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Chapter 9
Chapter 9
New Product Development
and
Product Life-Cycle Strategies
PRINCIPLES OF MARKETINGEighth Edition
Philip Kotler and Gary Armstrong
Copyright 1999 Prentice Hall
9-29-2New-Product DevelopmentStrategiesNew-Product DevelopmentStrategies
Original Products
Original Products
ProductImprovements
ProductImprovements
ProductModifications
ProductModifications
NewBrands
NewBrands
AcquiredCompanies
AcquiredCompanies
Acquired Patents
Acquired Patents
AcquiredLicenses
AcquiredLicenses
Strategies for Obtaining New Product Ideas
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9-39-3Causes of New Product FailuresCauses of New Product Failures
• Overestimation of Market Size
• Product Design Problems
• Product Incorrectly Positioned, Priced or Advertised
• Costs of Product Development
• Competitive Actions
• To create successful new products, the company must:– understand it’s customers, markets and
competitors
– develop products that deliver superior value to customers.
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9-49-4New Product Development ProcessNew Product Development Process
IdeaGeneration
IdeaScreening
ConceptDevelopmentand Testing
MarketingStrategy
BusinessAnalysis
ProductDevelopment
TestMarketing
Commercialization
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CUSTOMERS
CUSTOMERS
COMPETITORS
COMPETITORS
DISTRIBUTORS
DISTRIBUTORS
SUPPLIERS
SUPPLIERS
New Product Development ProcessStep 1. Idea Generation
New Product Development ProcessStep 1. Idea Generation
Idea Generation is the Systematic Search for New Product Ideas Obtained Internally and From:
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• Process to spot good ideas and drop poor ones as soon as possible.
• Many companies have systems for rating and screening ideas which estimate:– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
• Then, the idea is evaluated against a set of general company criteria.
New Product Development ProcessStep 2. Idea Screening
New Product Development ProcessStep 2. Idea Screening
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New Product Development ProcessStep 3. Concept Development & Testing
New Product Development ProcessStep 3. Concept Development & Testing
1. Develop Product Ideas into Alternative
Product Concepts
1. Develop Product Ideas into Alternative
Product Concepts
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
2. Concept Testing - Test theProduct Concepts with Groups
of Target Customers
3. Choose the Best One3. Choose the Best One
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New Product Development ProcessStep 4. Marketing Strategy Development
New Product Development ProcessStep 4. Marketing Strategy Development
Part Two Describes Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Two Describes Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three Describes Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Three Describes Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One Describes Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
Part One Describes Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
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New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
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
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If Yes, Move to Product Development
If No, Eliminate Product Concept
If No, Eliminate Product Concept
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New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 7. Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
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New Product Development ProcessStep 8. Commercialization
New Product Development ProcessStep 8. Commercialization
When?When? Where?Where? To Whom?
To Whom? How?How?
Commercialization is the Introduction of the New Product
into the Marketplace.
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9-129-12Speeding Up DevelopmentSpeeding Up Development
Step 1Step 1
Step 2Step 2
Step 3Step 3
Step 4Step 4S
tep
1
Ste
p 2
Step 3
Step 4
Sequential Simultaneous
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Product Life CycleProduct Life Cycle
Time
ProductDevelop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
Sales andProfits ($)
Sales and Profits Over the Product’s Life From Introduction to Decline
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9-149-14Introduction Stage of the PLCIntroduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
NegativeNegative
Create product awareness and trial
Create product awareness and trial
Offer a basic productOffer a basic product
Use cost-plus Use cost-plus
DistributionDistribution Build selective distributionBuild selective distribution
AdvertisingAdvertising Build product awareness among early adopters and dealers
Build product awareness among early adopters and dealers
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Growth Stage of the PLCGrowth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer product extensions, service, warranty
Offer product extensions, service, warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Build intensive distributionBuild intensive distribution
AdvertisingAdvertising Build awareness and interest in the mass market
Build awareness and interest in the mass market
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Maturity Stage of the PLCMaturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profitsHigh profits
Maximize profit while defending market share
Maximize profit while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitors
Price to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress brand differences and benefits
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Decline Stage of the PLCDecline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profits
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Phase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outlets
Go selective: phase out unprofitable outlets
AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers