duplication Limited introduction in a small market supported by a full-fledged marketing campaign to gauge customer reactions

8. 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).

9. Introduction Growth Maturity Decline Industry Sales Industry Profits Dollars 0 Time Product Life Cycles

10. 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 Sales Phase outpromotion Promotion Strategy Advertise. Promote heavily Awareness. Stimulate demand.Sampling Aggressive ads. Stimulatedemand Pricing Strategy Fall as result of competition &efficient produc- tion. Prices fall (usually). Prices stabilize at low level. High to recoupdevelopment costs Product Life Cycles Time

11. Some misconceptions about PLC • At the level of the category and not the brand – Cell phones not CINGULAR wireless. • Different products go through the stages differently. • Timing of stages may vary substantially.

12. Product Life Cycle • Criticisms: • Self fulfilling prophecy • All do not follow pattern • Product may be in different stages by the market • What do you see are the advantages of the PLC? Why should m.managers care?

13. Product Life Cycle • Factors that may speed products through PLC: • Ease of trial (supermarkets, no risk, test drive) • Ease of use (some assembly required; Toys R Us (bike); Gateway store) • Easy to communicate advantages (Always low price; cars) • Compatible with customer experience (Poland & free samples)

14. The Consumer Adoption Process • Adoption process: series of stages for which consumers decide whether or not to become a regular user of a new product, including: • Awareness • Interest • Evaluation • Trial • Adoption or rejection

15. Diffusion The process by which the adoption of an innovation spreads. Diffusion

16. Adopter Categories

17. Introduction Growth Decline Maturity Product life cycle curve Sales Early majority Late majority Early adopters Innovators Laggards Diffusion curve Diffusion Process and PLC Curve LO6

18. Complexity Compatibility Relative Advantage Observability Trialability Product Characteristics and the Rate of Adoption