9-1

Chapter 9
New Product Development
and
Product Life-Cycle Strategies
PRINCIPLES OF MARKETING

9-2
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.
9-3


New Product Development
Process
Idea Generation and Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
9-4
New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product
Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
9-5
Process to spot good ideas and drop
poor ones
Criteria
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return

New Product Development Process
Step 2. Idea Screening
9-6
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One
9-7
New Product Development Process
Step 4. Marketing Strategy Development
Part Two - Short-Term:
Products Planned Price
Distribution
Marketing Budget


Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy


Marketing Strategy Statement Formulation

Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share

9-8
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development

Business Analysis

Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives

If Yes, Move to
Product Development
If No, Eliminate
Product Concept
9-9
New Product Development Process
Step 7. Test Marketing


Standard
Test Market

Full marketing campaign
in a small number of
representative cities.



Simulated
Test Market

Test in a simulated
shopping environment
to a sample of
consumers.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
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Product Life Cycle
Time
Product
Develop-
ment

Introduction
Profits
Sales
Growth Maturity Decline
Losses/
Investments ($)
Sales and
Profits ($)
9-11
Introduction Stage of the
PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
Create product awareness
and trial
Offer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising
Build product awareness among
early adopters and dealers
9-12
Growth Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer product extensions,
service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising
Build awareness and interest in
the mass market
9-13
Maturity Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak sales
Low cost per customer
High profits
Maximize profit while defending
market share
Diversify brand and models
Price to match or best
competitors
Distribution Build more intensive distribution
Advertising
Stress brand differences and
benefits
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Decline Stage of the PLC
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits
Reduce expenditure and milk the
brand
Phase out weak items
Cut price
Distribution
Go selective: phase out
unprofitable outlets
Advertising
Reduce to level needed to retain
hard-core loyal customers