1. CONCEPT GENERATION & METHODOLOGY

2. Methods for Generating Product Concepts
Two Broad Categories of Methods:
• Gathering Ready-Made Product Concepts
• Using a Managed Process Run by the New
Products Team

3. Problem-Based Concept Generation

4. Major Stages in
New-Product Development
10- 4

5. New Product Development Strategy
• New Product Development Process:
– Stage 1: Idea Generation
• Internal idea sources:
–R&D
• External idea sources:
– Customers,
competitors,
distributors, suppliers
10- 5

6. 3M’s corporate
culture
encourages,
supports, and
rewards new
product ideas
and innovation
10- 6

7. New Product Development Process
New Product Development Process
Step 1. Idea Generation
Step 1. Idea Generation
Systematic Search for New Product
Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers

8. Using the Web to Solicit Product Ideas
Procter and Gamble
To see how P&G solicits ideas from customers, visit
the Procter and Gamble home page, click on the
Resources and Offers button, then select the Share
Your Thoughts listing.
Procter & Gamble
10- 8

9. New Product Development Strategy
• New Product Development Process:
– Stage 2: Idea Screening
• Product development
costs increase dramatically
in later stages.
• Ideas are evaluated
against criteria;
most are eliminated.
10- 9

10. New Product Development Process
New Product Development Process
Step 2. Idea Screening
Step 2. Idea Screening
• Process to spot good ideas and drop poor ones
• Criteria
– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return

11. New Product Development Strategy
• New Product Development Process:
– Stage 3: Concept Development and Testing
• Product concepts provide
detailed versions of new
product ideas.
• Consumers evaluate
ideas in concept tests.
10- 11

12. New Product Development Process
New Product Development Process
Step 3. Concept Development & Testing
Step 3. Concept Development & Testing
1. Develop Product Ideas into
1. Develop Product Ideas into
Alternative
Alternative
Product Concepts
Product Concepts
2. Concept Testing --Test the
2. Concept Testing Test the
Product Concepts with Groups
Product Concepts with Groups
of Target Customers
of Target Customers
3. Choose the Best One
3. Choose the Best One

13. New Product Development Strategy
• New Product Development Process:
– Stage 4: Marketing Strategy Development
• Strategy statements describe:
– The target market, product positioning, and sales,
share, and profit goals for the first few years.
– Product price, distribution, and marketing budget for
the first year.
– Long-run sales and profit goals and the marketing mix
strategy.
10- 13

14. New Product Development Process
New Product Development Process
Step 4. Marketing Strategy Development
Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One -- Overall:
Part One Overall:
Target Market
Target Market
Planned Product Positioning
Planned Product Positioning
Sales & Profit Goals
Sales & Profit Goals
Market Share
Market Share
Part Two -- Short-Term:
Part Two Short-Term:
Product’s Planned Price
Product’s Planned Price
Distribution
Distribution
Marketing Budget
Marketing Budget
Part Three -- Long-Term:
Part Three Long-Term:
Sales & Profit Goals
Sales & Profit Goals
Marketing Mix Strategy
Marketing Mix Strategy

15. New Product Development Strategy
• New Product Development Process:
– Stage 5: Business Analysis
• Sales, cost, and profit
projections
– Stage 6: Product
Development
• Prototype development
and testing
10- 15

16. New Product Development Process
New Product Development Process
Step 5. Business Analysis
Step 5. Business Analysis
Step 6. Product Development
Step 6. Product Development
Business Analysis
Business Analysis
Review of Product Sales, Costs,
Review of Product Sales, Costs,
and Profits Projections to See if
and Profits Projections to See if
They Meet Company Objectives
They Meet Company Objectives
If No, Eliminate
If No, Eliminate
Product Concept
Product Concept
If Yes, Move to
If Yes, Move to
Product Development
Product Development

17. THE NEW-PRODUCT PROCESSBusiness Analysis
• if positive, build a prototype
Demand
Considerations
Considerations
in
in
Business
Business
Analysis Stage
Analysis Stage
Cost
Sales
Profitability

18. New Product Development Strategy
• New Product Development Process:
– Stage 7: Test Marketing
• Standard test markets
• Controlled test markets
• Simulated test markets
– Stage 8:
Commercialization
10- 18

19. New Product Development Process
New Product Development Process
Step 7. Test Marketing
Step 7. Test Marketing
Standard
Standard
Test Market
Test Market
Full marketing campaign
Full marketing campaign
in a small number of
in a small number of
representative cities.
representative cities.
Controlled
Controlled
Test Market
Test Market
A few stores that have
A few stores that have
agreed to carry new
agreed to carry new
products for a fee.
products for a fee.
Simulated
Simulated
Test Market
Test Market
Test in a simulated
Test in a simulated
shopping environment
shopping environment
to a sample of
to a sample of
consumers.
consumers.

20. THE NEW-PRODUCT PROCESSMarketing
Test
The limited introduction of a product
and a marketing program to determine
the reactions of potential customers
in a market situation.

21. When Test Markets Don’t Work
Limited time to market
Service nature of the item
Time to see product benefit is long
 Number of units produced is small

22. Daimler is currently road-testing its
prototype NECAR 5 (New Electric Car)
10- 22

23. BusinessNow
Sensable Video Clip
Computer modeling
is being used to aid
in product design
10- 23

24. Benefits of test marketing
• Yields a more reliable forecast of future sales
than no testing.
• Can pre-test alternative marketing plans.
• May discover a product fault missed in the
product development stage.
• Discover clues to distribution problems.
• Gain better insights into the behavior of
different market segments.

25. Actions from test marketing
• High trial, high repurchase rate
GO
• High trial, low repurchase rateDrop or
redesign product
• Low trial, high repurchase rate
Increase advertising and sales promotion
• Low trial, low repurchase rate Drop
product

26. New Product Development Strategy
IRI BehaviorScan
provides an inmarket laboratory
for testing new
products and
marketing programs
IRI BehaviorScan
10- 26

27. Sales and Profits
Over A Product’s Life
10- 27

28. Product Life-Cycle Strategies
• The Typical Product Life Cycle (PLC) Has
Five Stages
– Product Development, Introduction,
Growth, Maturity, Decline
– Not all products follow this cycle:
• Fads
• Styles
• Fashions
10- 28

29. Figure 10-3:
Styles, Fashions, and Fads
10- 29

30. Companies
want their
products to
enjoy a long
life cycle.
Hershey’s
actively
promotes
the fact that
it has been
“unchanged
since 1899”
10- 30

31. Product Life-Cycle Strategies
• Additional marketing
investments can move a
product back into the
growth stage, as in the
case of Cracker Jack.
10- 31

32. Product Life-Cycle Strategies
PLC Stages
• Product
development
• Introduction
• Growth
• Maturity
• Decline
10- 32
• Begins when the
company develops a
new-product idea
• Sales are zero
• Investment costs are
high
• Profits are negative

33. Product Life-Cycle Strategies
PLC Stages
• Product
development
• Introduction
• Growth
• Maturity
• Decline
10- 33
• Low sales
• High cost per
customer acquired
• Negative profits
• Innovators are
targeted
• Little competition

34. Marketing Strategies: Introduction
Stage
•
•
•
•
Product – Offer a basic product
Price – Use cost-plus basis to set
Distribution – Build selective distribution
Advertising – Build awareness among early
adopters and dealers/resellers
• Sales Promotion – Heavy expenditures to create
trial
10- 34

35. Introduction Stage of the PLC
Sales
Sales
Low sales
Low sales
Costs
Costs
High cost per customer
High cost per customer
Profits
Profits
Negative
Negative
Marketing Objectives
Marketing Objectives
Create product awareness
Create product awareness
and trial
and trial
Product
Product
Offer a basic product
Offer a basic product
Price
Price
Use cost-plus
Use cost-plus
Distribution
Distribution
Advertising
Advertising
Build selective distribution
Build selective distribution
Build product awareness among early
Build product awareness among early
adopters and dealers
adopters and dealers

36. Product Life-Cycle Strategies
PLC Stages
• Product
development
• Introduction
• Growth
• Maturity
• Decline
10- 36
• Rapidly rising sales
• Average cost per
customer
• Rising profits
• Early adopters are
targeted
• Growing
competition

37. Marketing Strategies:
Growth Stage
• Product – Offer product extensions, service,
warranty
• Price – Penetration pricing
• Distribution – Build intensive distribution
• Advertising – Build awareness and interest in
the mass market
• Sales Promotion – Reduce expenditures to take
advantage of consumer demand
10- 37

38. Growth Stage of the PLC
Sales
Sales
Rapidly rising sales
Rapidly rising sales
Costs
Costs
Average cost per customer
Average cost per customer
Profits
Profits
Rising profits
Rising profits
Marketing Objectives
Marketing Objectives
Maximize market share
Maximize market share
Product
Product
Offer product extensions, service,
Offer product extensions, service,
warranty
warranty
Price to penetrate market
Price to penetrate market
Price
Price
Distribution
Distribution
Advertising
Advertising
Build intensive distribution
Build intensive distribution
Build awareness and interest in the
Build awareness and interest in the
mass market
mass market

39. Product Life-Cycle Strategies
PLC Stages
• Product
development
• Introduction
• Growth
• Maturity
• Decline
10- 39
• Sales peak
• Low cost per
customer
• High profits
• Middle majority are
targeted
• Competition begins
to decline

40. Marketing Strategies:
Maturity Stage
•
•
•
•
Product – Diversify brand and models
Price – Set to match or beat competition
Distribution – Build more intensive distribution
Advertising – Stress brand differences and
benefits
• Sales Promotion – Increase to encourage brand
switching
10- 40

41. Maturity Stage of the PLC
Sales
Sales
Peak sales
Peak sales
Costs
Costs
Low cost per customer
Low cost per customer
Profits
Profits
High profits
High profits
Marketing Objectives
Marketing Objectives
Maximize profit while defending
Maximize profit while defending
market share
market share
Product
Product
Diversify brand and models
Diversify brand and models
Price
Price
Price to match or best competitors
Price to match or best competitors
Distribution
Distribution
Advertising
Advertising
Build more intensive distribution
Build more intensive distribution
Stress brand differences and benefits
Stress brand differences and benefits

42. Product Life-Cycle Strategies
PLC Stages
• Product
development
• Introduction
• Growth
• Maturity
• Decline
10- 42
• Declining sales
• Low cost per
customer
• Declining profits
• Laggards are
targeted
• Declining
competition

43. Marketing Strategies: Decline Stage
• 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 minimal level
10- 43

44. Decline Stage of the PLC
Sales
Sales
Declining sales
Declining sales
Costs
Costs
Low cost per customer
Low cost per customer
Profits
Profits
Declining profits
Declining profits
Marketing Objectives
Marketing Objectives
Reduce expenditure and milk the brand
Reduce expenditure and milk the brand
Product
Product
Phase out weak items
Phase out weak items
Price
Price
Cut price
Cut price
Distribution
Distribution
Advertising
Advertising
Go selective: phase out unprofitable
Go selective: phase out unprofitable
outlets
outlets
Reduce to level needed to retain
Reduce to level needed to retain
hard-core loyal customers
hard-core loyal customers