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New Product Development and Product Life-Cycle Strategies

Chapter 11 PowerPoint slides Express version

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Principles of Marketing, Sixth Canadian Edition

Learning Objectives
After studying this chapter, you should be able to:
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Explain how companies find and develop new-product ideas List and define the steps in the new-product development process

Describe the stages of the product life cycle Describe how marketing strategies change during the products life cycle

Principles of Marketing, Sixth Canadian Edition

Major Stages in New Product Development


Idea generation: systematic search for new ideas
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Internal sources: brainstorming External sources: customers, competitors, distributors and suppliers

Figure 11.1

Idea screening: identify


good ideas and drop poor ones Usefulness to consumers Good for company Fit with objectives and strategies Have the resources Add value

Principles of Marketing, Sixth Canadian Edition

Major Stages in New Product Development


Concept development: detailed version of the
product concept in meaningful consumer terms
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Concept testing: testing new-product concepts for


consumer appeal

Figure 11.1

Marketing strategy: initial


strategy for product concept: Target market, positioning, and sales, market share, and profit goals Price, distribution, and marketing budget Strategy statement, long-run sales, profit goals, and marketing mix Principles of Marketing, Sixth Canadian Edition

Major Stages in New Product Development


Business analysis: review of sales, costs, and profit
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projections to determine if they meet company objectives.

Product development:
developing the product concept into a physical product Large investment Building a prototype Testing for safety, durability, and acceptability

Figure 11.1

Principles of Marketing, Sixth Canadian Edition

Major Stages in New Product Development


Test marketing: testing the product in more
realistic market settings Determine the target market profile Assess consumer acceptability, trial, repeat purchase rate Evaluate trade reception and distribution penetration Design effective media plans Standard test markets Controlled test markets Simulated test market
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Figure 11.1

Principles of Marketing, Sixth Canadian Edition

Major Stages in New Product Development


Commercialization: introducing a new product
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into the market Introduction timing Market rollout or full-scale introduction

Figure 11.1

Sequential product development Simultaneous (teambased) product development

Principles of Marketing, Sixth Canadian Edition

Product Life-Cycle Strategies


Product life cycle (PLC): the course of a products
sales and profits over its life

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Figure 11.2
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Principles of Marketing, Sixth Canadian Edition

Styles, Fashions, and Fads


Style: basic and distinctive mode of expression Fashion: currently accepted or popular style in a
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given field

Fad: a fashion the enters quickly, adopted with great


zeal, peaks early, and decline very fast
Figure 11.3

Principles of Marketing, Sixth Canadian Edition

Summary of PLC (Table 11.2)


Characteristics:
Sales Costs Profits Customers Competitors

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Introduction
Low High cost per customer Negative Innovators Few

Growth
Rapidly rising sales Average cost per customer Rising profits Early adopters Growing number

Maturity
Peak Low cost per customer High profits Middle majority Stable number

Decline
Declining sales Low cost per customer Declining profits Laggards Declining number

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Marketing objectives:
Create product awareness and trial Maximize market share Maximize profit & defend market share Reduce expenditure & milk brand

Strategies:
Product Price Distribution Advertising Sales promotion Offer basic product Use cost-plus Build selective distribution Build awareness early adopters/dealers Heavy sales promotion to entice trial Offer product extensions, service Price to penetrate market Build intensive distribution Build awareness & interest mass market Reduce promotion due to heavy demand Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits Increase to encourage brand switching Phase out weak items Cut price

Selective; phase out unprofitable outlets Reduce to level needed to retain hard-core loyal Reduce to minimal level

Source: Philip Kotler and Peggy Cunningham, Marketing Management: Analysis, Planning, Implementation, and Control, Canadian 11th Edition, Pearson Education Canada, Toronto, Ontario, 2004, p. 347

Principles of Marketing, Sixth Canadian Edition

In Conclusion
The learning objectives for this chapter were:
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Explain how companies find and develop new-product ideas List and define the steps in the new-product development process Describe the stages of the product life cycle Describe how marketing strategies change during the products life cycle

Principles of Marketing, Sixth Canadian Edition

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