New-ProductDevelopmentandProductLife-CycleStrategiesChapter1010-1Objectives•Understandhowcompaniesfindanddevelopnew-productideas.•Learnthestepsinthenew-productdevelopmentprocess.•Knowthestagesoftheproductlifecycle.•Understandhowmarketingstrategieschangeduringtheproduct’slifecycle.10-2•$50billioninprofitsover27years•Earlynew-productdevelopmentreliedheavilyoncopyingthecompetition•$4.2billionannuallyinvestedinR&D•InnovationiscriticaltoMicrosoft’sfuturesuccess•MuchofR&DeffortsareInternetrelated•ManynewproductsandservicesareindevelopmentMicrosoftCaseStudy10-3Definition•NewProductDevelopmentDevelopmentoforiginalproducts,productimprovements,productmodifications,andnewbrandsthroughthefirm’sownR&Defforts.10-4•Newproductscanbeobtainedviaacquisitionordevelopment.•Newproductssufferfromhighfailurerates.•Severalreasonsaccountforfailure.NewProductDevelopmentStrategy10-5•NewProductDevelopmentProcess:Stage1:IdeaGenerationInternalideasources:–R&DExternalideasources:–Customers,competitors,distributors,suppliersNewProductDevelopmentStrategy10-6•NewProductDevelopmentProcess:Stage2:IdeaScreeningProductdevelopmentcostsincreasesubstantiallyinlaterstages.Ideasareevaluatedagainstcriteria;mostareeliminated.NewProductDevelopmentStrategy10-7•NewProductDevelopmentProcess:Stage3:ConceptDevelopmentandTestingProductconceptsprovidedetailedversionsofnewproductideas.Concepttestsasktargetconsumerstoevaluateproductconcepts.NewProductDevelopmentStrategy10-8•NewProductDevelopmentProcess:Stage4:MarketingStrategyDevelopmentStrategystatementsdescribe:–Thetargetmarket,productpositioning,andsales,share,andprofitgoalsforthefirstfewyears.–Productprice,distribution,andmarketingbudgetforthefirstyear.–Long-runsalesandprofitgoalsandthemarketingmixstrategy.NewProductDevelopmentStrategy10-9•NewProductDevelopmentProcess:Stage5:BusinessAnalysisSales,cost,andprofitprojectionsStage6:ProductDevelopmentPrototypedevelopmentandtestingNewProductDevelopmentStrategy10-10•NewProductDevelopmentProcess:Stage7:TestMarketingStandardtestmarketsControlledtestmarketsSimulatedtestmarketsStage8:CommercializationNewProductDevelopmentStrategy10-11•TheTypicalProductLifeCycle(PLC)HasFiveStagesProductDevelopment,Introduction,Growth,Maturity,DeclineNotallproductsfollowthiscycle:FadsStylesFashionsProductLife-CycleStrategies10-12•Theproductlifecycleconceptcanbeappliedtoa:Productclass(softdrinks)Productform(dietcolas)Brand(DietDr.Pepper)UsingthePLCtoforecastbrandperformanceortodevelopmarketingstrategiesisproblematicProductLife-CycleStrategies10-13ProductLife-CycleStrategies•Productdevelopment•Introduction•Growth•Maturity•Decline•Beginswhenthecompanydevelopsanew-productidea•Salesarezero•Investmentcostsarehigh•ProfitsarenegativePLCStages10-14ProductLife-CycleStrategies•Productdevelopment•Introduction•Growth•Maturity•Decline•Lowsales•Highcostpercustomeracquired•Negativeprofits•Innovatorsaretargeted•LittlecompetitionPLCStages10-15•Product–Offerabasicproduct•Price–Usecost-plusbasistoset•Distribution–Buildselectivedistribution•Advertising–Buildawarenessamongearlyadoptersanddealers/resellers•SalesPromotion–HeavyexpenditurestocreatetrialMarketingStrategies:IntroductionStage10-16ProductLife-CycleStrategies•Productdevelopment•Introduction•Growth•Maturity•Decline•Rapidlyrisingsales•Averagecostpercustomer•Risingprofits•Earlyadoptersaretargeted•GrowingcompetitionPLCStages10-17•Product–Offerproductextensions,service,warranty•Price–Penetrationpricing•Distribution–Buildintensivedistribution•Advertising–Buildawarenessandinterestinthemassmarket•SalesPromotion–ReduceexpenditurestotakeadvantageofconsumerdemandMarketingStrategies:GrowthStage10-18ProductLife-CycleStrategies•Productdevelopment•Introduction•Growth•Maturity•Decline•Salespeak•Lowcostpercustomer•Highprofits•Middlemajorityaretargeted•CompetitionbeginstodeclinePLCStages10-19•Product–Diversifybrandandmodels•Price–Settomatchorbeatcompetition•Distribution–Buildmoreintensivedistribution•Advertising–Stressbranddifferencesandbenefits•SalesPromotion–IncreasetoencouragebrandswitchingMarketingStrategies:MaturityStage10-20ProductLife-CycleStrategies•Productdevelopment•Introduction•Growth•Maturity•Decline•Decliningsales•Lowcostpercustomer•Decliningprofits•Laggardsaretargeted•DecliningcompetitionPLCStages10-21•Product–Phaseoutweakitems•Price–Cutprice•Distribution–Useselectivedistribution:phaseoutunprofitableoutlets•Advertising–Reducetolevelneededtoretainhard-coreloyalists•SalesPromotion–ReducetominimallevelMarketingStrategies:DeclineStage