Developing New Products and Managing the Product Life Cycle

New Product Development and Product Life Cycle

8.1 New Product Ideas

• New Product Development Strategy: Developing new products through the firm’s own research and development efforts.
• Creating successful new products requires:
  • Understanding consumers, markets, and competitors.
  • Developing products that deliver superior value to customers.
• Sources of New Product Ideas
  • Internal sources: Firm’s own research and development efforts.
  • External sources: Competitor's offerings, ideas from distributors and suppliers, as well as customers themselves.
  • Crowdsourcing or open-innovation new product idea programs.

8.2 New Product Development Process

• Major Stages in New Product Development
  • Idea generation
  • Idea screening
  • Concept development and testing
  • Marketing strategy development
  • Business analysis
  • Product development
  • Test marketing
  • Commercialization
• Idea Generation
  • Systematic search for new product ideas.
  • Internal idea sources:
    • Internal social networks and Intrapreneurial programs (employees).
  • External idea sources:
    • Distributors and suppliers.
    • Competitors.
    • Customers.
• Idea Screening
  • Screening new product ideas to spot good ones and drop poor ones as soon as possible.
  • Ways of screening new ideas:
    • New idea write-up reviewed by a committee.
    • R-W-W framework: Real, win, worth doing
      • Is it real? Is there a real need and desire for the product, and will customers buy it?
      • Can we win? Does the product offer a sustainable competitive advantage?
      • Is it worth doing? Does the product fit the company’s overall growth strategy?
• Product Concept
  • A product idea is an idea for a possible product that the company can see itself offering to the market.
  • A product concept is a detailed version of the new product idea stated in meaningful consumer terms.
  • Product image is the way consumers perceive an actual or potential product.
• Concept Development
  • Developing a new product into alternative product concepts.
  • Find out how attractive each concept is to customers.
  • Choose the best one.
• Concept Testing
  • Testing new product concepts with groups of target consumers.
  • Methods:
    • Presenting the concepts to consumers symbolically or physically.
    • Asking customers to respond by answering questions about their reactions to the concepts.
• Marketing Strategy Development
  • Initial marketing strategy for a new product.
  • Three parts of the marketing strategy statement:
    • Describes the target market, planned value proposition, sales, market-share, and profit goals.
    • Determines product’s planned price, distribution, and marketing budget.
    • Develops 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
  • Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering.
• Test Marketing
  • Introduces the product and its proposed marketing program into realistic market settings.
  • Gives the marketer an experience with marketing a product before full introduction.
  • Tests the product and its marketing program.
  • Testing takes time, and costs can be high.
  • Alternatives to standard test markets:
    • Controlled test markets or simulated test markets.
  • Reasons for using alternative test markets:
    • Reducing the costs.
    • Speeding up the process.
• Commercialization
  • Introducing a new product into the market.
  • Considerations for launching a new product:
    • When to launch
    • Where to launch: Single location, region, national market, or international market
• Managing New Product Development
  • Requires a holistic approach:
    • 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: Various company departments work together, overlapping the steps in the product development process.
    • Systematic new product development: Innovation management systems collect, review, evaluate, and manage new product ideas.

8.3 Product Life Cycle

• Stages of the Product Life Cycle:
  • Product development
  • Introduction stage
  • Growth stage
  • Maturity stage
  • Decline stage
• Styles, Fashions, and Fads
  • A style is a basic and distinctive mode of expression (e.g., colonial).
  • A fashion is a currently accepted or popular style in a given field (e.g., business casual).
  • Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.
• Product Life-Cycle Characteristics, Objectives, and Strategies
  • Introduction
    • Characteristics: Low sales, high cost per customer, negative profits, innovators are the customers, few competitors
    • Marketing objectives: Create product awareness and trial
    • Strategies: Offer a basic product, use cost-plus pricing, build selective distribution, build product awareness among early adopters and dealers through advertising, use heavy sales promotion to entice trial
  • Growth
    • Characteristics: Rapidly rising sales, average cost per customer, rising profits, early adopters are the customers, growing number of competitors
    • Marketing objectives: Maximize market share
    • Strategies: Offer product extensions, service, and warranty, price to penetrate market, build intensive distribution, build engagement and interest in the mass market through advertising, reduce sales promotion to take advantage of heavy consumer demand
  • Maturity
    • Characteristics: Peak sales, low cost per customer, high profits, middle majority are the customers, stable number beginning to decline in competitors
    • Marketing objectives: Maximize profit while defending market share
    • Strategies: Diversify brand and models, price to match or beat competitors, build more intensive distribution, stress brand differences and benefits through advertising, increase sales promotion to encourage brand switching
  • Decline
    • Characteristics: Declining sales, low cost per customer, declining profits, laggards are the customers, declining number of competitors
    • Marketing objectives: Reduce expenditure and milk the brand
    • Strategies: Phase out weak items, cut price, go selective: phase out unprofitable outlets, reduce advertising to level needed to retain hard-core loyals, reduce sales promotion to minimal level

8.4 Social Responsibility and International Considerations

• Product Decisions and Social Responsibility
  • Considerations for companies:
    • Public policy issues
    • Regulations regarding acquiring or dropping products
    • Patent protection
    • Product quality and safety
    • Product warranties
• International Product and Services Marketing
  • Challenges facing international marketers:
    • Finding what products and services to introduce and in which countries
    • Deciding on how much to standardize or adapt the products and services for world markets
  • Service firms are taking the lead in international expansion.