New Product Development: Strategies and Challenges

1. Chapter 10 Developing, Positioning, and Differentiating Products through the Life Cycle PowerPoint by Karen E. James Louisiana State University - Shreveport To accompany A Framework for Marketing Management, 2nd Edition

2. Objectives • Understand the challenges a company faces in developing and introducing new products. • Learn the main stages in developing new products and how they can be better managed. • Know the factors that affect the rate at which consumers adopt new products. To accompany A Framework for Marketing Management, 2nd Edition

3. Objectives • Learn what marketing strategies are appropriate at each stage of the product life cycle. • Understand how a company can choose and communicate an effective market position. To accompany A Framework for Marketing Management, 2nd Edition

4. New Product Development • What is a “New” Product? • New-to-the-world products • New product lines • Additions to existing product lines • Improvements and revisions of existing products • Repositioned products • Cost reduction products To accompany A Framework for Marketing Management, 2nd Edition

5. New Product Development • New Product Failure is Rampant: • 95% of new U.S. consumer products • 90% of new European consumer products • Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions To accompany A Framework for Marketing Management, 2nd Edition

6. New Product Development • Successful new products: • Offer a strong relative advantage • Reflect better understanding of customer needs, and beat the competition to market • Exhibit higher performance-to-cost ratios and higher contribution margins • Are launched with larger budgets • Have stronger top management support To accompany A Framework for Marketing Management, 2nd Edition

7. Idea generation Idea screening Concept development Concept testing Marketing strategy development Business analysis Managing New Products New Product Development Process: Ideas to Strategy To accompany A Framework for Marketing Management, 2nd Edition

8. Product development Market testing Commercialization Managing New Products New Product Development Process: Development to Commercialization To accompany A Framework for Marketing Management, 2nd Edition

9. Consumer Adoption Process • Adopters of new products move through five stages: • Awareness • Interest • Evaluation • Trial • Adoption To accompany A Framework for Marketing Management, 2nd Edition

10. Consumer Adoption Process • People adopt new products at different rates • Innovators • Early adopters • Early majority • Late majority • Laggards To accompany A Framework for Marketing Management, 2nd Edition

11. Consumer Adoption Process • Five product characteristics influence the rate of adoption: • Degree of relative advantage • Degree of compatibility • Degree of complexity • Degree of divisibility (trialability) • Degree of communicability To accompany A Framework for Marketing Management, 2nd Edition

12. Marketing Through the Product Life Cycle • Five product characteristics influence the rate of adoption: • Degree of relative advantage • Degree of compatibility • Degree of complexity • Degree of divisibility (trialability) • Degree of communicability To accompany A Framework for Marketing Management, 2nd Edition

13. PLC Stages Introduction Growth Maturity Decline Low sales High costs per customer Negative profits Innovator customers Few competitors Stages of the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

14. PLC Stages Introduction Growth Maturity Decline Rising sales Average costs Rising profits Early adopters customers Growing competition Stages of the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

15. PLC Stages Introduction Growth Maturity Decline Peak sales Low costs High profits Middle majority customers Stable/declining competition Stages of the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

16. PLC Stages Introduction Growth Maturity Decline Declining sales Low costs Declining profits Laggard customers Declining competition Stages of the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

17. PLC Stages Introduction Growth Maturity Decline Objective: to create awareness and trial Offer a basic product Price at cost-plus Selective distribution Awareness – dealers and early adopters Induce trial via heavy sales promotion Objectives and Strategies for the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

18. PLC Stages Introduction Growth Maturity Decline Objective: maximize market share Offer service, product extensions, warranty Price to penetrate Intensive distribution Awareness and interest – mass market Reduce promotions due to heavy demand Objectives and Strategies for the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

19. PLC Stages Introduction Growth Maturity Decline Objective: maximize profit while defending market share Diversify brands/items Price to match or beat competition Intensive distribution Stress brand differences and benefits Increase promotions to encourage switching Objectives and Strategies for the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

20. PLC Stages Introduction Growth Maturity Decline Objective: reduce costs and milk the brand Phase out weak models Cut price Selective distribution Reduce advertising to levels needed to retain hard-core loyalists Reduce promotions to minimal levels Objectives and Strategies for the Product Life Cycle To accompany A Framework for Marketing Management, 2nd Edition

21. Positioning and Differentiation • Two views of positioning: • Ries and Trout: products are positioned in the mind of prospect • Treacy and Wiersema: positioning via value disciplines • Product leader firm • Operationally excellent firm • Customer intimate firm To accompany A Framework for Marketing Management, 2nd Edition

22. Positioning and Differentiation • Positioning statements: • To (target group and need) our (brand) is (concept) that (point-of-difference) • Example: To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine. To accompany A Framework for Marketing Management, 2nd Edition

23. Positioning and Differentiation • Differentiated products feature meaningful and valuable differences that distinguish the company’s offering from the competition. • Differences are stronger when they are important, distinctive, superior, preemptive, affordable, and profitable. To accompany A Framework for Marketing Management, 2nd Edition

24. Form Features Performance Conformance Durability Reliability Repairability Style Design Positioning and Differentiation Product Differentiation Tools To accompany A Framework for Marketing Management, 2nd Edition

25. Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Miscellaneous Positioning and Differentiation Services Differentiation Tools To accompany A Framework for Marketing Management, 2nd Edition

26. Competence Courtesy Credibility Reliability Responsiveness Communication Positioning and Differentiation Personnel Differentiation Tools To accompany A Framework for Marketing Management, 2nd Edition

27. Coverage Expertise Performance Positioning and Differentiation Channel Differentiation Tools Image Differentiation Tools • Symbols • Media • Atmosphere • Events To accompany A Framework for Marketing Management, 2nd Edition