New Product Development and Product Life-Cycle
- 2. New Product Development and Product Life-Cycle Strategies Technology Management Industrial Development Strategies Technical Language , Professor B. Pourabdollahian (PH.D.) Providers : Hamid Reza Bahmani & Seyyed Taghi Mahmoudi
- 3. Learning Objectives After studying this chapter, you will be able to: • Explain how companies find and develop new-product ideas • List and define the steps in the new-product development process • Describe the stages of the product life cycle • Describe how marketing strategies change during the product’s life cycle 2 of 12
- 4. Major Stages in New Product Development Idea generation : systematic search for new ideas • Internal sources : brainstorming • External sources : customers, competitors, distributors and suppliers Idea screening : identify good ideas and drop poor ones • Usefulness to consumers • Good for company • Fit with objectives and strategies • Have the resources • Add value 3 of 12
- 5. Major Stages in New Product Development Concept development and concept testing : • Concept development : detailed version of the product concept in meaningful consumer terms • Concept testing : testing new-product concepts for consumer appeal Marketing strategy : initial strategy for product concept : • Target market, positioning, and sales, market share, and profit goals • Price, distribution, and marketing budget • Strategy statement, long-run sales, profit goals, and marketing mix 4 of 12
- 6. Major Stages in New Product Development Business analysis : review of sales, costs, and profit projections to determine if they meet company objectives. Product development : developing the product concept into a physical product • Large investment • Building a prototype • Testing for safety, durability, and acceptability 5 of 12
- 7. Major Stages in New Product Development Test marketing : testing the product in more realistic market settings • Determine the target market profile • Assess consumer acceptability, trial, repeat purchase rate • Evaluate trade reception and distribution penetration • Design effective media plans Standard test markets Controlled test markets Simulated test market 6 of 12
- 8. Major Stages in New Product Development Commercialization : introducing a new product into the market • Introduction timing • Market rollout or full-scale introduction Sequential product development Simultaneous (team-based) product development 7 of 12
- 9. Introduction to Product Life Cycle Concepts Products, services, and processes all have a life cycle. For products, the life cycle begins when raw materials are extracted or harvested. Raw materials then go through a number of manufacturing steps until the product is delivered to a customer. The product is used, then disposed of or recycled. Processes also have a life cycle. The life cycle begins with planning, research and development. The products and processes are then designed and constructed. A process will have an active lifetime, then will be decommissioned and, if necessary, remediation and restoration may occur. 8 of 12
- 10. Product Life - Cycle Template Gragh It involves four distinct stages : Introduction, Growth, Maturity, and Decline. Introduction stage : The product life-cycle stage in which the new product is first distributed and made available for purchase. Growth stage : The product life-cycle stage in which a product’s sales start climbing quickly. Maturity stage : The stage in the product life cycle in which sales growth slows or levels off. Modify the market, the product, and the marketing mix. Decline Stage : The product life cycle stage in which a product’s sales decline 9 of 12
- 11. Relationship Between Sales and Profit in Product Life - Cycle Product Life Cycle (PLC) : The course of a product’s sales and profits over its life 10 of 12
- 12. Introduction Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers
- 13. Growth Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market
- 14. Maturity Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits
- 15. Decline Stage of the PLC Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers
- 16. Summary of PLC Characteristics: Introduction Growth Maturity Decline Sales Low Rapidly rising sales Peak Declining sales Costs High cost Average cost Low cost Low cost per customer per customer per customer per customer Profits Negative Rising profits High profits Declining profits Customers Innovators Early adopters Middle majority Laggards Competitors Few Growing number Stable number Declining number Marketing objectives: Create product Maximize market Maximize profit & Reduce expenditure awareness and trial share defend market share & milk brand Strategies: Product Offer basic product Offer product Diversify brand and Phase out weak extensions, service models items Price Use cost-plus Price to penetrate Price to match or Cut price market best competitors Distribution Build selective Build intensive Build more Selective; phase out distribution distribution intensive distribution unprofitable outlets Advertising Build awareness Build awareness & Stress brand differences Reduce to level needed early adopters/dealers interest mass market and benefits to retain hard-core loyals Sales promotion Heavy sales promotion Reduce promotion due Increase to encourage Reduce to minimal to entice trial to heavy demand brand switching level Source: Philip Kotler and Peggy Cunningham, Marketing Management: Analysis, Planning, Implementation, and Control, Canadian 11th Edition, Pearson Education Canada, Toronto, Ontario, 2004, p. 347 11 of 12
- 17. Thank You Hamid Reza Bahmani Seyyed Taghi Mahmoudi 11/December/2015 Science & Research Branch University
Editor's Notes
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