New Product Development

1. New Product Development
Product life cycle strategies

2. Developing New Products
1. Must develop new products
2. Consumer needs
3. Source of growth for the company
4. Response to environment and technology
5. Every product is born, has its stages and
then dies
6. New Product Development strategies: 1.
acquisition 2. new product development
(original products, product improvements,
product modifications, new brands)

3. New Product Odds
 Up to 90 % of new products meet failure
 New Coke, Eagle Snacks, Zap Mail, Premier
“Smokeless” cigarettes, Arch Deluxe
 Reasons:
 Market overestimation
 Actual product poorly designed
 Incorrectly positioned
 Wrong timing for launch
 Price too high
 Poor advertisement

4. Process
 Idea generation
 Idea screening
 Concept development and testing
 Marketing strategy development
 Business analysis
 Product development
 Test marketing
 Commercialization

5. Idea generation
 New product development starts with idea generation
 Finding good ideas difficult. Out of 3000 only 10 to 12
are accepted
 Internal sources: R & D, brains of executives,
engineers, scientists, engineers, manufacturing staff,
and salespeople
 3 M bootlegging rule
 External: customers, LEGO train, competitors – good
source of new product ideas, distributors and
suppliers, trade magazines, shows, seminars, govt
agencies, new product consultants, ad agencies,
marketing research firms, inventors

6. Idea screening
 Reducing the number of ideas
 Picking good ones, drop bad ones
 Workable and usable ideas are chosen for further
development
 Profitability factor
 Questions like:
 Usefulness
 Good for company or not
 In line with co’s strategy
 Value chain support
 Competing goods
 Distribution channels

7. Concept development & testing
 Detailed version of the idea stated in meaningful
consumer terms
 Daimler Chrysler
 Fuel-cell-powered electric car
 Concept 1: second friendly car
 Concept 2: young people
 Concept 3: environment friendly
 Concept 4: high end SUV
 Concept Testing: concept testing calls for testing new
product concepts with groups of target customers.
After being exposed to the concept, consumers than
may be asked to react to it by answering questions.

9. Marketing strategy development
 Target market
 Product Positioning
 Sales, market share and profit goals
 Concept 3
 Young
 Colors, AC, price, advertisements
 3 % of car market share

10. Business Analysis
 Business attractiveness of the proposal
 Costs
 Sales
 Profits

11. Product Development
 After passing business test
 Moves to product development
 Physical shape give by R & D
 Examples Gillette, Louis Vuitton

12. Test Marketing
 Product introduced into more realistic market
setting
 To gain experience before fully introducing
the product
 Olay cosmetics
 Redbox

13. Standard Test Markets
 By making use of smaller number of
representative test cities to gauge
performance
 Results used for national sales forecast
 Competitors can monitor test results
 Clorox bleach – P & G Tide with bleach

14. Controlled Test Markets
 Panel stores
 Tracking consumer behavior from television
to check counter
 Observing consumer reaction to price, shelf
placement, in-store promotions
 Reports generated

15. Simulated Test Markets
 Testing new products in simulated shopping
environment
 Some money is given to consumers to shop
 New products
 Competing products
 After purchase follow up

16. Commercialization
 Test marketing gives information
 Decision to launch a product based on that
information
 Costs will be incurred if a company decides to
launch the new product
 Timing
 Place

17. Product Life Cycle
 Product launch – happy life
 Cover costs
 Earn profits
 Length not know in advance
 Coca-Cola, Gillette, Budweiser, American
Express, Wells-Fargo, and Tabasco

18. PLC – S Curve

19. Introduction Stage
 Product launch
 Takes time
 Slow growth
 Negative profits
 High promotion and distribution cost

20. Growth Stage
 Product, if satisfies market, enters growth stage
 Sales climb quickly
 Early adopters continue, new join through favorable
word of mouth
 New competitors enter market
 Competition – increase in sale points
 Spread of sales, unit cost reduces
 Sustain rapid growth
 New market segments
 Prices may be lowered to attract more customers
(iPod)

21. Maturity
 At some point sale slows down, product enters
maturity stage
 Lasts longer
 Marketing management most of the time deals with
mature products
 More producers selling the same product
 Greater competition
 Prices down, increase in sales promotion
 Drop in profit
 Well established competitors stay

22. Maturity
 Product manager should modify market,
product and marketing mix
 Market: increase consumption of product,
new users, present users
 Product: quality, features, style (milk pak,
Honda City)
 Four Ps

23. Decline Stage
 Eventually dip
 Oat meal, VHS tapes, VCR, Tape recorders
 Reasons: technology, consumer tastes, increased
competition, profits decline, withdrawal from market
 Furthermore:
 Weak product costly to firm
 Management time
 Price adjustments
 Advertising/sales efforts
 Reputation of other co products affected
 Old Spice/ co can sell brands

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