Principles of Marketing PDF

Principles of Marketing Nineteenth Edition, Global Edition Chapter 9 Developing New Products and Managing the Product Life Cycle Copyright © 2024 Pe...

Principles of Marketing Nineteenth Edition, Global Edition Chapter 9 Developing New Products and Managing the Product Life Cycle Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objectives 9.1 Explore how companies find and develop new product ideas. 9.2 Define the steps in the new product development process and the major considerations in managing this process. 9.3 Describe the stages of the product life cycle and how marketing strategies change during a product’s life cycle. 9.4 Discuss two additional product issues: socially responsible product decisions and international product and services marketing. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. GOOGLE (… er, Alphabet): The New ellipsis Product Moonshot Factory Alphabet is the New Product Moonshot Factory. Google’s new product development process moves quickly and has unleashed diverse new products. Innovation is more than a process at Google; it is part of the company’s DNA. “Where does innovation happen at Google? It happens everywhere.” Google and parent company Alphabet are wildly innovative. The company’s innovation machine is renowned for producing new product “moon shots,” futuristic long shots that, if successful, will profoundly change how people live. VovanIvanovich/Shutterstock Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objective 1 By one estimate, of the more than 30,000 new products introduced every year, 95 percent fail (Kotler et. al, 2024). Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objective 1 Explore how companies find and develop new product ideas. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Strategy Ways to Obtain New Products Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product. New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objective 2 Define the steps in the new product development process and the major considerations in managing this process. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (1 of 17) Figure 9.1 Major Stages in New Product Development Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (2 of 17) Idea Generation Idea generation is the systematic search for new product ideas. Sources of new product ideas Internal External Internal new product ideas: To encourage continued internal innovation, Google set up Area 120, an in-house innovation incubator that lets selected employees devote full time to their dream projects. Hero Images Inc./Alamy Stock Photo Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (3 of 17) Idea Generation Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs. External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms. Using technology to generate ideas: Delfast uses high-tech software platforms to find and evaluate new electric bicycle design prototypes, transforming itself from a parcel delivery service into a manufacturer of cutting- edge electric bicycles. Ivan Okyere-Boakye Photography/Alamy Stock Photo Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (4 of 17) Idea Generation Crowdsourcing involves inviting broad communities of people—customers, employees, independent scientists and researchers, and even the public at large—into the new product innovation process. Crowdsourcing: Food container giant Tupperware sponsored the Clever Container Challenge contest seeking ideas for integrating Internet of Things technologies into food containers for future smart kitchens. Tupperware Brands Corporation Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (5 of 17) Idea Screening Identify good ideas and drop poor ideas R-W-W screening framework: Is it real? Can we win? Is it worth doing? Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (6 of 17) Concept Development and Testing Product idea is an idea for a possible product that the company can see itself offering to the market. Product concept is a detailed version of the idea stated in meaningful consumer terms. Product image is the way consumers perceive an actual or potential product. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (7 of 17) Concept Development and Testing Concept testing refers to testing new product concepts with groups of target consumers. Concept development and testing: The striking HondaJet Elite has a range of 1,653 miles and a maximum speed of 486 miles per hour and can accommodate seven people including the crew. Honda Motor Company Ltd via Getty Images Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (8 of 17) Marketing Strategy Development Marketing strategy development is designing an initial marketing strategy for a new product based on the product concept. Marketing strategy statement consists of: Target market description Value proposition planned Sales, market-share, and marketing mix Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (9 of 17) Business Analysis Business analysis is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (10 of 17) Product Development Product development is developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering. Product testing: The Carhartt Crew community consists of “real [men and women] wearing and working in Carhartt” who help “shape the future of Carhartt products.” VI Images via Getty Images Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (11 of 17) Test Marketing Test marketing is the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings. Test marketing: To figure out if and how to best market its plant-based, meatless McPlant burger, McDonald’s spent more than three years test marketing the product. James Copeland/Alamy Stock Photo Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (12 of 17) Test Marketing Marketing Strategy Development When test marketing is likely – New product with large investment – Uncertainty about product or marketing program When test marketing is unlikely – Simple line extension – Copy of competitor product – Low costs – Management confidence Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (13 of 17) Commercialization Commercialization involves introducing a new product into the market. When to launch? Where to launch? Planned market rollout? Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (14 of 17) Successful new product development should be: Customer centered Team based Systematic Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (15 of 17) Customer-Centered New Product Development Customer-centered new product development focuses on finding new ways to solve customer problems and creating more customer-satisfying experiences. Customer-centered new product development: ASICS uses huge amounts of consumer input to develop new products and streamline customer experience. Uwe Deffner/Alamy Stock Photo Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (16 of 17) Team-Based New Product Development Team-based new product development involves various company departments working closely together, overlapping the steps in the product development process to save time and increase effectiveness. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. New Product Development Process (17 of 17) Systematic New Product Development Innovation management system – Creates an innovation-oriented company culture – Yields a large number of new product ideas New Product Development in Turbulent Times Tempted to reduce spending May become less competitive Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Discussion Question (1 of 2) What is systematic new product development? Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objective 3 Describe the stages of the product life cycle and how marketing strategies change during a product’s life cycle. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (1 of 10) Figure 9.2 Sales and Profits over the Product’s Life from Inception to Decline Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (2 of 10) Product development Zero sales and increasing investment costs Introduction Slow sales and nonexistent profits Growth Rapid market acceptance and increasing profits Maturity Slow sales growth and profits level off or decline Decline Sales fall off and profits drop Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (3 of 10) Introduction Stage Slow sales growth Little or no profit High distribution and promotion expenses Apple: Innovative to Its Core Avid Apple fans have crowned the brand as the keeper of all things cool. To keep that crown, Apple must rvlsoft/Shutterstock retain its new product innovation edge. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (4 of 10) Figure 9.3 Styles, Fashions, and Fads Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (5 of 10) Growth Stage Fads: Dubbed the “hula hoop of Gen Z,” fidget spinners took the Sales increase preteen and teen market by New competitors enter the storm. However, like most fads, market sales quickly fizzled as teens Profits increase moved on to the next new thing. Economies of scale Consumer education Lowering prices to attract more buyers 3Baboons/Shutterstock Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (6 of 10) Maturity Stage Slowdown in sales Many suppliers Substitute products Overcapacity leads to competition Increased promotion and R&D to support sales and profits Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (7 of 10) Maturity Stage Modification Strategies Modify the market Modify the product Modify the marketing mix Maturity stage: The Campbell’s Kitchen website and phone app offer meals and recipes to encourage greater usage of the brand’s soups and other products. Campbell Soup Company Meal planners can search for or exchange recipes, create their own personal recipe box, learn ways to eat healthier, and calculate meal costs. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (8 of 10) Decline Stage Maintain the product Harvest the product Drop the product Reinvigorating an iconic brand: As people shop and engage with brands differently in the greeting card industry, the venerable 111-year-old Hallmark brand is reimagining how it delivers modern digital experiences. © Hallmark, used under license Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (9 of 10) Table 9.2 Summary of Product Life-Cycle Characteristics, Objectives, and Strategies Blank Introduction Growth Maturity Decline Blank Blank Blank Blank Characteristics Sales Low sales Rapidly rising Peak sales Declining sales sales Costs High cost per Average cost per Low cost per Low cost per customer customer customer customer Profits Negative Rising profits High profits Declining profits Customers Innovators Early adopters Mainstream Lagging adopters adopters Competitors Few Growing number Stable number Declining number beginning to decline Blank Blank Blank Blank Marketing objectives Blank Create product Maximize market Maximize profit Reduce engagement and share while defending expenditure and trial market share milk the brand Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies (10 of 10) Table 9.2 Summary of Product Life-Cycle Characteristics, Objectives, and Strategies (continued) Blank Introduction Growth Maturity Decline Blank Blank Blank Blank Strategies Product Offer a basic product Offer product extensions, Diversify brand and Phase out weak service, and warranty models items Price Price based on value Price high enough to drive Price to match or beat Cut price delivered profits but low enough to competitors; increase penetrate market price based on innovation Distribution Build selective Build intensive distribution Build more intensive Go selective: distribution distribution phase out unprofitable outlets Advertising Build product Build interest in the mass Stress brand differences Reduce to level awareness among market; focus on and benefits needed to retain early adopters and communicating delivered hard-core loyals dealers value Sales Use heavy sales Reduce to take advantage Increase to encourage Reduce to minimal promotion promotion to entice of heavy consumer demand brand switching level trial Source: Based on Philip Kotler, Kevin Lane Keller, and Alexander Chernev Marketing Management, 16th ed. (Hoboken, NJ: Pearson Education, 2021), Chapter 17, Table 17.1. © 2021. Printed and electronically reproduced by permission of Pearson Education, Inc., Hoboken, New Jersey. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Learning Objective 4 Discuss two additional product issues: socially responsible product decisions and international product and services marketing. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Additional Product and Service Considerations (1 of 2) Product Decisions and Social Responsibility Public policy and regulations regarding developing and dropping products, patents, quality, safety, and product warranties should be considered carefully. Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Additional Product and Service Considerations (2 of 2) International Product and Service Marketing Determining what products and services to introduce in which countries Standardization versus customization Packaging and labeling Customs, values, laws Global product adaptation: By adapting its menu and operations to the needs and preferences of French consumers and their culture, McDonald’s has turned France into its second-most- profitable world market. ERIC PIERMONT/AFP/Getty Images Copyright © 2024 Pearson Education Ltd. All Rights Reserved. Discussion Question (2 of 2) What are the special challenges involved in international marketing? Copyright © 2024 Pearson Education Ltd. All Rights Reserved.