Chapter 9

1. PRINCIPLES OF MARKETING Chapter 9 New Product Development and Product Life-Cycle Strategies

2. Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand it’s customers, markets and competitors develop products that deliver superior value to customers. Causes of New Product Failures

3. Idea Generation and Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization New Product Development Process

4. New Product Development ProcessStep 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

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

6. New Product Development ProcessStep 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. New Product Development ProcessStep 4. Marketing Strategy Development Marketing Strategy Statement Formulation 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 Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy

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

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

10. Product Life Cycle Sales and Profits ($) Sales Profits Time Product Develop- ment Introduction Growth Maturity Decline Losses/ Investments ($)

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

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

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

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