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Successful Strategies in New Product Development

Explore the comprehensive process of new product development, from idea generation to market testing and launch. Learn the strategies and stages involved to ensure the success of your new product.

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Successful Strategies in New Product Development

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  1. Chapter Nine New-Product Development and Product Life-Cycle Strategies

  2. New-Product Development and Product Life-Cycle Strategies New-Product Development Strategy New-Product Development Process Managing New-Product Development Product Life-Cycle Strategies Additional Product and Service Considerations Topic Outline

  3. New-Product Development Strategy Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development efforts Two ways to obtain new products

  4. New-Product DevelopmentReasons for new product failure

  5. New-Product Development Process Major Stages in New-Product Development

  6. New-Product Development Process Idea generation is the systematic search for new-product ideas Sources of new-product ideas Internal External Ex. IBM recently held an “Innovation Jam” Generated46,000 ideas,Of which IBM planned to develop only 10 Idea Generation

  7. New-Product Development Process Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms Idea Generation

  8. New-Product Development Process Identify good ideas and drop poor ideas R-W-W ( real, win, worth it )Screening Framework: • Is it real? • Can we win? • Is it worth doing? The company should be able to answer yes to all the questions before developing the new product idea further Idea Screening

  9. New-Product Development Process Product idea is an idea for a possible product that the company can see itself offering to the market Product concept is a detailed version of the idea stated in meaningful consumer terms Product image is the way consumers perceive an actual or potential product Concept Development and Testing

  10. New-Product Development Process Concept testing refers to testing new-product concepts with groups of target consumers Concept Development and Testing

  11. New-Product Development Process Marketing strategy development refers to the initial marketing strategy for introducing the product to the market Marketing strategy statement includes: • Description of the target market • Value proposition( the product planned price, distribution and marketing budget for the year • Sales and profit goals Marketing Strategy Development

  12. New-Product Development Process Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives _ if they do , the product can move to the product development stage Marketing Strategy Development

  13. New-Product Development Process Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments Requires an increase in investment Ex. Gillette uses employee-volunteers to test new shaving products. Marketing Strategy Development

  14. New-Product Development Process Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings Provides the marketer with experience in testing the product and entire marketing program before full introduction Marketing Strategy Development

  15. New-Product Development Process For example : KFC test marketed its new kentucky grilled chicken product for three years before rolling it out widely. Says the chain’s president, “ we had to get it right “ Marketing Strategy Development

  16. New-Product Development Process Types of Test Markets

  17. New-Product Development Process Standard test markets are small representative markets where the firm conducts a full marketing campaign and uses store audits, consumer and distributor surveys, and other measures to gauge product performance. Results are used to forecast national sales and profits, discover product problems, and fine-tune the marketing program. Controlled test markets are panels of stores that have agreed to carry new products for a fee. In general they are less expensive than standard test market, faster than standard test markets, but competitors gain access to the new product. Types of Test Markets

  18. New-Product Development Process Simulated test markets are events where the firm will create a shopping environment and note how many consumers buy the new product and competing products. Provides measure of trial and the effectiveness of promotion. Researchers can interview consumers Types of Test Markets

  19. New-Product Development Process Advantages of simulated test markets • Less expensive than other test methods • Faster • Restricts access by competitors Disadvantages • Not considered as reliable and accurate due to the controlled setting Marketing Strategy Development

  20. New-Product Development Process Marketing Strategy Development

  21. New-Product Development Process Commercialization is the introduction of the new product into the market When to launch “ Timing” Where to launch” Location” Planned market rollout over time. Marketing Strategy Development

  22. New-Product Development Process An example of the commercialization when Microsoft recently did this with windows Vista operating system. Microsoft used the advertising to lunch Vista in more than 30 markets worldwide. Marketing Strategy Development

  23. Managing New-Product Development Successful new-product development should be: Customer centered Team centered Systematic

  24. Managing New-Product Development Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer satisfying experiences Begins and ends with solving customer problems New-Product Development Strategies

  25. Customer-centered new product development • An example of this when engineers and marketers from Black & Decker’s division, the division that makes power tools used by professional contractors, spend a great deal of time at job sites , generating ideas by talking to the end users. Then once prototypes of new products have been completed, those same people take them to the same job sites, leave the tools , and come back a week or so later to collect information on how they perform.

  26. Managing New-Product Development Sequential new-product development is a development approach where company departments work closely together individually to complete each stage of the process before passing it along to the next department or stage Increased control in risky or complex projects Slow New-Product Development Strategies

  27. Managing New-Product Development Team-based new-product development is a development approach where company departments work closely together in cross-functional teams, overlapping in the product-development process to save time and increase effectiveness _ creates more organizational tension and confusion than the more orderly sequential approach. New-Product Development Strategies

  28. Managing New-Product Development Systematic new-product development is an innovative development approach that collects, reviews, evaluates, and manages new-product ideas Creates an innovation-oriented culture Yields a large number of new-product ideas New-Product Development Strategies Ex. Google is both successful & wildly innovative. At Google, innovation is more than just a process. Its in the air , in the spirit of the place

  29. Product life cycle • The course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development , introduction, growth , maturity and decline.

  30. Product Life-Cycle Strategies Product Life Cycle

  31. Product life cycle ( PLC) • The product life cycle begins when the company finds and develops a new product idea. During product development, the company accumulates increasing investment costs. After the company launches the product, sales pass through an introductory period, then through a period of strong growth, followed by maturity and eventual decline. Meanwhile profits go from negative to positive, peak in the growth or mature sales stages, and then decline

  32. Product Life-Cycle Strategies • Product development • Sales are zero and investment costs mount • Introduction • Slow sales growth and profits are nonexistent • Growth • Rapid market acceptance and increasing profits. • Maturity • Slowdown in sales growth and profits level off or decline • Decline • Sales fall off and profits drop

  33. Product Life-Cycle Strategies • Style : a basic and distinctive mode of expression for example , styles appear in homes , clothing and art. Once a style is invented , it may last for generations. • Fashion: a currently accepted or popular style in a given field. • Fashion tend to grow slowly, remain popular for a while and then decline slowly

  34. Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity Product Life-Cycle Strategies

  35. Product Life-Cycle Strategies

  36. Product life cycle stages: 1. Introduction: A period of slow sales growth as the product is introduced in the market, profit nonexistent because of the heavy expenses of product introduction. 2. Growth: A period of rapid market acceptance & substantial profit improvement. 3. Maturity: A slowdown in sales growth because the product has achieved acceptance by most potential buyers, profit stabilize or decline because of increased competition. 4. Decline: Sales show a downward drift & profit erode.

  37. 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

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

  39. Strategies for Sustaining Rapid Market Growth • Improve product quality, add new features, and improve styling • Add new models and flanker products • Enter new market segments • Increase distribution coverage • Shift from product-awareness advertising to product-preference advertising • Lower prices to attract the next layer of price-sensitive buyers

  40. 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

  41. Maturity Stage: Strategies Marketers can extend the life of the brand by the following methods: • Market modification: converting nonusers & entering new market segments. • Product modification: quality and features improvements. • Marketing-mix modification: Price, distribution, advertising, sales promotion, services.

  42. Ways to Increase Sales Volume • Convert nonusers • Enter new market segments • Attract competitors’ customers • Have consumers use the product on more occasions • Have consumers use more of the product on each occasion • Have consumers use the product in new ways

  43. 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

  44. Product in Decline

  45. Decline Stage: Strategies • Increasing the firm's investment ( to dominate the market or strengthen its competitive position.) • Maintaining the firm’s investment level until the uncertainties about the industry are resolved. • Decreasing the firm’s investment level selectivity, by dropping unprofitable customers, while simultaneously strengthening the firm’s investment in lucrative niches. • Harvesting the firm’s investment to recover cash quickly. • Divesting the business quickly by disposing of its assets as advantageously as possible.

  46. Additional Product and Service Considerations Public policy and regulations regarding developing and dropping products, patents, quality, and safety Product Decisions and Social Responsibility

  47. Additional Product and Service Considerations Determining what products and services to introduce in which countries Standardization versus customization Packaging and labeling Customs, values, laws International Product and Service Marketing—Challenges Kit kat which translates in japanese as “ you will surely win” ( Kitto Katsu)

  48. Additional Product and Service Considerations For examples , names , labels , and colors may not translate easily from one country to another. A firm using yellow flowers in its logo might fare well in Canada but meet with disaster in Mexico , where a yellow flower symbolizes death or disrespect. International Product and Service Marketing—Challenges

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