Comprehensive Guide to New Product Development, Pricing, and PLC Stages

New product development

The development of original products, product improvements, product modifications, and new brands through the firm's own product development efforts.

Crowdsourcing

Inviting broad communities of people — customers, employees, independent researchers, and the general public — into the new-product innovation process.

Idea generation

The systematic search for new-product ideas, drawn from internal sources (R&D, employees, AI tools) and external sources (competitors, distributors, suppliers, customers).

Idea screening

Screening new product ideas to spot good ideas and drop poor ones as soon as possible, using the company's own criteria.

Product concept development

Stating a detailed version of the new-product idea in meaningful consumer terms.

Concept testing

Testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

Marketing strategy development

Designing an initial marketing strategy for a new product based on the product concept.

Business analysis

A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives.

Product development phase

Developing the product concept into a physical product to ensure that the product idea can be turned into a workable product.

Test marketing

The stage at which the product and its proposed marketing program are tested in realistic market settings.

Commercialization

Introducing a new product into the market — full-scale production and launch.

Customer-centered new product development

New-product development that focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.

Team-based new product development

An approach in which company departments work closely together, often overlapping steps in the process, to save time and increase effectiveness.

Product life cycle (PLC)

The course a product's sales and profits take over its lifetime — includes development, introduction, growth, maturity, and decline.

Introduction stage

The PLC stage in which slow sales growth and low or no profits occur as the product is introduced into the market.

Growth stage

The PLC stage in which a product's sales start climbing quickly and profits increase.

Maturity stage

The PLC stage in which sales growth slows or levels off and profits stabilize or decline as competition increases.

Decline stage

The PLC stage in which a product's sales and profits decline; management must decide to maintain, harvest, or drop the product.

Style

A basic and distinctive mode of expression.

Fashion

A currently accepted or popular style in a given field.

Fad

A temporary period of unusually high sales driven by consumer enthusiasm and immediate product/fashion popularity.

Self-fulfilling PLC prophecy

The risk that managers, wrongly assuming a product is dying, cut support and cause the decline they assumed — mismanaging the PLC rather than reacting to real demand.

Price

The sum of all the values that customers give up in order to gain the benefits of having or using a product or service.

Customer value-based pricing

Setting price based on buyers' perceptions of value rather than on the seller's cost.

Good-value pricing

Offering the right combination of quality and good service at a fair price.

Value-added pricing

Attaching value-added features and services to differentiate a company's offers and support charging higher prices.

Cost-based pricing

Setting prices based on the costs of producing, distributing, and selling the product, plus a target profit.

Fixed costs

Costs that do not vary with production level or sales revenue.

Variable costs

Costs that vary directly with the level of production.

Total costs

The sum of fixed and variable costs for a given level of production.

Cost-plus (markup) pricing

Adding a standard markup to the cost of the product.

Break-even (target return) pricing

Setting price to break even on production/marketing costs, or to make a target profit/return.

Competition-based pricing

Setting prices based largely on competitors' strategies, costs, prices, and market offerings.

Target costing

Pricing that starts with an ideal selling price, then targets costs that will ensure the price is met.

Demand curve

A curve showing the number of units the market will buy in a given time period at different prices.

Price elasticity

A measure of consumer sensitivity to price — how much demand changes when price changes.

Market-skimming pricing (price skimming)

Setting a high price for a new product to skim maximum revenue from segments willing to pay the high price.

Market-penetration pricing

Setting a low initial price to penetrate the market quickly and deeply, winning a large market share.

Product line pricing

Setting price steps across an entire product line based on cost differences, customer value perceptions, and competitors' prices.

Optional-product pricing

Pricing optional or accessory products sold along with a main product.

Captive-product pricing

Pricing products that must be used along with a main product, such as blades for a razor or ink for a printer.

By-product pricing

Pricing low-value byproducts to get rid of them or make money on them.

Product bundle pricing

Combining several products and offering the bundle at a reduced price.

Discount

A straight reduction in price on purchases during a stated period of time or of larger quantities.

Allowance

A promotional or trade-in payment given to a buyer in return for some action, such as trading in an old item.

Segmented pricing

Selling a product at two or more prices, where the difference is not based on differences in costs.

Psychological pricing

Pricing that considers the psychology of prices, not simply the economics — the price communicates something about the product.

Reference prices

Prices buyers carry in mind and refer to when looking at a given product.

Promotional pricing

Temporarily pricing products below list price, sometimes even below cost, to increase short-run sales.

Loss leader

A product priced below cost to draw customers into a store, hoping they'll buy other regularly priced items.

Geographical pricing

Setting prices for customers located in different parts of a country or world.

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations.

Personalized pricing

Using customer data to tailor individual prices based on a specific customer's characteristics and behavior.

International pricing

Setting prices for products sold in different countries, adjusted for local market conditions.

Fighting brand

A new, lower-priced brand a company introduces specifically to combat a competitor's low-price move without cutting the price of the main brand.

Price-fixing

An illegal practice where competitors at the same channel level collude to set prices rather than letting the market decide.

Predatory pricing

Illegally selling below cost with the intent of punishing or eliminating competitors.

Retail price maintenance

A manufacturer illegally requiring dealers to charge a specified retail price for its product.

Discriminatory pricing

Illegally selling the same product to different buyers at different prices in ways that injure competition.

Deceptive pricing

Illegally stating or implying prices or price savings that mislead consumers.