To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 10©2003 Prentice Hall, Inc.

Chapter 10Chapter 10

Developing, Positioning, Developing, Positioning, and Differentiating and Differentiating Products through Products through

the Life Cyclethe Life Cycle

PowerPoint by Karen E. JamesPowerPoint by Karen E. JamesLouisiana State University - ShreveportLouisiana State University - Shreveport

To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 10©2003 Prentice Hall, Inc.

ObjectivesObjectives

Understand the challenges a company faces in developing and introducing new products.

Learn the main stages in developing new products and how they can be better managed.

Know the factors that affect the rate at which consumers adopt new products.

To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 10©2003 Prentice Hall, Inc.

ObjectivesObjectives

Learn what marketing strategies are appropriate at each stage of the product life cycle.

Understand how a company can choose and communicate an effective market position.

To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 10©2003 Prentice Hall, Inc.

New Product DevelopmentNew Product Development

What is a “New” Product?

– New-to-the-world products– New product lines– Additions to existing product lines– Improvements and revisions of existing

products– Repositioned products– Cost reduction products

To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 10©2003 Prentice Hall, Inc.

New Product DevelopmentNew Product Development

New Product Failure is Rampant:

– 95% of new U.S. consumer products– 90% of new European consumer products

Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions

To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 10©2003 Prentice Hall, Inc.

New Product DevelopmentNew Product Development

Successful new products:

– Offer a strong relative advantage– Reflect better understanding of customer

needs, and beat the competition to market– Exhibit higher performance-to-cost ratios

and higher contribution margins– Are launched with larger budgets– Have stronger top management support

To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 10©2003 Prentice Hall, Inc.

Managing New ProductsManaging New Products

Idea generation

Idea screening

Concept development

Concept testing

Marketing strategy development

Business analysis

New Product Development Process: Ideas to Strategy

To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 10©2003 Prentice Hall, Inc.

Managing New ProductsManaging New Products

Product development

Market testing

Commercialization

New Product Development Process: Development to Commercialization

To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 10©2003 Prentice Hall, Inc.

Consumer Adoption ProcessConsumer Adoption Process

Adopters of new products move through five stages:

– Awareness– Interest– Evaluation– Trial– Adoption

To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 10©2003 Prentice Hall, Inc.

Consumer Adoption ProcessConsumer Adoption Process

People adopt new products at different rates

– Innovators– Early adopters– Early majority– Late majority– Laggards

To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 10©2003 Prentice Hall, Inc.

Consumer Adoption ProcessConsumer Adoption Process

Five product characteristics influence the rate of adoption:

– Degree of relative advantage– Degree of compatibility – Degree of complexity– Degree of divisibility (trialability)– Degree of communicability

To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 10©2003 Prentice Hall, Inc.

Marketing Through the Marketing Through the Product Life CycleProduct Life Cycle

Five product characteristics influence the rate of adoption:

– Degree of relative advantage– Degree of compatibility – Degree of complexity– Degree of divisibility (trialability)– Degree of communicability

To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 10©2003 Prentice Hall, Inc.

Stages of the Product Life Stages of the Product Life CycleCycle

PLC Stages

Introduction

Growth

Maturity

Decline

Low sales

High costs per customer

Negative profits

Innovator customers

Few competitors

To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 10©2003 Prentice Hall, Inc.

Stages of the Product Life Stages of the Product Life CycleCycle

PLC Stages

Introduction

Growth

Maturity

Decline

Rising sales

Average costs

Rising profits

Early adopters customers

Growing competition

To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 10©2003 Prentice Hall, Inc.

Stages of the Product Life Stages of the Product Life CycleCycle

PLC Stages

Introduction

Growth

Maturity

Decline

Peak sales

Low costs

High profits

Middle majority customers

Stable/declining competition

To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 10©2003 Prentice Hall, Inc.

Stages of the Product Life Stages of the Product Life CycleCycle

PLC Stages

Introduction

Growth

Maturity

Decline

Declining sales

Low costs

Declining profits

Laggard customers

Declining competition

To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 10©2003 Prentice Hall, Inc.

Objectives and Strategies for Objectives and Strategies for the Product Life Cyclethe Product Life Cycle

PLC Stages

Introduction

Growth

Maturity

Decline

Objective: to create awareness and trial

Offer a basic product

Price at cost-plus

Selective distribution

Awareness – dealers and early adopters

Induce trial via heavy sales promotion

To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 10©2003 Prentice Hall, Inc.

Objectives and Strategies for Objectives and Strategies for the Product Life Cyclethe Product Life Cycle

PLC Stages

Introduction

Growth

Maturity

Decline

Objective: maximize market share

Offer service, product extensions, warranty

Price to penetrate

Intensive distribution

Awareness and interest – mass market

Reduce promotions due to heavy demand

To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 10©2003 Prentice Hall, Inc.

Objectives and Strategies for Objectives and Strategies for the Product Life Cyclethe Product Life Cycle

PLC Stages

Introduction

Growth

Maturity

Decline

Objective: maximize profit while defending market share

Diversify brands/items

Price to match or beat competition

Intensive distribution

Stress brand differences and benefits

Increase promotions to encourage switching

To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 10©2003 Prentice Hall, Inc.

Objectives and Strategies for Objectives and Strategies for the Product Life Cyclethe Product Life Cycle

PLC Stages

Introduction

Growth

Maturity

Decline

Objective: reduce costs and milk the brand

Phase out weak models

Cut price

Selective distribution

Reduce advertising to levels needed to retain hard-core loyalists

Reduce promotions to minimal levels

To accompany A Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Two views of positioning:

– Ries and Trout: products are positioned in the mind of prospect

– Treacy and Wiersema: positioning via value disciplinesProduct leader firmOperationally excellent firmCustomer intimate firm

To accompany A Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Positioning statements:

– To (target group and need) our (brand) is (concept) that (point-of-difference)

Example: To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

To accompany A Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Differentiated products feature meaningful and valuable differences that distinguish the company’s offering from the competition.

Differences are stronger when they are important, distinctive, superior, preemptive, affordable, and profitable.

To accompany A Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Form

Features

Performance

Conformance

Durability

Reliability

Repairability

Style

Design

Product Differentiation Tools

To accompany A Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Ordering ease

Delivery

Installation

Customer training

Customer consulting

Maintenance and repair

Miscellaneous

Services Differentiation Tools

To accompany A Framework for Marketing Management, 2nd Edition Slide 26 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Competence

Courtesy

Credibility

Reliability

Responsiveness

Communication

Personnel Differentiation Tools

To accompany A Framework for Marketing Management, 2nd Edition Slide 27 in Chapter 10©2003 Prentice Hall, Inc.

Positioning and Positioning and DifferentiationDifferentiation

Coverage

Expertise

Performance

Channel Differentiation Tools

Symbols

Media

Atmosphere

Events

Image Differentiation Tools