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2013 by Cengage Learning Inc. All Rights Reserved. 1
Lamb, Hair, McDaniel
Chapter 11
Developing
and Managing
Products
2013-2014
2013 by Cengage Learning Inc. All Rights Reserved. 2
Categories of New Products
New-to-the-World
New Product Lines
Product Line Additions
Improvements or Revisions
Repositioned Products
Lower-Priced Products
1
New to the World Innovations
(aka Discontinuous Innovations)

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New Product Lines

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Product Line Additions

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Improvements or Revisions

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Repositioned Products

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Lower Priced Products

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New Product Success Factors
Long-term commitment
Company-specific approach
Capitalize on experience
Establish an environment
2
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1. Each of the 7 stages acts as
a screen.

2. It helps to filter out
unworkable ideas
a plan that links the new-product
development process with the
objectives of the marketing
department, the business unit, and
the corporation.
2013 by Cengage Learning Inc. All Rights Reserved. 11
New-Product Strategy
2
Idea Generation
Customers: Internet chatter or blogs; customer
innovation centers
Employees: marketing, advertising and sales people
are involved in marketplace. E.g. iPlace
Distributors: closer proximity to end users e.g.
Rubbermaids Sidekick
Vendors: 7-Eleven forges partnerships e.g. Coca Cola
Slurpee and Kwik-e-Mart
Competitors: monitoring competitors success
Research and Development: basic research,
applied research, product development and product
modification e.g. Nike Flyknit, Speedo Sharkskin
Consultants: external perspective to evaluate brand
or companys internal capacities

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Approaches for New Product
Development
Brainstorming
Focus Group
The process of getting a group to
think of unlimited ways to vary a
product or solve a problem.
The objective of focus group
interviews is to stimulate insightful
comments through group
interaction.
2
Idea Screening
Eliminates ideas that are inconsistent with the organizations
new product strategy or are obviously inappropriate for some
other reason.

Concept test evaluates new product ideas, usually before any
prototype has been created.

Good for testing line extension but not new products that
require major changes in consumer behaviour.
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Business Analysis
Preliminary figures for demand, cost, sales and
profitability are calculated.

The newness of the product, size of the market, nature of
the competition all affect the accuracy of revenue
projections

Important to understand economic trends and impact on
sales for product categories that are sensitive to
fluctuations in the business cycle.

Understanding of market potential to understand cost
increases

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Development
Marketing strategy product packaging, branding,
labelling etc.
A tedious and time consuming process
Crest Toothpaste, Polaroid, Gillette, Dupont

Simultaneous Product Development
Shorten development process and reduce cost
Cross functional teams and global R&D
Threadless and RYZ online voting competitions
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Test Marketing
Limited introduction of a product and a marketing program to
determine the reactions of potential customers in a market
situation

Evaluate alternative strategies and to assess how well various
aspects of the marketing mix fit together

Identify cities where demographics and purchasing habits
mirror the overall market

Isolation of media from test markets to avoid attracting
consumers outside the market

Risks of costly failures and exposure to competitors

Freebies and samples testing

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Commercialization
The decision to market the product

Success depends on good match between the product and
market needs

Successful new products deliver a meaningful and perceivable
benefit to a sizable number of people or organizations

Success stories depend on:
1. A history of listening carefully to customers
2. An obsession with producing the best product possible
3. A vision of what the market will be like in the future
4. Strong leadership
5. A commitment to new-product development
6. A project-based team approach to new-product development
7. Getting every aspect of the product development process right
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Global Marketing Questions
Develop product for potential
worldwide distribution

Modify for unique market
requirements (e.g. customization)

Design products to meet regulations
and key market requirements
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3
The process by which the
adoption of an innovation
spreads.
Diffusion
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4
Laggards
Late Majority
Early Majority
Early Adopters
Innovators
Categories of Adopters Categories of Adopters
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4
Trialability
Observability
Relative Advantage
Compatibility
Complexity
Product Characteristics and
the Rate of Adoption
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4
Complexity
The degree of difficulty involved in understanding
and using a new product. The more complex the
product, the slower is its diffusion.
Compatibility
The degree to which the new product is
consistent with existing values and product
knowledge, past experiences, and current needs.
Incompatible products diffuse more slowly than
compatible products.
Relative advantage
The degree to which a product is perceived as
superior to existing substitutes.
Observability
The degree to which the benefits or other results
of using the product can be observed by others
and communicated to target customers. For
instance, fashion items and automobiles are highly
visible and more observable than personal care
items.
Trialability
The degree to which a product can be tried on a
limited basis. It is much easier to try a new
toothpaste or breakfast cereal than a new
automobile or computer.
Direct from
Marketer
Word of Mouth
Communication
Aids the
Diffusion Process
Marketing Implications of the
Adoption Process
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4
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The Product Life Cycle
The purpose of PLC
The PLC traces the stages of a products
acceptance from introduction to decline
Can be used to analyze a brand, a product form,
or a product category
Product categories have the longest lifecycle
(e.g. all brands that satisfy a particular type of need)

Grocery brands tend to have long PLCs

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Introductory Stage
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High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits with slow sales increases
Promotion focuses on awareness and
information
Communication challenge is to stimulate
primary demand
5
Growth Stage
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Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the
differences between brands
Wider distribution
5
Maturity Stage
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Sales increase at a decreasing rate
Saturated markets
Annual models appear
Lengthened product lines
Service and repair assume important roles
Heavy promotions to consumers and
dealers
Marginal competitors drop out
Niche marketers emerge
5
Decline Stage
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Long-run drop in sales
Dependent on changes in taste or
speed of adoption of substitution
products
Large inventories of
unsold items
Elimination of all nonessential
marketing expenses
Organized abandonment
5
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Conclusions on PLC
The PLC can sometimes REPEAT
E.g. classic pieces
Nylon
For hosiery
Wartimes for parachutes, mosquito netting, etc
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