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Chapter Nine. New-Product Development and Product Life-Cycle Strategies. New-Product Development and Product Life-Cycle Strategies. New-Product Development Strategy New-Product Development Process Managing New-Product Development Product Life-Cycle Strategies

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chapter nine

Chapter Nine

New-Product Development and Product Life-Cycle Strategies

new product development and product life cycle strategies
New-Product Development and Product Life-Cycle Strategies

New-Product Development Strategy

New-Product Development Process

Managing New-Product Development

Product Life-Cycle Strategies

Additional Product and Service Considerations

Topic Outline

new product development strategy
New-Product Development Strategy

Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product

New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development efforts

Two ways to obtain new products

new product development process
New-Product Development Process

Major Stages in New-Product Development

new product development process1
New-Product Development Process

Idea generation is the systematic search for new-product ideas

Sources of new-product ideas

Internal

External

Ex. IBM recently held an

“Innovation Jam”

Generated46,000 ideas,Of which IBM planned to develop only 10

Idea Generation

new product development process2
New-Product Development Process

Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs

External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms

Idea Generation

new product development process3
New-Product Development Process

Identify good ideas and drop poor ideas

R-W-W ( real, win, worth it )Screening Framework:

  • Is it real?
  • Can we win?
  • Is it worth doing?

The company should be able to answer yes to all the questions before developing the new product idea further

Idea Screening

new product development process4
New-Product Development Process

Product idea is an idea for a possible product that the company can see itself offering to the market

Product concept is a detailed version of the idea stated in meaningful consumer terms

Product image is the way consumers perceive an actual or potential product

Concept Development and Testing

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New-Product Development Process

Concept testing refers to testing new-product concepts with groups of target consumers

Concept Development and Testing

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New-Product Development Process

Marketing strategy development refers to the initial marketing strategy for introducing the product to the market

Marketing strategy statement includes:

  • Description of the target market
  • Value proposition( the product planned price, distribution and marketing budget for the year
  • Sales and profit goals

Marketing Strategy Development

new product development process7
New-Product Development Process

Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives

_ if they do , the product can move to the product development stage

Marketing Strategy Development

new product development process8
New-Product Development Process

Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments

Requires an increase in investment

Ex. Gillette uses employee-volunteers to test new shaving products.

Marketing Strategy Development

new product development process9
New-Product Development Process

Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings

Provides the marketer with experience in testing the product and entire marketing program before full introduction

Marketing Strategy Development

new product development process10
New-Product Development Process

For example :

KFC test marketed its new kentucky grilled chicken product for three years before rolling it out widely. Says the chain’s president, “ we had to get it right “

Marketing Strategy Development

new product development process11
New-Product Development Process

Types of Test Markets

new product development process12
New-Product Development Process

Standard test markets are small representative markets where the firm conducts a full marketing campaign and uses store audits, consumer and distributor surveys, and other measures to gauge product performance. Results are used to forecast national sales and profits, discover product problems, and fine-tune the marketing program.

Controlled test markets are panels of stores that have agreed to carry new products for a fee. In general they are less expensive than standard test market, faster than standard test markets, but competitors gain access to the new product.

Types of Test Markets

new product development process13
New-Product Development Process

Simulated test markets are events where the firm will create a shopping environment and note how many consumers buy the new product and competing products. Provides measure of trial and the effectiveness of promotion. Researchers can interview consumers

Types of Test Markets

new product development process14
New-Product Development Process

Advantages of simulated test markets

  • Less expensive than other test methods
  • Faster
  • Restricts access by competitors

Disadvantages

  • Not considered as reliable and accurate due to the controlled setting

Marketing Strategy Development

new product development process15
New-Product Development Process

Marketing Strategy Development

new product development process16
New-Product Development Process

Commercialization is the introduction

of the new product into the market

When to launch “ Timing”

Where to launch” Location”

Planned market

rollout over time.

Marketing Strategy Development

new product development process17
New-Product Development Process

An example of the commercialization when Microsoft recently did this with windows Vista operating system. Microsoft used the advertising to lunch Vista in more than 30 markets worldwide.

Marketing Strategy Development

managing new product development
Managing New-Product Development

Successful new-product development should be:

Customer centered

Team centered

Systematic

managing new product development1
Managing New-Product Development

Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer satisfying experiences

Begins and ends with solving customer problems

New-Product Development Strategies

customer centered new product development
Customer-centered new product development
  • An example of this when engineers and marketers from Black & Decker’s division, the division that makes power tools used by professional contractors, spend a great deal of time at job sites , generating ideas by talking to the end users. Then once prototypes of new products have been completed, those same people take them to the same job sites, leave the tools , and come back a week or so later to collect information on how they perform.
managing new product development2
Managing New-Product Development

Sequential new-product development is a development approach where company departments work closely together individually to complete each stage of the process before passing it along to the next department or stage

Increased control in risky or complex projects

Slow

New-Product Development Strategies

managing new product development3
Managing New-Product Development

Team-based new-product development is a development approach where company departments work closely together in cross-functional teams, overlapping in the product-development process to save time and increase effectiveness

_ creates more organizational tension and confusion than the more orderly sequential approach.

New-Product Development Strategies

managing new product development4
Managing New-Product Development

Systematic new-product development is an innovative development approach that collects, reviews, evaluates, and manages new-product ideas

Creates an innovation-oriented culture

Yields a large number of new-product ideas

New-Product Development Strategies

Ex. Google is both successful & wildly innovative. At Google, innovation is more than just a process. Its in the air , in the spirit of the place

product life cycle strategies1
Product Life-Cycle Strategies
  • Product development
    • Sales are zero and investment costs mount
  • Introduction
    • Slow sales growth and profits are nonexistent
  • Growth
    • Rapid market acceptance and increasing profits.
  • Maturity
    • Slowdown in sales growth and profits level off or decline
  • Decline
    • Sales fall off and profits drop
product life cycle strategies2
Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularityProduct Life-Cycle Strategies
product life cycle strategies4
Product Life-Cycle Strategies

Slow sales growth

Little or no profit

High distribution and promotion expense

Introduction Stage

product life cycle strategies5
Product Life-Cycle Strategies

Sales increase

New competitors enter the market

Price stability or decline to increase volume

Consumer education

Profits increase

Promotion and manufacturing costs gain economies of scale

Growth Stage

product life cycle strategies6
Product Life-Cycle Strategies

Slowdown in sales

Many suppliers

Substitute products

Overcapacity leads to competition

Increased promotion and R&D to support sales and profits

Maturity Stage

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Product Life-Cycle Strategies

Market modifying

Product modifying

Marketing mix modifying

Maturity Stage Modifying Strategies

product life cycle strategies8
Product Life-Cycle Strategies

Maintain the product

Harvest the product

Drop the product

Decline Stage

product life cycle strategies9
Product Life-Cycle Strategies

Summary of Product Life Cycle

additional product and service considerations
Additional Product and Service Considerations

Public policy and regulations regarding developing and dropping products, patents, quality, and safety

Product Decisions and Social Responsibility

additional product and service considerations1
Additional Product and Service Considerations

Determining what products and services to introduce in which countries

Standardization versus customization

Packaging and labeling

Customs, values, laws

International Product and

Service Marketing—Challenges