2. New Product Development
A New Product Development is the entire set
of activities required to bring a new concept
to a state of market readiness.
3. New Product Development Process
Idea Generation and Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
4. Step 1. Idea Generation
Systematic Search for New Product Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
5. 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
6. Step 3.Concept Development &
Testing
1. Develop Product Ideas into
Alternative
Product Concepts.
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers.
3. Choose the Best One
7. Step 4. Marketing Strategy
Development
Marketing Strategy Statement Formulation
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals
Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
8. Step 5. Business Analysis
Step 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 No, Eliminate
Product Concept
If Yes, Move to
Product Development
9. Step 7. Test Marketing
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
10. Product Life Cycle
The product life cycle describes the
stages a new product goes through in the
marketplace: introduction, growth,
maturity, and decline.
The product life cycle describes the
stages a new product goes through in the
marketplace: introduction, growth,
maturity, and decline.
12. Introductory Stage
High failure rates
Limited distribution
High marketing and
production costs
Negative profits
Promotion focuses on
awareness and information
Intensive personal selling to
channels
Full-Scale Launch
of New Products
Full-Scale Launch
of New Products
13. Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Promotion emphasizes brand ads
Goal is wider distribution
Prices normally fall
Development costs are recovered
Offered in more
sizes,
flavors, options
Offered in more
sizes,
flavors, options
Growth stage
14. Declining sales growth
Saturated markets
Extending product line
Stylistic product changes
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Niche marketers emerge
Many consumer
products are in
Maturity Stage
Many consumer
products are in
Maturity Stage
Maturity Stage
15. Long-run drop in sales
Large inventories of
unsold items
Elimination of all nonessential
marketing expenses
Rate of decline depends on
change in tastes or
adoption of substitute products
Rate of decline depends on
change in tastes or
adoption of substitute products
Decline Stage
16. How stages of the product life cycle relate to firm’s
marketing objectives & marketing mix actions
INTRODUCTION GROWTH MATURITY DECLINE
Product
Strategy
Distribution
Strategy
Promotion
Strategy
Pricing
Strategy
Limited models
Frequent
changes
More models
Frequent
changes.
Large number
of models.
Eliminate
unprofitable
models
Limited
Wholesale/
retail distributors
Expanded
dealers. Long-
term relations
Extensive.
Margins drop.
Shelf space
Phase out
unprofitable
outlets
Awareness.
Stimulate
demand.Sampling
Aggressive ads.
Stimulate
demand
Advertise.
Promote
heavily
Phase out
promotion
Higher/recoup
development
costs
Fall as result of
competition &
efficient produc-
tion.
Prices fall
(usually).
Prices
stabilize at
low level.
Notes:
During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product.
Production costs are high.
Promotion strategy focuses on developing product awareness and informing consumers about the product’s potential benefits. Intensive personal selling is often required.
Promotion of convenience products may require heavy consumer sampling and couponing. Shopping and specialty products demand educational advertising and personal selling to the final consumer.
Notes:
In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms.
Profits rise rapidly, peak, and begin declining as competition increases.
Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy.
Adequate distribution is a major key to establish a strong market position and product success.
On Line: McDonald’s
What is McDonald’s doing to successfully compete in the maturity stage?
Notes:
The maturity stage begins when sales increase at a decreasing rate, and the market approaches saturation. This is normally the longest stage of the PLC.
Annual models may appear during the maturity stage for shopping and specialty products. Product lines are lengthened to appeal to additional market segments.
Service and repair help manufacturers distinguish their products from others.
Heavy promotion is required to maintain market share. For example, consider the competitive “wars” between Coke and Pepsi, Budweiser and Miller, and McDonalds against Burger King and Wendy’s.
As prices and profits continue to fall, marginal competitors drop out of the market.
Niche marketers that target narrow, well-defined segments of a market emerge.
Notes:
The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted.
A strategy for declining products includes elimination of nonessential marketing expenses, and the eventual product withdrawal as sales decline.