CH 10

Developing and Managing Products
10
chapter
Prepared by Deborah Baker Texas Christian University

2002 South-Western 1
Chapter 10 Version 6e
Learning Objectives
1. Explain the importance of developing new products and describe the six categories of new products.
10
chapter
2. Explain the steps in the new-product development process.

3. Explain why some products succeed and others fail.
Learning Objectives (continued)

4. Discuss global issues in new-product development.
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5. Explain the diffusion process through which new products are adopted. 6. Explain the concept of product life cycles.
chapter
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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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Categories of New Products
New-To-The-World New Product Lines
Six Categories of New Products
Product Line Additions Improvements/Revisions Repositioned Products
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Lower-Priced Products 6
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Learning Objective
Explain the steps in the new-product development process.
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Successful 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

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 organizations 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
Preliminary Demand Considerations in Business Analysis Stage Cost
Sales
Profitability
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Development
Creation of prototype
Marketing strategy Technical production 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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Choosing a Test Market
Similar to planned distribution Relative isolation and free of influences Advertising availability; multiple media Diversified cross section No atypical purchase habits Representative population/income Not overly used or easily jammed Year-round sales stability Available research/audit and retailers
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Alternatives to Test Marketing
Single-source research using supermarket scanner data Simulated (laboratory) market testing
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2
Commercialization
Production
Inventory Buildup Distribution Shipments Sales Training
Steps in Marketing a New Product

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 South-Western Chapter 10 Version 6e 2002
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3
Success Factors
Factors in Successful New Products
Match between product and market needs
Benefit to large number of people
Unique but superior product

3
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
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
Categories of Adopters
Percentage of Adopters
Early Innovators Adopters 2.5% 13.5%

Early Majority 34%
Late Majority 34%
Laggards 16%
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Time
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Product Characteristics and the Rate of Adoption

Complexity
Compatibility Product Characteristics Predict Rate of Adoption Relative Advantage Observability
Trialability
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 products acceptance, from its introduction (birth) to its decline (death).
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Product Life Cycle
Introductory Growth Stage Stage Maturity Stage Decline Stage Product Category Sales
Dollars
Product Category Profits
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Time
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Extending the PLC
Change product
Change product use Change product image
Change product positioning

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Introductory Stage

Full-Scale Launch 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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Growth Stage
Offered in more sizes, Increasing rate of sales flavors, options
Entrance of competitors 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 Declining sales growth products are in Maturity 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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Decline Stage
Rate of decline depends on change in tastes or adoption of substitute products
Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses
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Marketing Strategies for PLC
INTRODUCTION 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.
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Limited Expanded Wholesale/ dealers. Longretail distributors term relations
Promotion Strategy Pricing Strategy
Awareness. Aggressive ads. Advertise. Stimulate Stimulate Promote heavily demand.Sampling demand Higher/recoup development costs Fall as result of competition & efficient production.
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Prices fall (usually).
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Diffusion Process and PLC Curve
Introduction
Growth
Maturity
Decline
Sales
Product life cycle curve

Early majority Late majority Early adopters
Innovators
Laggards
Diffusion curve

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Developing and Managing Products

Prepared by Deborah Baker Texas Christian University

2. Explain the steps in the new-product development process.

Learning Objectives (continued)

Six Categories of New Products

Product Line Additions Improvements/Revisions Repositioned Products

Successful New-Product Development Process

New Product Strategy

New Product Success Factors

New-Product Development Process

Sources of New-Product Ideas

R&D Consultants Creative Thinking

usually before any prototype has

Simultaneous Product Development

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

Steps in Marketing a New Product

Trade Announcements Customer Advertising

Poor match between features and customer desires

Match between product and market needs

Benefit to large number of people

Unique but superior product

The process by which the adoption of an innovation spreads.

Early Innovators Adopters 2.5% 13.5%

Early Majority 34%

Late Majority 34%

Product Characteristics and the Rate of Adoption

Marketing Implications of the Adoption Process

Direct from Marketer

Explain the concept of product life cycles.

Product Category Profits

Change product positioning

Product Strategy Distribution Strategy

Limited models Frequent changes

More models Frequent changes.

Limited Expanded Wholesale/ dealers. Longretail distributors term relations

Promotion Strategy Pricing Strategy

Prices fall (usually).

Product life cycle curve

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