Effective Product Development Strategies and Life Cycle Management

1. Chapter 9 Developing and Managing Products Prepared by Deborah Baker Texas Christian University

2. Chapter 9 Objectives 1. Explain the importance of developing new products and describe the six categories of new products. 2. Explain the steps in the new-product development process. 3. Explain the concept of product life cycles. 4. Explain the diffusion process through which new products are adopted.

3. Categories of New Products New-To-The-World New Product Lines Six Categories of New Products Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products

4. The New-Product Development Process New ProductSuccessFactors Long-Term Commitment New Product Strategy Capitalize on Experience Establish an Environment

5. New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product New-Product Development Process

6. Customers Sources ofNew-ProductIdeas Employees Distributors Competitors R & D Consultants Creative Thinking Idea Generation

7. Preliminary Demand Considerations in Business Analysis Stage Cost Sales Profitability Business Analysis

8. Development Development Phase Decisions • Creation of prototype • Packaging • Branding • Labeling • Promotion strategy • Pricing • Distribution • Technical production feasibility • Final government approvals if needed

9. Test Marketing Criteria for Choosing a Test Market • Similar to planned distribution • Relative isolation • Advertising availability • Diversified cross section • No atypical purchase habits • Representative population • Typical per capita income • Not overly used • Not easily “jammed” • Year-round sales stability • No dominant TV; multiple media • Available retailers • Available research/audit • Free of unusual influences

10. Introductory Stage Growth Stage Maturity Stage Decline Stage Product Category Sales Dollars Product Category Profits 0 Time Four Stages of Product Life Cycle

11. Introductory Stage Full-Scale Launch of New Products • High failure rates • Little competition • Frequent product modification • Limited distribution • High marketing and production costs • Negative profits • Promotion focuses on awareness and information • Intensive personal selling to channels

12. Growth Stage Offered in more sizes, flavors, options • Increasing rate of sales • Entrance of competitors • Market consolidation • Healthy profits • Promotion emphasizes brand ads • Goal is wider distribution • Prices normally fall • Development costs are recovered • Economies of scale

13. Maturity Stage Many consumer products are in Maturity • Declining sales growth • Saturated markets • Cosmetic product changes • Extending product line • Marginal competitors drop out • Heavy promotions to dealers and consumers • Prices and profits fall • Niche marketers emerge

14. Decline Stage Rate of decline depends on change in tastes or adoption of substitute products • Long-run drop in sales • Competitors forced out of market • Small specialty firms manufacture product

15. Promote more frequent use Strategies to Prevent Decline Phase Find new target markets Find new uses Price below market New distribution channels Change ingredients Dramatic new guarantee Implications for Marketing Management

16. GROWTH MATURITY DECLINE INTRODUCTION Product Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models LimitedWholesale/retail distributors Expanded dealers. Long- term relations Phase out unprofitable outlets Extensive. Margins drop. Shelf space Distribution Strategy Promotion Strategy Phase outpromotion Advertise. Promote heavily Awareness. Stimulate demand.Sampling Aggressive ads. Stimulatedemand Fall as result of competition &efficient produc- tion. Higher/recoupdevelopment costs Pricing Strategy Prices fall (usually). Prices stabilize at low level. Marketing Strategies During PLC

17. The Spread of New Products Innovators Early Adopters Categories of Adoptersin theDiffusion Process Early Majority Late Majority Laggards

18. Percentage of Adopters Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16% Innovators 2.5% Time Categories of Adopters

19. Rate of Adoption Complexity Compatibility ProductCharacteristics Predict Rate of Adoption Relative Advantage Observability Trialability

20. Product Life Cycle & Diffusion Process Introduction Growth Decline Maturity Product life cycle curve Early majority Late majority Early adopters Innovators Laggards Diffusion curve