CHAPTER 8: Developing New Products and Managing the Product Life Cycle

A firm can obtain new products 2 ways:

Acquisition: Buying a whole company, a patent, or a license to produce someone else’s product.

New product development efforts: Original products, product improvements, product modifications, and new brands that the firm develops through its own product development

• New products bring new solutions and variety to customers’ lives, and they are a key source of growth for companies. 

• Many companies rely on new products for the majority of their growth. 

new products fail because:

• The company may overestimate market size. 

• The actual product may be poorly designed

• Incorrectly positioned

• launched at the wrong time

• Priced too high

• Poorly advertised. 

Stages in Product Development

Idea Generation: The systematic search for new product ideas.

• Internal idea sources: companies can find new ideas through formal R&D.

• External idea sources: distributors, suppliers, competitors customers

• Crowdsourcing: A company invites broad communities of people into the innovation process.

  • Ex: Ben & Jerry’s ran a “Do the World a Flavor” campaign, an online video game on the company’s website and social media by which fans could create and name new flavors. 

Idea Screening: Screening new product ideas to spot good ones and drop poor ones as soon as possible

Concept Development and Testing: An attractive idea must then be developed into a product concept.

• Product idea: idea for a possible product that the company can see itself offering to the market. 

• Product concept: detailed version of the idea stated in meaningful consumer terms.

• Product image: is the way consumers perceive an actual or potential product.

Marketing Strategy Development: Company must decide whether to advance a single concept or multiple concepts into the next stage. It consists of 3 parts:

• The first describes the target market; the planned value proposition; and the sales, market-share, and profit goals for the first few years.

• The second part of the marketing strategy statement outlines the product’s planned price, distribution, and marketing budget for the first year

• The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy:

Business Analysis: review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives. 

Product development: R&D or engineering develops the product concept into a physical product. 

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

• Test marketing costs can be high, and testing takes time that may allow market opportunities to slip by or competitors to gain advantages. 

• A company may do little or no test marketing when management is already confident about the new product.

• Controlled test markets: New products and tactics are tested among controlled panels of shoppers and stores.

• Simulated test markets: Researchers measure consumer responses to new products and marketing tactics in laboratory stores or simulated online shopping environments.

Commercialization: introducing the new product into the market

• Must first decide on introduction timing, and where to launch the new product

Managing New Product Development:

Customer-Centered New Product Development: Focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.

Team-Based New Product Development: Company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness.

• creates more organizational tension and confusion than the more orderly sequential approach.

Systematic New Product Development

Innovation management system: collect, review, evaluate, and manage new product ideas.

PLC: Course of a product sales and profits over its lifetime 

five distinct stages:

1. Product development: The company finds and develops a new product idea. During product development, sales are zero, and the company’s investment costs mount.

2. Introduction: A period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

3. Growth: A period of rapid market acceptance and increasing profits.

4. Maturity: A period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.

5. Decline: The period when sales fall off and profits drop.

Style: Basic and distinctive mode of expression.

• Homes (colonial, ranch, transitional), clothing (formal, casual), and art (realist, surrealist, abstract)

• May last for generations, passing in and out of vogue

Fashion: Currently accepted or popular style in a given field.

• Fashions tend to grow slowly, remain popular for a while, and then decline slowly.

Fads: Temporary periods of intense sales driven by short-term consumer enthusiasm.

• Fidget spinner, Selfie sticks, pokemon go 

Introduction Stage: Starts when a new product is first launched.

• Profits are negative or low because of the low sales and high distribution and promotion expenses.

• Market pioneers: Chooses a launch strategy that is consistent with the intended product positioning.

Growth stage: Sales will start climbing quickly.

• Early adopters will continue to buy, and later buyers will start following their lead

• New competitors will enter the market. 

• Introduce new product features and the market will expand.

• Firm faces a trade-off between high market share and high current profit

Maturity Stage: A product’s sales growth will slow down

• Competitors begin marking down prices, increasing their advertising and sales promotions

• Some of the weaker competitors start dropping out, and the industry eventually contains only well-established competitors.

• Modifying the market: The company tries to increase consumption by finding new users and new market segments for its brands. 

Decline Stage: The sales of most product forms and brands eventually dip.

• Sales may decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. 

• companies must identify products in the decline stage and decide whether to maintain, harvest, or drop them. 

• Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving it back into the growth stage of the product life cycle.

Product decisions and social responsibility: 

Marketers should carefully consider public policy issues and regulations regarding acquiring or dropping products, patent protection, product quality and safety, and product warranties.

International product and services marketing:

First, they must figure out what products and services to introduce and in which countries. Then they must decide how much to standardize or adapt their products and services for world markets.