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7/29/2019 adbms new product.ppt
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New-Product
Development andProduct Life-Cycle
Strategies
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Definition
New Product Development
Development of original
products, product
improvements, product
modifications, and new brandsthrough the firms own R & D
efforts.
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New products can be obtained
via acquisition or development.New products suffer from high
failure rates.
Several reasons account for
failure.
New Product Development
Strategy
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Causes of failure of new product
Overestimation of Market Size
Product Design ProblemsProduct Incorrectly Positioned,
Priced or Advertised
Costs of Product DevelopmentCompetitive Actions
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To create successful new
products, the company must:
understand its customers,markets and competitors
develop products thatdeliversuperior value to
customers.
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New Product Development
Process:
Stage 1: Idea Generation Internal idea sources:
R & D External idea sources:
Customers, competitors,
distributors su liers
New Product Development
Strategy
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Process to spot good ideasand drop poor ones
Criteria Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
New Product Development ProcessStep 2. Idea Screening
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New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas intoAlternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One
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New Product Development ProcessStep 4. Marketing StrategyDevelopment
Short term PriceDistribution
Marketing BudgetLong-Term:
Sales & Profit Goals
Marketing Mix Strategy
Short term Target MarketPlanned Product Positioning
Sales & Profit Goals
Market Share
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New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
Business Analysis
Review of Product Sales, Costs,and Profits Projections to See if
They Meet Company Objectives
If Yes, Move toProduct Development
If No, Eliminate
Product Concept
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New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number ofrepresentative cities.
SimulatedTest Market
Test in a simulatedshopping environment
to a sample ofconsumers.
ControlledTest Market
A few stores that haveagreed to carry newproducts for a fee.
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New Product Development Process:
Stage 7: Test Marketing
Standard test markets Controlled test markets
Simulated test markets
Stage 8:Commercialization
New Product Development
Strategy
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The Typical Product Life Cycle(PLC) Has Five Stages
Product Development,
Introduction, Growth, Maturity,Decline
Not all products follow this cycle:
Fads
Styles
Fashions
Product Life-Cycle Strategies
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Product Life
Cycle
Time
Product
Develop-ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
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Product Life-Cycle Strategies
Product
development
Introduction
Growth
Maturity
Decline
Begins when the
company
develops a new-
product idea
Sales are zero
Investment costsare high
Profits are
ne ative
PLC Stages
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Product Life-Cycle Strategies
Product
development Introduction
Growth
Maturity
Decline
High cost percustomer
acquiredNegative profits
Innovators are
targeted
Low sales
Little com etition
PLC Stages
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Product Offer a basic product
Price Use cost-plus basis to set
Distribution Build selectivedistribution
Advertising Build awareness
among early adopters anddealers/resellers
Sales Promotion Heavy
expenditures to create trial
Marketing Strategies:
Introduction Stage
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Product Life-Cycle Strategies
Product development
Introduction
Growth Maturity
Decline
Rapidly rising sales
Average cost per
customerRising profits
Early adopters are
targeted
Growing
competition
PLC Stages
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Product Offer product extensions,service, warranty
Price
Penetration pricingDistribution Build intensive
distribution
Advertising Build awareness andinterest in the mass market
Sales Promotion Reduce
expenditures
Marketing Strategies:
Growth Stage
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Product Life-Cycle Strategies
Product development
Introduction
Growth
Maturity Decline
Sales peakLow cost per
customer
High profitsMiddle majority
are targeted
Competitionbegins to decline
PLC Stages
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Product
Diversify brand and models
Price Set to match or beat competition
Distribution Build more intensivedistribution
Advertising Stress brand differences
and benefits
Sales Promotion Increase toencourage brand switching
Marketing Strategies:
Maturity Stage
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Product Life-Cycle Strategies
Product development
Introduction
Growth
Maturity
Decline
Declining sales
Low cost per
customerDeclining profits
Laggards are
targetedDeclining
competition
PLC Stages
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Product
Phase out weak items
Price Cut price
Distribution Use selective distribution:phase out unprofitable outlets
Advertising Reduce to level needed to
retain hard-core loyalists
Sales Promotion Reduce to minimallevel
Marketing Strategies: Decline
Stage