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New Product Development and Product Life-Cycle StrategiesTechnology ManagementIndustrial Development StrategiesTechnical Language , Professor B. Pourabdollahian (PH.D.)Providers : Hamid Reza Bahmani & Seyyed Taghi Mahmoudi
Learning Objectives
After studying this chapter, you will be able to:
• Explain how companies find and develop new-product ideas
• List and define the steps in the new-product development process
• Describe the stages of the product life cycle
• Describe how marketing strategies change during the product’s life cycle
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Major Stages in New Product Development
Idea generation : systematic search for new ideas
• Internal sources : brainstorming
• External sources : customers, competitors, distributors and suppliers
Idea screening : identify good ideas and drop poor ones
• Usefulness to consumers
• Good for company
• Fit with objectives and strategies
• Have the resources
• Add value
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Major Stages in New Product Development
Concept development and concept testing :
• Concept development : detailed version of the product concept in meaningful consumer terms
• Concept testing : testing new-product concepts for consumer appeal
Marketing strategy : initial strategy for product concept :
• Target market, positioning, and sales, market share, and profit goals
• Price, distribution, and marketing budget
• Strategy statement, long-run sales, profit goals, and marketing mix
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Major Stages in New Product Development
Business analysis : review of sales, costs, and profit projections to determine if they meet company objectives.
Product development : developing the product concept into a physical product
• Large investment
• Building a prototype
• Testing for safety, durability, and acceptability
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Major Stages in New Product Development
Test marketing : testing the product in more realistic market settings
• Determine the target market profile
• Assess consumer acceptability, trial, repeat purchase rate
• Evaluate trade reception and distribution penetration
• Design effective media plans
Standard test markets
Controlled test markets
Simulated test market
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Major Stages in New Product Development
Commercialization : introducing a new product into the market
• Introduction timing
• Market rollout or full-scale introduction
Sequential product development
Simultaneous (team-based) product development
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Introduction to Product Life Cycle Concepts
Products, services, and processes all have a life cycle. For products, the life cycle begins when raw materials are extracted or harvested. Raw materials then go through a number of manufacturing steps until the product is delivered to a customer. The product is used, then disposed of or recycled.
Processes also have a life cycle. The life cycle begins with planning, research and development. The products and processes are then designed and constructed. A process will have an active lifetime, then will be decommissioned and, if necessary, remediation and restoration may occur.
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Product Life - Cycle Template GraghIt involves four distinct stages :
Introduction, Growth, Maturity, and Decline.
Introduction stage : The product life-cycle stage in which the new product is first distributed and made available for purchase.
Growth stage : The product life-cycle stage in which a product’s sales start climbing quickly.
Maturity stage : The stage in the product life cycle in which sales growth slows or levels off.
Modify the market, the product, and the marketing mix.
Decline Stage : The product life cycle stage in which a product’s sales decline
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Relationship Between Sales and Profit inProduct Life - Cycle
Product Life Cycle (PLC) : The course of a product’s sales and profits over its life
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Introduction Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
Create product awareness and trial
Offer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising Build product awareness among early adopters and dealers
Growth Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer product extensions, service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising Build awareness and interest in the mass market
Maturity Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak sales
Low cost per customer
High profits
Maximize profit while defending market share
Diversify brand and models
Price to match or best competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
Decline Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits
Reduce expenditure and milk the brand
Phase out weak items
Cut price
Distribution Go selective: phase out unprofitable outlets
Advertising Reduce to level needed to retain hard-core loyal customers
Summary of PLCCharacteristics: Introduction Growth Maturity DeclineSales Low Rapidly rising sales Peak Declining salesCosts High cost Average cost Low cost Low cost
per customer per customer per customer per customerProfits Negative Rising profits High profits Declining profitsCustomers Innovators Early adopters Middle majority LaggardsCompetitors Few Growing number Stable number Declining number
Marketing objectives:Create product Maximize market Maximize profit & Reduce expenditureawareness and trial share defend market share & milk brand
Strategies:Product Offer basic product Offer product Diversify brand and Phase out weak
extensions, service models itemsPrice Use cost-plus Price to penetrate Price to match or Cut price
market best competitorsDistribution Build selective Build intensive Build more Selective; phase out
distribution distribution intensive distribution unprofitable outletsAdvertising Build awareness Build awareness & Stress brand differences Reduce to level needed
early adopters/dealers interest mass market and benefits to retain hard-core loyalsSales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal
to entice trial to heavy demand brand switching level
Source: Philip Kotler and Peggy Cunningham, Marketing Management: Analysis, Planning, Implementation,and Control, Canadian 11th Edition, Pearson Education Canada, Toronto, Ontario, 2004, p. 347
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Thank YouHamid Reza BahmaniSeyyed Taghi Mahmoudi
11/December/2015
Science & Research Branch University
