CH9 – New Product Development & Product Life-Cycle

Flashcards about New Product Development & Product Life-Cycle

Acquisition

The buying of a whole company, a patent, or a license to produce someone else’s product.

New product development

Original products, product improvements, product modifications, and new brands developed from the firm’s own research and development.

Why many new products fail

Poor product design, priced too high, ineffective promotion, wrong timing, incorrect positioning, overestimation of market size, management influence, high development costs and competition.

Idea Generation

The systematic search for new product ideas.

Internal Sources

The company’s own formal R&D, executives, employees, sales people, scientists, engineers, and manufacturing staff, management and staff, and intrapreneurial programs.

External Sources

Sources outside the company such as distributors (retailers, wholesalers), suppliers, competitors, outside design firms, and the most important are the customers

Crowdsourcing

Inviting broad communities of people—customers, employees, scientists and researchers, and even the public at large—into the new product innovation process.

Idea Screening

Reviewing new-product ideas in order to Identify good ideas and drop poor ones as soon as possible.

R-W-W screening framework

Is it real? Can we win? Is it worth doing?

Concept Testing

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

Product idea

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 a meaningful consumer terms.

Product image

Is the way the consumer perceives an actual or potential product.

Concept testing

Refers to testing new-product concepts with groups of target consumers, to find out how attractive each concept is to customers, and choose the best one.

Marketing strategy development

Designing an initial marketing strategy for introducing the new product to the market based on the product concept.

The first part marketing strategy statement consists of

Description of the target market, The planning product positioning; sales, market share, and profit goals for the first few years.

The second part marketing strategy statement consists of

Price, distribution, and marketing budget for the first year

The third part marketing strategy statement consists of

Long-run sales, profit goals, and marketing mix strategy.

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

Involves the creation and testing of one or more physical versions by the R&D or engineering departments.

Test marketing

The product and its proposed marketing program are tested in realistic market settings.

When firms test market

New product with large investment and uncertainty about product or marketing program

When firms may not test market

Simple line extension, copy of competitor product, low costs and management confidence

Standard test markets

Small representative markets where the firm conducts a full marketing campaign and the firm uses store audits, consumer and distributor surveys, and other measures to gauge product performance results are used to forecast national sales and profits.

Controlled test markets

Panels of stores that have agreed to carry new products for a fee.

Simulated test markets

Events where the firm will create a shopping environment and note how many consumers buy the new product and competing products

Commercialization

Introducing a new product into the market.

Customer-centered new product development

Focuses on finding new ways to solve customer problems and creating more satisfying customer experiences.

Team-based new product development

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.

Sequential new product development

A development approach where company departments work individually to complete each stage of the process before passing it along to the next department or stage.

Systematic New Product Development

Is an innovative development approach that collects, reviews, evaluates, and manages new product ideas.

Product life cycle (PLC)

The course of a product’s sales and profits over its lifetime.

Advantages of PLC

describe how products and markets work and develop marketing strategies for its different stages

Disadvantages of PLC

Difficult to forecast the sales level at each PLC stage, the length of each stage; shape of the PLC curve.

Product classes

Product classes have the longest life cycles.

Product forms

Product forms tend to have the standard PLC shape. introduction, rapid growth, maturity, and decline.

Brands

brands life cycle can change quickly because of changing competitive attacks and responses. have changing PLCs due to competitive threats.

Style

Basic and distinctive mode of expression. A style has a cycle showing several periods of renewed interest.

Fashion

A currently accepted popular style in a given field. Fashions tend to grow slowly, remain popular for a while, and then decline slowly.

Fad

A temporary periods of unusually high sales driven by consumer enthusiasm, and immediate product or brand popularity.

Product Development Stage

Zero sales and increasing investment costs

Introduction Stage

The stage in which a new product is first distributed and made available for purchase

Introduction Stage Characteristics

Takes time , slow sales growth ,profits are negative because of the low sales and high distribution and promotion expenses and the high distribution and promotion expense

Product development in introduction stage

The best versions of the product are produces

Growth Stage

The stage in which a product’s sales start climbing quickly

Growth Stage features

New competitors enter the market attracted by profit opportunities,promotion spending the same or a slightly higher level ,prices stability or decline to increase volume,sales increase, Profits increase as unit manufacturing costs decrease , Consumer education and promotion and manufacturing costs gain economies of scale

Growth Stage strategies

the firm uses several strategies to sustain rapid market growth:improve product quality ,add new product features, enter new product segments and distribution channels and shifts advertising from awareness to product purchase

Maturity Stage

The PLC stage in which sales growth slows or levels off, and it is a long-lasting stage of a product that has gained consumer acceptance.

Maturity Stage Characteristics

The maturity stage normally lasts longer than the previous stages, and it poses challenges to marketing management and most products are in the maturity stage of the lifecycle, and therefore most of marketing management deal with a mature product

Product managers should defend their mature products, they consider

modifying the market, modifying the product and modifying the marketing mix

Modifying the market

is when a company tries to increase consumption of the current product new users increase usage of existing users and new market segments.

Modifying the product

changing characteristics, quality, feature, style, packaging to attract new usersand to inspire more usage. classic toys – new digital versions

Modifying the marketing mix

improving sales by changing one or more marketing mix element (Price Promotion, Distribution channels ) - offer new services to buyers - cutting prices to attract new customers, - better advertising campaigns, - moving into new marketing channels.

Decline Stage

is when sales decline or level off for an extended time, creating a weak product.

Decline Stage Reasons

Sales decline for many reasons: technological advancements, shifts in consumer taste, increased competition

How can a weak product be costly to a firm apart from profit terms?

take too much of management’s time ,requires price and inventory adjustments, requires advertising and sales force attention, product fail reputation can cause customer concerns about the company and its other products and delays the search for placements, weakens the company foothold on the future.

companies must identify products in the decline stage and decide whether

Maintain the product , reposition or reformulate the product, harvest the product and drop the product

Maintain the product

maintain the product without change in the hope that competitors leave the industry

Reposition or reformulate the product

reposition or reformulate the product in hopes of moving back into the growth stage

Harvest the product

harvest the product that means reducing various costs and hoping that sales hold up

Drop the product

drop the product by selling it to another firm or simply liquidate it at salvage value

Product Decisions and Social Responsibility

Public policy and regulations regarding developing and dropping products, patent protection, product quality and safety, and product warranties

International Marketing and Services Marketing

International product marketers face special challenges like what products and services to introduce and in which countries and companies would like to standardize their offerings.