Marketing Chapter 8: Product Development

Chapter 8: Developing New Products and Managing the Product Life Cycle

• Google, a globally renowned company, is known for continuous innovation.
• Google initially focused on organizing the world's information via online search, with a 94% market share in mobile search.
• Google expanded beyond search to other markets, leveraging its core information mission (e.g., Gmail, Google Maps, Google Docs, Google Photos, Google Cloud, Chrome).
• Google acquired companies to enter new markets (e.g., Nest Labs, Waze).
• Alphabet (Google's parent company) was created to encompass diverse projects like self-driving cars (Waymo) and health technology (Verily).
• Alphabet's X Lab focuses on addressing global issues with groundbreaking technologies (e.g., Waymo, Verily, Wing, Everyday Robot Project).

I - New Product Development Strategy

• New product development encompasses original products, improvements, modifications, and new brands developed internally.
• Companies acquire new products through purchase (acquisitions) or licensing.
• New products are crucial for customer satisfaction and company growth.
• A significant challenge in new product development is the high failure rate of approximately 95% of new products.
• Common reasons for product failure include overestimation of market size, poor design, improper positioning, wrong price points, poor advertising, and internal company biases.
• Understanding customer needs, markets, and competitors is key to successful new product development.
• Prioritizing products that deliver superior value is essential.

II - The New Product Development Process

• Idea generation is the systematic process of identifying new product concepts.
• Internal sources of ideas include R&D departments and employee contributions (intrapreneurship, hackathons).
• External sources of ideas include distributors, suppliers, competitors, and customers (crowdsourcing).
• Companies use idea screening to narrow down ideas based on factors like customer value, potential market size, development time, and profitability.
• The next phase is concept development, involving a detailed description of the product idea in consumer-friendly terms.
• This is followed by concept testing with potential customers to assess their receptiveness.

III - Marketing Strategy Development

• The marketing strategy outlines the launch plan and involves pricing, distribution, and marketing.
• The plan includes target markets, value propositions, sales, market share, and profit goals for initial years.
• A marketing plan considers product price, distribution strategy, and the initial budget.
• The plan also addresses long-term sales and profits.

IV - Business Analysis, Product Development, and Test Marketing

• Business analysis evaluates the financial viability of the product based on sales projections, costs, and profit projections.
• Product development ensures production of a viable product prototype (satisfies customer needs and cost objectives)
• Test marketing is the process of testing the product in the market prior to launch in order to gain insights.

V - Commercialization

• Commercialization involves officially launching the product and scaling marketing efforts.
• The timing and target market (geographic strategy) are vital components to successful launch.
• Successful new product development requires a customer-centered, collaborative, and systematic approach.

VI - Product Life Cycle (PLC)

• The product life cycle (PLC) illustrates the trajectory of product sales and profitability over time. Common stages are introduction, growth, maturity, and decline.
• Product life cycles can be classified by style (e.g., clothing), fashion (e.g., business casual attire), or fad (e.g., fidget spinners).
• Strategies tailored to each stage of the product life cycle are critical for success, including maintaining, harvesting, or discontinuing the product entirely.
• Declining products can demand different approaches and considerations, impacting the company's reputation and requiring resource allocation decisions to maximize return.

VII - Product Decisions & Social Responsibility, & International Product Marketing

• Companies must consider product decision implications relating to social and ethical components.
• Decisions about acquiring or dropping products due to competition considerations.
• Patent protection and quality considerations, specifically the Federal Food, Drug, and Cosmetic Act, and the Consumer Product Safety Commission are relevant to product design considerations in the U.S.
• International product marketing involves adopting products to specific market preferences (adaptation) or maintaining an identical standardized product for different markets.