2. Developing New Products
1. Must develop new products
2. Consumer needs
3. Source of growth for the company
4. Response to environment and technology
5. Every product is born, has its stages and
then dies
6. New Product Development strategies: 1.
acquisition 2. new product development
(original products, product improvements,
product modifications, new brands)
3. New Product Odds
Up to 90 % of new products meet failure
New Coke, Eagle Snacks, Zap Mail, Premier
“Smokeless” cigarettes, Arch Deluxe
Reasons:
Market overestimation
Actual product poorly designed
Incorrectly positioned
Wrong timing for launch
Price too high
Poor advertisement
4. Process
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization
5. Idea generation
New product development starts with idea generation
Finding good ideas difficult. Out of 3000 only 10 to 12
are accepted
Internal sources: R & D, brains of executives,
engineers, scientists, engineers, manufacturing staff,
and salespeople
3 M bootlegging rule
External: customers, LEGO train, competitors – good
source of new product ideas, distributors and
suppliers, trade magazines, shows, seminars, govt
agencies, new product consultants, ad agencies,
marketing research firms, inventors
6. Idea screening
Reducing the number of ideas
Picking good ones, drop bad ones
Workable and usable ideas are chosen for further
development
Profitability factor
Questions like:
Usefulness
Good for company or not
In line with co’s strategy
Value chain support
Competing goods
Distribution channels
7. Concept development & testing
Detailed version of the idea stated in meaningful
consumer terms
Daimler Chrysler
Fuel-cell-powered electric car
Concept 1: second friendly car
Concept 2: young people
Concept 3: environment friendly
Concept 4: high end SUV
Concept Testing: concept testing calls for testing new
product concepts with groups of target customers.
After being exposed to the concept, consumers than
may be asked to react to it by answering questions.
8.
9. Marketing strategy development
Target market
Product Positioning
Sales, market share and profit goals
Concept 3
Young
Colors, AC, price, advertisements
3 % of car market share
11. Product Development
After passing business test
Moves to product development
Physical shape give by R & D
Examples Gillette, Louis Vuitton
12. Test Marketing
Product introduced into more realistic market
setting
To gain experience before fully introducing
the product
Olay cosmetics
Redbox
13. Standard Test Markets
By making use of smaller number of
representative test cities to gauge
performance
Results used for national sales forecast
Competitors can monitor test results
Clorox bleach – P & G Tide with bleach
14. Controlled Test Markets
Panel stores
Tracking consumer behavior from television
to check counter
Observing consumer reaction to price, shelf
placement, in-store promotions
Reports generated
15. Simulated Test Markets
Testing new products in simulated shopping
environment
Some money is given to consumers to shop
New products
Competing products
After purchase follow up
16. Commercialization
Test marketing gives information
Decision to launch a product based on that
information
Costs will be incurred if a company decides to
launch the new product
Timing
Place
17. Product Life Cycle
Product launch – happy life
Cover costs
Earn profits
Length not know in advance
Coca-Cola, Gillette, Budweiser, American
Express, Wells-Fargo, and Tabasco
19. Introduction Stage
Product launch
Takes time
Slow growth
Negative profits
High promotion and distribution cost
20. Growth Stage
Product, if satisfies market, enters growth stage
Sales climb quickly
Early adopters continue, new join through favorable
word of mouth
New competitors enter market
Competition – increase in sale points
Spread of sales, unit cost reduces
Sustain rapid growth
New market segments
Prices may be lowered to attract more customers
(iPod)
21. Maturity
At some point sale slows down, product enters
maturity stage
Lasts longer
Marketing management most of the time deals with
mature products
More producers selling the same product
Greater competition
Prices down, increase in sales promotion
Drop in profit
Well established competitors stay
22. Maturity
Product manager should modify market,
product and marketing mix
Market: increase consumption of product,
new users, present users
Product: quality, features, style (milk pak,
Honda City)
Four Ps
23. Decline Stage
Eventually dip
Oat meal, VHS tapes, VCR, Tape recorders
Reasons: technology, consumer tastes, increased
competition, profits decline, withdrawal from market
Furthermore:
Weak product costly to firm
Management time
Price adjustments
Advertising/sales efforts
Reputation of other co products affected
Old Spice/ co can sell brands