2. TOPICS TO BE COVERED IN
THIS LECTURE
Explain how companies find and develop new-
product ideas.
2. List and define the steps in the new-product
development process and the major
considerations in managing this process.
3. Describe the stages of the product life cycle
and how marketing strategies change during
the product’s life cycle.
5. Discuss two additional product and services
issues: socially responsible product decisions
and international product and services
marketing.
3. NEW-PRODUCT DEVELOPMENT
STRATEGY
A firm can obtain new products in two ways.
1. Acquisition—by buying a whole company, a
patent, or a license to produce someone
else’s product.
2. New-product development efforts.
* There are a number of reasons new products
may fail.
4. Product life cycle
I. Product have limited life
II. Product sales pass through distinct
stages, each posing different
challenges, opportunities, and
problems to seller.
III. Profits rise and fall at different stages
of the product life cycle.
IV. Products require different marketing,
financial, manufacturing, purchasing,
and human resource strategies in each
life cycle stage.
5. Characteristics of the Product
life cycle
Stages Introduction Growth Maturity Decline
1. Sales Low Sales Rapidly
Increasing Sales
Peak Sales Declining Sales
2. Costs High cost per
customer
Average cost per
customer
Low cost per
customer
Low cost per
customer
3. Profits Negative More Profit High Profit Declining Profit
4. Customer Innovators Early Adopters Early Majority +
Late Majority
Laggards
5. Competitor
Few More in number Stable number,
beginning to
decline
Declining
numbers.
7. Characteristics of Introductory stages
of Product life cycle
Higher investment, lesser profits
Minimal Competition
Company tries to Induce acceptance and gain
initial distribution
Company needs Promotions targeted
towards customers to increase awareness and
demand for product
Company needs Promotions targeted
towards channel to increase confidence in the
product
8. Characteristics of Growth stage of
Product life cycle
Product is successfully launched
Demand increases
Distribution increases
Competition intensifies
Company might introduce secondary
products or support services.
Better revenue generation and ROI
9. Characteristics of Maturity stages of
Product life cycle
Competition is high
Product is established and promotion
expenditures are less
Little growth potential for the product
Penetration pricing, and lower profit
margins
The major focus is towards extending the
life cycle and maintaining market share
Converting customers product to your
own is a major challenge in maturity
stage
10. Characteristics of Decline stages of
Product life cycle
Market is saturated
Sales and profits decline
Company becomes cost conscious
A lot of resources are blocked in rejuvenating the
dead product.
There are only three options left with the
company
◦ Re positioning or Rebranding of the product to extend
product life cycle
◦ Maintain the product as it is and reduce costs to get
maximum profits till the product can produce profits
◦ Take the product off the market.
11. Strategies of Product life Cycle
Stages Introduction Growth Maturity Decline
1. Product
Offer basic
product
Offer product
extension,
service,
warranty
Diversify brands
/ models
Phase out weak
products
2. Price
Change cost + Price to
penetrate
market
Price to match
better
competition
Cut price
3. Distribution
Build selective
distribution
Build intensive
distribution
Build more
intensive
distribution
Selective phase
out of
unprofitable unit
4. Advertising
Build product
awareness
among early
adopters and
dealers
Build
awareness and
interest in mass
market
Stress on brand
difference and
benefits
Reduce to
retain hard core
loyal’s
5. Sales
Promotion
Use heavy
sales promotion
to induce trial
Reduce sales
promotion due
to increased
More sales
promotion to
encourage
Reduce to
minimum le
12. Product Life cycle
EXAMPLE of APPLE
The Ipad is a perfect example of
the product life cycle. For example,
currently, Apple faces fierce
competition from comparable
products. But recently, the iPad
was reintroduced with new
features and at a lower price.
“One of the iPhone’s most beloved
features is its ultrasharp retina display.
And while the iPad 2′s screen is no
lightweight, a bump up in pixel density is
one of the most hotly anticipated iPad 3
improvements. MacRumors claims to
have obtained an iPad 3 display that
confirms the bump in resolution. The
display is the same size as iPad 1 and 2
screens, but has double the resolution at
2048×1536 with pixels about a quarter
the size of the iPad 2′s.Android tablet
displays passed the iPad last summer,
and since then have moved into 1080p
territory, so it seems far fetched that
Apple would put off upgrading the iPad’s
screen another year.(Wagner, 2012)”
13. THE NEW-PRODUCT DEVELOPMENT PROCESS
Idea generation
New product development starts with idea generation. Idea generation is the systematic search for
new product ideas.
Major sources of new product ideas are-
Internal idea sources: formal research and development
External idea sources: distributors and suppliers, competitors & customers
Idea screening
Screening new product ideas in order to spot good ideas and drop poor ones as soon as possible.
Concept development and testing
A detailed version of the new product idea stated in meaningful consumer terms.
Testing new product concepts with a group of target consumers to find out if the concepts have
strong consumer appeal.
Marketing strategy
Designing an initial marketing strategy for a new product based on the product concept.
14. Business analysis
A review of sales, cost, and profit projections for a new product to find out whether
these factors satisfy the company’s objectives.
Product development
Developing the product concept into a physical product in order to ensure that the
product idea can be turned into workable product.
Market testing
The stage of new product development in which the product and marketing program
are tested in more realistic market settings.
In market testing system there are three approaches-
1. Standard test markets
2. Controlled test markets
3. Simulated test market
Commercialization
Introducing a new product into the market.
15. The three approaches to test marketing
are:
Standard test markets:
the company finds a small number of representative test
cities, conducts a full marketing campaign in these cities, and
uses store audits, consumer and distributor surveys, and other
measures to gauge product performance.
Controlled test markets:
several research firms keep controlled panels of stores that
have agreed to carry new products for a fee. The research
firms track individual consumer behavior for new products.
Simulated test markets:
the company or research firm shows ads and promotions for a
variety of products, including the new product being tested, to
a sample of consumers. It gives consumers a small amount of
money and invites them to a real or laboratory store where
they may keep the money or use it to buy items. The
researchers note how many consumers buy the new product
and competing brands.
16. MANAGING NEW-PRODUCT DEVELOPMENT
Customer-Centered New-Product Development:
solve customer problems and create more
customer-satisfying experiences. Good new-
product development also requires a total-company,
cross-functional effort.
Team-Based New-Product Development:
company departments work closely together in
cross-functional teams, overlapping the steps in the
product development process to save time and
increase effectiveness.
Team-Based New-Product Development:
1. It helps create an innovation-oriented company
culture.
2. It will yield a larger number of new-product ideas,
among which will be found some especially good
ones.
17. Product Decisions & Social
Responsibility
Marketers should consider public policy
issues and regulations regarding acquiring or
dropping products, patent protection, product
quality and safety, and product warranties.
Regarding new products, the government
may prevent companies from adding products
through acquisitions if the effect threatens to
lessen competition.
Manufacturers must comply with specific laws
regarding product quality and safety.
18. International Product and
Services Marketing
International product and service marketers
face special challenges.
They must figure out what products and
services to introduce and in which countries.
They must decide how much to standardize or
adapt their products and services for world
markets.
Packaging presents new challenges for
international marketers.
