9. Developing new products and managing the product life cycle1. New product development strategy Two ways to obtain new products: Acquisition refers to the buying of a whole company, a patent or a license to producesomeone elses product. New product development refers to the development of original products, product improvements, product modifications and new brands through the firms own product development efforts Bring new solutions Variety BUT can be very expensive & risky Reasons a new product might fail Overestimate market size Poorly designed Incorrectly positioned Launched at the wrong time Price too high Poorly advertised Cost of product development higher than expected Competitors fight back harder than expected2. New product development process Major stages in new product development

1) Idea generation= the systematic research for new-product ideas Internal sources = companys own formal research and development, management and staff, and intrapreneurial programs.Ex internal R&D, employees External sources = sources outside the company such as customers, competitors, distributors, suppliers and outside design firms. Distributors: close to the market and can pass along information about consumer problems and new product possibilities Suppliers: new concepts, techniques and materials that can be used Competitors Other idea sources: trade magazines, seminars and shows, government agencies, advertising agencies, marketing reseach firms, university and commercial laboratories, inventors Customers: questions & complaints, share suggestions and ideasEx: starbucks, can post ideas Crowdsourcing = inviting broad communities of people into the new-product innovation processEx Netflix: 1 million price for best solution2) Idea screening= screening new-product ideas to spot good ideas and drop poor ones as soon as possible Rough estimates Evaluating against general set of criteria RWW: is it real? (real need and desire) can we win? (sustainable competitive advantage) Is it worth doing? ( sufficient profit potential)3) Concept development and testing Product idea =idea for a possible product that the company can see itself offering to the market. Product concept = detailed version of the idea stated in meaningful consumer terms. Product image = the way consumers perceive an actual or potential product. Concept development Concept testing =testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.4) Marketing strategy development Marketing strategy developmentinvolves designing an initial marketing strategy for a new product based onthe product concept. Marketing strategy statement includes:o Description of the target market, planned value proposition, sales, market share and profit for the first few yearso Value proposition : planned price, distribution and marketing budget for the first few yearso Sales and profit goals. In the long run Business analysis= involves a review of the sales, costs and profit projections for a new product to find out whether it satisfy the companies objectives Product development= developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering R&D will develop and test one or more physical versions of a product concept: needs to satisfy consumer, produced quickly and at low costs Involve actual consumersEx HP: test new products from few days to 8 weeks in own home and office A new product must have the required functional features and also convey the intended psychological characteristics Ex : a battery powered electric car should be seen as well built, comfortable and safe Test marketing = the stage of new-product development in which the product and its proposed marketing programs are tested in realistic market settings Standard test marketing - costs can be high and takes time that may allow competitors to gain advantage Controlled test market: new products and tactics are tested among controlled groups of customers and stores+ less expensive + can provide accurate forecasts Simulated test markets= in laboratory or simulated shopping environment+ less expensive + faster+ Restricts access by competitors- Not considered as reliable and accurate due to the controlled setting.Ex Procter & gamble: launched online store that will serve as learning lab5) Commercialization = introducing a new product into the market Introduction timingEx: down economy or will decrease profits of other products Where to launch Ex: single location, international market Planed market rollout over timeEx Microsoft windows 7 advertising to launch simultaneously in 30 markets

3. Product life-cycle strategies Product life cycle strategies

A specific brands lifecycle can change quickly because of changing competitive attacks and responses Style: a basic and distinctive mode of expression Cycle: several periods of renewed interest Fashion: a currently accepted or popular style in a given field Grow slowly, remain popular for a while then decline slowly Fad: a temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity Can be part of otherwise normal life cycle or can be entire life cycleEx: Rubiks cube, low-carbohydrate diets1) Product developmentSales are zero and investment costs mount.2) IntroductionSlow sales growth and profits are nonexistent. Slow sales growth Little or no profit High distribution and promotion expense3) GrowthRapid market acceptance and increasing profits. Sales increase New competitors enter market Price stability or decline to increase volume Consumer education Increase profit Promotion and manufacturing costs gain economies of scale Early adopters will continue to buy and later buyers will start following their lead, especially if they hear favorable mouth to mouth. Trade-off between high market share and high current profitby spending a lot of money on product improvement, promotion and distribution, the company can capture a dominant position. But this reduces current profit4) MaturitySlowdown in sales growth and profits level off or decline. Slowdown ales Many suppliers Substitute products Overcapacity leads to competition Increased promotion and R&D to support sales and profit Maturity stage modifying strategies Market modifying= increase consumption by finding new users and new market segments/ or increasing usage among present customersEx: wii balance bord: attrackt females Product modifying= changing characteristics such as quality, features, style r packaging to attract new users and inspire more usage Marketing mix modifying= improving sales by changing one or more marketing mix elementsex pricing, promotion, new marketing channels 5) DeclineSales fall off and profits drop Maintain the product= repositioning or reinvigorating it in the hopes of moving it back into the growth stage Harvest the product= reducing costs ( plant & equipment, maintenance, R&D, advertising..) Drop the product= sell it to another firm or liquidate it at salvage value Why? Technological advances, shift in consumer taste, increased competition Keeping weak product: needs frequent price & inventory adjustments, advertising and sales attention, failing reputation with customers

PLC concept: Product class (ex petrol-powered motor cars) Product form ( 4x4s) Brand (BMW X5) Product class: longest life-cycle Product forms: standard PLC shape Difficult to forecast sales level at each PLC stage, length of each stage and shape of PLC curve Strategy is both cause and result of PLC curve Moral of PLC= companies must continually innovate or they risk extinction. No matter how successful its current position, a company must skillfully manage the lifecycles of existing products for future success. And to grow it must develop a steady stream of new products that bring new values to customers

6. Additional product and service considerations