Developing and Managing Products

1. Developing and Managing Products Chapter 10 Prepared by Deborah Baker Texas Christian University

2. Learning 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 why some products succeed and others fail.

3. Learning Objectives (continued) 4. Discuss global issues in new-product development. 5. Explain the diffusion process through which new products are adopted. 6. Explain the concept of product life cycles.

4. Learning Objective 1 On Line http://www.chrysler.com Explain the importance of developing new products and describe the six categories of new products.

5. New Product 1 A product new to the world, the market, the producer, the seller, or some combination of these.

6. New Product Introductions, 1964-2000 1 On Line http://www.newproductworks.com

7. New-To-The-World New Product Lines Six Categories of New Products Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Categories of New Products 1

8. Learning Objective 2 Explain the steps in the new-product development process.

9. The New-Product Development Process 2 New ProductSuccessFactors Long-Term Commitment New Product Strategy Capitalize on Experience Establish an Environment

10. New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product New-Product Development Process 2

11. Sources ofNew-ProductIdeas Customers Employees Distributors Competitors R & D Consultants Creative Thinking Idea Generation 2 On Line http://www.ideo.com

12. Brainstorming 2 The process of getting a group to think of unlimited ways to vary a product or solve a problem.

13. Idea Screening 2 The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.

14. Concept Test 2 A test to evaluate a new-product idea, usually before any prototype has been created.

15. Demand Considerations in Business Analysis Stage Cost Sales Profitability Business Analysis 2

16. Development 2 • Creation of prototype • Marketing strategy • Packaging, branding, labeling • Manufacturing feasibility • Final government approvals if needed

17. Simultaneous Product Development 2 A new team-oriented approach to new-product development.

18. Test Marketing 2 On Line http://www.google.com The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

19. Checklist for Selecting Test Markets 2

20. Alternatives to Test Marketing 2 • Single-source research using supermarket scanner data • Simulated (laboratory) market testing

21. Commercialization 2 Steps in Marketing a New Product Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising

22. Learning Objective 3 Explain why some products succeed and others fail.

23. Why New Products Fail 3 • No discernible benefits • Poor match between features and customer desires • Overestimation of market size • Incorrect positioning • Price too high or too low • Inadequate distribution • Poor promotion • Inferior product

24. Success Factors 3 On Line http://www.jnj.com Factors in SuccessfulNew Products Match between product and market needs Benefit to large number of people Unique but superior product

25. Success Factors 3 Listens to Customers Vision Do it Right! Leadership Commitment Project-Based Team

26. Learning Objective 4 Discuss global issues in new-product development.

27. Global Issues 4 On Line http://www.levi.com • Develop product for potential worldwide distribution • Build in unique market requirements • Design products to meet regulations and key market requirements

28. Learning Objective 5 Explain the diffusion process through which new products are adopted.

29. Diffusion 5 The process by which the adoption of an innovation spreads.

30. Innovators Early Adopters Categories of Adoptersin theDiffusion Process Early Majority Late Majority Laggards Categories of Adopters 5

31. Diffusion of Three Familiar Products among U.S. Households 5

32. Percentage of Adopters Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16% Innovators 2.5% Time Categories of Adopters 5

33. Complexity Compatibility ProductCharacteristics Predict Rate of Adoption Relative Advantage Observability Trialability Product Characteristics and the Rate of Adoption 5 On Line http://www.electronicgadgetdepot.com

34. Word of Mouth CommunicationAids theDiffusion Process Direct fromMarketer Marketing Implications of the Adoption Process 5

35. Learning Objective 6 Explain the concept of product life cycles.

36. Product Life Cycle 6 A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). PLC

37. Introductory Stage Growth Stage Maturity Stage Decline Stage Product Category Sales Dollars Product Category Profits 0 Time Product Life Cycle 6

38. Product Life Cycles for Styles, Fashions, and Fads 6

39. Extending the PLC 6 • Change product • Change product use • Change product image • Change product positioning

40. Introductory Stage 6 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

41. Growth Stage 6 Offered in more sizes, flavors, options • 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

42. Maturity Stage 6 On Line http://www.mcdonalds.com Many consumer products are in Maturity Stage • 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

43. Decline Stage 6 • 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

44. GROWTH MATURITY DECLINE INTRODUCTION Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Marketing Strategies for PLC 6 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 Phase outpromotion Advertise. Promote heavily Awareness. Stimulate demand.Sampling Aggressive ads. Stimulatedemand Fall as result of competition &efficient produc- tion. Higher/recoupdevelopment costs Prices fall (usually). Prices stabilize at low level.

45. Introduction Growth Decline Maturity Product life cycle curve Sales Early majority Late majority Early adopters Innovators Laggards Diffusion curve Diffusion Process and PLC Curve 6