Product Life Cycle

“…in addition to nonstop advertising, food companies must bring out a constant stream of new products to keep sales upand revenue high.” (The End of Food)

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Why new product development?

• Impacts the future• Role of the sales professional• New products more broadly defined

• In developing a product, a firm is determining a lot about its future

Question #5

5 New Product Classes?• New-to-the-World• New Product Lines • Additions to Existing Product Lines

Extensions • Product Improvements• Repositioning

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New to the World

• Innovative products→ create a new market• “the thoroughbreds of product innovation”• Examples:– Kellogg’s Pop Tarts (1963)– Oscar Mayer’s Lunchables (1988)– Dreyer’s Slow-Churned Light Ice Cream (2003)

Creating “new to the world” products is expensive but potentially quite lucrative.

New Product Line

• Allows a company to enter an existing market for the first time - often copies a rival’s product

Line Extension

• Company makes additions to existing product lines

• Wendy’s Homestyle Chicken Strips

• Heinz green and purple ketchup (2000)

Product Improvements

• Quality, feature, service enhancements toward greater value -Different flavor, change in packaging (i.e. tamper proof)

Repositioning

• Existing products targeted to a new market

• Cereal becomes a portable snack (Kellogg’s)

• 7-Up – the “un-cola”

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List & Classifying New Products (Added)

• New-to-the-World: Innovative products. Create a new market. Monsanto’s blue cotton

• New Product Lines: Allows the company to enter an established market for the first time. Gerber life insurance, private label

• Additions to Existing Product Lines:

Extensions. Vanilla Pepsi, Vanilla Diet Pepsi, Ocean Spray’s grapefruit juice products

• Product Improvements: Quality, feature, service enhancements toward greater value. Soft drink refrigerator packs

• Repositionings: Existing products targeted to a new market. Gerber graduates, Hilton and professional businesswomen

Be able to list example new products by class or label one

given you with the correct category

1. ______________2. _______________3. ______________4. _______________5. ______________

New Product Type and Development Time

Based on the previous classifications of new products, which would you expect to take the longest to get to the market?

New-to-the-worldRepositioning New linesExtensionImprovements

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Q#5 (b): Development Time by New Product Type

Which would you expect to take the longest to get to market? The shortest time to market?

• New-to-the-World: Innovative products. • New Product Lines, new to the Co.• Additions to Existing Product Lines: Extensions.

• Product Improvements: modifications• Repositionings: new market existing item

04/11/23 AEC 320-Fall 2008- Robbins 12

Product Life Cycle

Life Cycle StageCompetition

Role of Sales Professional

Advertising

None Input on demand for various features

Raising client awareness

Focus on awareness

Increasing Gather maximum

profits

Trial/loyalty

Intense Differentiation Loyalty

Less Tie in to other products

Less return to adv.

Difficult to differentiate

Less Look for niche clients

ditto

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Q#4: Activities in New Product Development Process

1st step of product life cycle

Where do new product ideas come from? • Opportunity Identification

– Market Intelligence: Understand changes in the market and the best segments (profitable, growing) to enter

– Internal Intelligence or idea Generation: Generate new product ideas to enter these markets.

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• Product or Service Design– Consumer Value Measurement

– Other tools: Product Positioning3, Forecasting4, Perceptual Mapping5, Conjoint Analysis6,Test Marketing7

Product Positioning:

Forecasting:

Helps set goals.

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Perceptual Mapping• Objective: getting feedback from customers.• Identify holes • Helps see opportunities• Axes derived from surveys to see how primary

attributes valued. (conjoint analysis)• How is our product is perceived and the

competitive density of the space

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Organic Food Stores (like Wild Oats)

• Whole Foods Market, a fast growing US food retailer

• How is their Price and Quality

• Supermarkets are suffering

• US Household with incomes are changing

• Organic Food Stores are not high volume

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Organic Food Stores

Whole Foods Market has elite fare

Compare to the ‘30’s King Kullen’s store

Who, “Piled it high and sold it low”

Supermarkets are suffering because of Wal-Mart & similar stores

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Conjoint Analysis

• Define demand at the at the attribute level

• People drink wine not just because it’s wine

The (Modified and Simplified) McFadden Case - Dr. Hu

List attributes– In-vehicle time– Outside-vehicle time– Cost

• List “levels” within each attribute

Attributes and Levels - Dr. Hu

• How to determine attributes and levels?

• Then what?– Design and implement a survey– Analyze data– Draw conclusion

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Data Collected - Dr. Hu

• Attributes associated with each transportation mode; i.e., product (X variables)

• Choices people made (Y variables)

• Individuals’ characteristics (age, income,…) (another set of X variables)

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- Dr. Hu - Luckily…

• Attributes associated with each product (alternative)

• Choices people made

• Individuals’ characteristics (age, income,…)

Results - - Dr. Hu

• Individuals’ preferences for each level within each attribute

• Individuals’ willingness to pay for each level within each attribute

• Individuals’ overall WTP for a product (package)

• What and why different people like (dislike) different levels and attributes

• Particularly Useful for…

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Conjoint Analysis

– Statistical tool that helps us to understand consumer preferences of product

– Typical approach

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Conjoint Analysis

Allows developers to estimate the marginal value of each attribute—

Pros & cons?

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Q#1: What is Supply Chain Management and the advantages of using it?

• A strategy that integrates the various organizations’ objectives in order to increase the efficiency of the entire supply chain

• The channel members must behave as if they are part of the same company

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Q#2: WHAT ARE THE BENEFITS OF BUYER-SUPPLIER INVOLVEMENT?

BUYER INVOLVEMENT

SUPPLIER INVOLVEMENT

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Q#3: What is OUTSOURCING and what are some of the advantages and drawbacks

of using it?

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Best Management Practices in NPD1

• 1) Systematic Process• 2) Early involvement • 3) Parallel ProcessingAdvantages and disadvantages

04/11/23 AEC 320-Fall 2008- Robbins 31

PARALLEL PROCESSING ADVANTAGES & Disadvantages• Shortens the product development cycle time;• Reduces delays caused by failure to include necessary

information • Encourages frequent interaction • Maintains continuity across phases• There is a need for significant changes in the corporate culture

04/11/23 AEC 320-Fall 2008- Robbins 32

Cross-Functional Teams in NPD ADVANTAGES & DISADVATAGES

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Development Time MattersStrategy making has changed...The premium now is on moving fast and keeping pace...The best strategies are irrelevant if they take too long to formulate. ----Kathleen M. Eisenhardt

Speed kills competition. ----Richard D. Stewart

As a strategic weapon, time is the equivalent of money, productivity, quality even innovation. ----George Stalk, Jr.

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ADVANTAGES & DISADVANTAGES of First to Market

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The challenge is: “To achieve speed without cutting corners, sacrificing

quality or eliminating steps”

“Today’s climate is characterized by increased competition, changing customer requirements, rising product development costs and an increasing dependence on external organizations.” (Gupta and Souder, 1998)

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Misconceptions of NPD

• Two misconceptions of NPD– It worked over there, it will work over here– It worked once, it will work again

• Each organization will need to develop a flexible & unique NPD strategy that works for them