Principles of Marketing- New Product Development

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Product Management / New Product

Prof. Rushen Chahal

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Learning contents

1. Understand and describe the product life
   cycle concept
2. Appreciate the market evolution conditions
3. Describe about the approaches of product
4. Understand and describe the new product
   development process

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        1. The product lifecycle (PLC)

Product lifecycle concept:- an analytical tool
to assess the life span of a product class or
product form or service.

   Product class – another name for product
    category, e.g. clothes, toilet accessories

   Product form – a product’s name or structure
    or type, e.g. jeans, mouthwash

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1. The product lifecycle (PLC)

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a. Stage1 – Pre-launch phase

•   During product development, sales are zero
    and the company's investment costs mount.

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

•   Much money is needed to attract distributors
    and build their inventories.

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        b. Stage 2 - The introduction phase

•   Priority is to generate awareness of the
    product among the target segments and to
    stimulate product trial

•   Need to gain strong distribution networks to
    build demand

•   Need a unique       selling   point            to   beat

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        c. Stage 3 - The growth phase

•   There is for a rapid increase in trial and

•   Need to build as much brand preference and
    loyalty as possible.

•   Profits hopefully will rise rapidly during this

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          d. Stage 4 - The mature phase

•   The product achieves as much as it is going

•   Heavy price competition and increased
    marketing expenditure may be required to
    retain brand loyalty.

•   Distribution channels    may need careful
    handling during this phase.

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        e. Stage 5- The decline phase

•   Once a product goes into decline for market
    based reasons, it is almost impossible to stop it.

•   Decline can be as a result of a number of
    reasons, e.g. environmental or technological
    issues or poor management.

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     2. Market evolution

  Three components are involved in
  market evolution:
a. The diffusion of innovation (customers
  adopt new products)
b. The evolution and acceptance of
c. The impact of competition.

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    2. Market evolution

a. The diffusion of innovation.
    Innovators – first movers; buy and adopt specific
     categories early
    Early adopters – enters early and generates trial to
     mass market
    Early majority – mass market starts to build up; but
     wait for best price before adopting
    Late majority – less interested; wait and see
    Late adopters / laggards – little interest and averse
     to changes
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     2. Market evolution

b. Acceptance of technology.
•   Technological innovation can be used
    to extend the product lifecycle by
    helping to refresh and update a
•   Technological innovation can also
    shorten a lifecycle by rendering a
    product obsolete.

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      2. Market evolution

c. The impact of competition
    Competitors       can   be    classified
    according to their timing in entering a
    market, e.g.:
•   Pioneers.
•   Early imitators.
•   Early differentiators.
•   Early nichers.
•   Late entrants.
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    3. Positioning products

     There are 3 main areas for repositioning and
     product improvement:

•    Quality - reliability, durability, dependability,
     speed, taste, colour, price, packaging, etc.
•    Design - appearance, texture, taste, smell
     feel or sound, etc.
•    Performance – convenience,                    ease   of
     handling, efficient.

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3. Positioning products



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4. New-Product Development Process

 1.   Idea generation
 2.   Idea screening
 3.   Concept development and testing
 4.   Business analysis
 5.   Product development
 6.   Test marketing
 7.   Commercialization

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4. New-Product Development Process

1. Idea Generation

Internal sources refer to the company’s own
formal     research     and     development,
management and staff

External sources refer to sources outside the
company such as customers, competitors,
distributors, suppliers, and licensing

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     4. New-Product Development Process

     2. Idea Screening
     Idea screening:- refers to reviewing new-
     product ideas in order to drop poor ones as
     soon as possible

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4. New-Product Development Process

3. Concept Development and Testing

  Product idea:- an idea for a possible
  product that the company can see itself
  offering to the market
  Product concept:- a detailed version of the
  idea stated in meaningful consumer terms
  Product image:- the way consumers
  perceive an actual or potential product
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4. New-Product Development Process

4. Business Analysis

   Business analysis involves a review of the
   sales, costs, and profit projections to find
   out whether they satisfy the company’s

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4. New-Product Development Process

5. Product development

  Product development involves the creating
  a prototype
  - testing by the R&D or field/engineering
  departments.   Requires   an      increase             in

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4. New-Product Development Process
6. Test marketing

    Test marketing is the stage at which the
    product and marketing program are
    introduced into more realistic marketing

•   Standard Test – market audit (long time)
•   Controlled Test – using a research firm to
    test several locations or shops

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4. New-Product Development Process

7. Commercialization

    Commercialization is the introduction of the
    new product
•   When to launch
•   Where to launch
•   Planned market rollout

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