NEW-PRODUCT DEVELOPMENT

AND
PRODUCT LIFE-CYCLE STRATEGIES

What is a new product?

A product that opens an entirely new market A product that adapts or replaces an existing product A product that significantly broadens the market for an existing product An old product introduced in the new market An old product packaged in a different way An old product marketed in different way.

New product can be used:

Increase or defend market share by offering more choice or updating older products Demand to new segments Diversify into new markets Improve relationship with distributors Maintains the firms reputation a leading edge company Even out peaks and trough in demand Make better use of organizations resources

Definition
New Product Development
Development of original products, product improvements, product modifications, and new brands through the firms own R & D efforts.

New Product Development Strategy

New products can be obtained via acquisition or development. A firm can obtain new products in 2 ways: - Acquisition Buying either a whole company, a patent, or buying a license to produce someones else product. - New-product development In the companys own R&D, either original products, new products, improved products ,product modifications, and new brands.

New products suffer from high failure rates. Several reasons account for failure.

Causes of New Product Failures

Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions

To create successful new products, the company must:

understand its customers, markets and competitors develop products that deliver superior value to customers.

New Product Development Process:

Idea Generation and Idea Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization
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Stage 1: Idea Generation

Its the systematic search for new-product ideas. New-product development starts with ideageneration- a company has to generate many ideas in order to find the most efficient. Company idea generation can be obtained from internal sources within the company: scientists, engineers, company executives, and also external sources: customers, competitors, distributors, suppliers and others.
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 Good new-product ideas can also come from watching, observing and listening to customers.
Competitors companies can watch other companys ads and other communications to get clues about the new products - Companies can buy competing products, take them apart, and collect ideas of how they can produce their own.

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Stage 2: Idea Screening

The purpose of idea generation is to create a large number of ideas. The purpose of idea screening is to reduce this number by identifying good ideas and drop poor ones .

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 Many company will require the company executive to provide input into the new-product idea including: the product features, target market , the competitors

The committee also make rough estimates of market size, product price, development time and costs, manufacturing costs, and rate of return.
The committee to evaluate idea against a set of general criteria.
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Stage 3: Concept Development & Testing

An attractive idea must be developed into a product concept. Definitions: Product idea, Product concept, Product image. - Product Idea An idea for a 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 consumer perceive an actual or potential product.

Stage 4: Marketing Strategy Development

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

Stage 5: Business Analysis

Business Analysis - involves review of the sales, costs, and profit projections for the new product If the new-product satisfy the companys objectives, product can be moved to the product-development stage.

Stage 6: Product Development

Product Development At this stage the R&D or engineering develops the product concepts into a physical product in order to assure that the product idea can be turned into a workable product.

The R&D will develop one or more physical versions of the product concept

 It will also ensure to design a prototype that satisfy and excite consumers , produced quickly and at budgeted costs. Developing product can take days, weeks, months or even years on certain products. Often products undergo rigorous functional tests to ensure that products, perform safely and effectively.

Stage 7: Test Marketing

Test Marketing After passing through functional and consumer tests the next step is test-marketing Definition The stage of new-product development in which the product and marketing program are tested in more realistic market settings Test marketing give the marketer experience with marketing the product before going to the expense of full introduction.

 The product is tested on : positioning strategy, advertising, distribution, pricing, branding and packaging and budget levels. The amount of tests varies with each new product.

Stage 8: Commercialization
Introducing the new-product into the market. It involves high costs- Launching of a new product involves introduction timing. It can be delayed if economy is down or have an impact on other sales and etc. Location which location is best to launch the product e.g. single location, a region, national market, or international market.

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PRODUCT LIFE-CYCLE STRATEGIES

Product Life-Cycle Strategies

The Typical Product Life Cycle (PLC) Has Five Stages
Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle:
Fads Styles Fashions

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Product Life-Cycle Strategies

PLC Stages
Product development Introduction Growth Maturity Decline

Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative
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Product Life-Cycle Strategies

PLC Stages
Product development Introduction Growth Maturity Decline
Low sales High cost per customer acquired Negative profits Innovators are targeted

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Marketing Strategies: Introduction Stage

Product Offer a basic product Price Use cost-plus basis to set Distribution Build selective distribution Advertising Build awareness among early adopters and dealers/resellers Sales Promotion Heavy expenditures to create trial
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Product Life-Cycle Strategies

PLC Stages
Product development Introduction Growth Maturity Decline
Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted Growing competition
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Marketing Strategies: Growth Stage

Product Offer product extensions, service, warranty Price Penetration pricing Distribution Build intensive distribution Advertising Build awareness and interest in the mass market Sales Promotion Reduce expenditures to take advantage of consumer demand
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Product Life-Cycle Strategies

PLC Stages
Product development Introduction Growth Maturity Decline

Sales peak Low cost per customer High profits Middle majority are targeted Competition begins to decline
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Marketing Strategies: Maturity Stage

Product Diversify brand and models Price Set to match or beat competition Distribution Build more intensive distribution Advertising Stress brand differences and benefits Sales Promotion Increase to encourage brand switching
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Product Life-Cycle Strategies

PLC Stages
Product development Introduction Growth Maturity Decline

Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition

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Marketing Strategies: Decline Stage

Product Phase out weak items Price Cut price Distribution Use selective distribution: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyalists Sales Promotion Reduce to minimal level
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