LHM Chapter 10 7e by rajeevrainbow

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									Developing and Managing Products

Chapter 10

Prepared by Deborah Baker Texas Christian University
Chap. 10 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning 1

Learning Objectives
1. Explain the importance of developing new products and describe the six categories of new products. 2. Explain the steps in the new-product development process. 3. Explain why some products succeed and others fail.
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Learning Objectives (continued)
4. Discuss global issues in new-product development. 5. Explain the diffusion process through which new products are adopted. 6. Explain the concept of product life cycles.

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Learning Objective

Explain the importance of developing new products and describe the six categories of new products.
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New Product

A product new to the world, the market, the producer, the seller, or some combination of these.

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On Line http://www.newproductworks.com

New Product Introductions, 1964-2000

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Categories of New Products
New-To-The-World New Product Lines

Six Categories of New Products

Product Line Additions

Improvements/Revisions
Repositioned Products Lower-Priced Products 7

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Learning Objective

Explain the steps in the new-product development process.

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The New-Product Development Process
Long-Term Commitment

New Product Strategy

Capitalize on Experience

New Product Success Factors

Establish an Environment

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New-Product Development Process

New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization

New Product
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Idea Generation

Customers Employees Distributors Competitors

Sources of New-Product Ideas
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R&D

Consultants
Creative Thinking
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Brainstorming

The process of getting a group to think of unlimited ways to vary a product or solve a problem.

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Idea Screening
The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.
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Concept Test

A test to evaluate a new-product idea, usually before any prototype has been created.

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Business Analysis

Demand Considerations in Business Analysis Stage Cost

Sales Profitability

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Development

 Creation of prototype
 Marketing strategy  Packaging, branding, labeling  Manufacturing feasibility  Final government approvals if needed

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Simultaneous Product Development

A new team-oriented approach to new-product development.

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Test Marketing

The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

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Checklist for Selecting Test Markets

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Alternatives to Test Marketing
 Single-source research using supermarket scanner data  Simulated (laboratory) market testing

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Production Inventory Buildup

Commercialization

Distribution Shipments

Sales Training

Steps in Marketing a New Product
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Trade Announcements
Customer Advertising
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Learning Objective

Explain why some products succeed and others fail.

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Why New Products Fail
No discernible benefits Poor match between features and customer desires Overestimation of market size Incorrect positioning Price too high or too low Inadequate distribution Poor promotion Inferior product
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Success Factors

Factors in Successful New Products

Match between product and market needs Unique but superior product
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Benefit to large number of people

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Success Factors

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Learning Objective

Discuss global issues in new-product development.

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Global Issues

 Develop product for potential worldwide distribution
 Build in unique market requirements  Design products to meet regulations and key market requirements
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Learning Objective

Explain the diffusion process through which new products are adopted.

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Diffusion

The process by which the adoption of an innovation spreads.

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Categories of Adopters
Innovators Early Adopters Categories of Adopters in the Diffusion Process

Early Majority
Late Majority Laggards

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Diffusion of Three Familiar Products among U.S. Households

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Categories of Adopters
Percentage of Adopters
Early Innovators Adopters 2.5% 13.5%

Early Majority 34%

Late Majority 34%

Laggards 16%

Time
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Product Characteristics and the Rate of Adoption
Complexity Compatibility

Product Characteristics Predict Rate of Adoption

Relative Advantage Observability Trialability

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Marketing Implications of the Adoption Process
Word of Mouth Communication Aids the Diffusion Process

Direct from Marketer
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Learning Objective

Explain the concept of product life cycles.

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Product Life Cycle

A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

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Introductory Growth Stage Stage

Product Life Cycle
Maturity Stage Decline Stage Product Category Sales

Dollars

Product Category Profits 0

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Time

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Product Life Cycles for Styles, Fashions, and Fads

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Extending the PLC

 Change product
 Change product use  Change product image  Change product positioning
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Introductory Stage
High failure rates of New Products Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information  Intensive personal selling to channels
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Full-Scale Launch

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Growth Stage
Offered in more Increasing rate of sales sizes, Entrance of competitors flavors, options Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered
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Maturity Stage
Many consumer products are in Maturity Stage

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Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers  Marginal competitors drop out  Prices and profits fall  Niche marketers emerge
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6  Long-run drop in sales

Decline Stage

 Large inventories of unsold items
 Elimination of all nonessential marketing expenses
Rate of decline depends on change in tastes or adoption of substitute products
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INTRODUCTION

Marketing Strategies for PLC
GROWTH MATURITY DECLINE

Product Strategy Distribution Strategy

Limited models Frequent changes

More models Frequent changes.

Large number Eliminate of models. unprofitable models Extensive. Margins drop. Shelf space Phase out unprofitable outlets Phase out promotion Prices stabilize at low level.

Limited Expanded Wholesale/ dealers. Longretail distributors term relations Awareness. Aggressive ads. Stimulate Stimulate demand.Sampling demand Higher/recoup development costs Fall as result of competition & efficient production.

Promotion Strategy
Pricing Strategy

Advertise. Promote heavily
Prices fall (usually).

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Introduction

Diffusion Process and PLC Curve
Growth Maturity Decline

Sales

Product life cycle curve
Early majority

Late majority
Early adopters Innovators Laggards

Diffusion curve
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