New-Product Development and Product Life-Cycle Strategies PDF

Chapter 6 New-Product Development and Product Life-Cycle Strategies Objectives ◼ Explain how companies find and develop new-product ideas. ◼ List and define the steps in the new-product development process. ◼ Describe the stages of the product life cycle. ◼ Describe how marketi...

Chapter 6 New-Product Development and Product Life-Cycle Strategies Objectives ◼ Explain how companies find and develop new-product ideas. ◼ List and define the steps in the new-product development process. ◼ Describe the stages of the product life cycle. ◼ Describe how marketing strategies change during the product’s life cycle.  Case Example Focus on Innovation Corporate Results ◼ Adopts a culture of ◼ Annual sales of $36 billion continuous innovation across 130 countries “renewal” ◼ Global market share of ◼ Organizes into 38%, greater than that of autonomous units, which its nearest three rivals helps foster innovation combined ◼ Large R&D budget of $3 billion, with 40% of employees involved in R&D New-Product Development Strategy ◼ Strategies for obtaining new-product ideas: ❑ Acquisition of: ◼ companies, ◼ patents, ◼ licenses ❑ New product development, product improvements and modifications Nike acquired Converse in 2003 for $305 million Converse generated $2.35 billion in revenue in 2022 New-Product Failures ◼ Only 10% of new consumer products are still on the market and profitable after 3 years. ◼ Industrial products failure rate as high as 30%. ◼ Why do products fail? ❑ Overestimation of market size ❑ Design problems ❑ Incorrectly priced or advertised ❑ Pushed despite poor marketing research findings ❑ Development costs ❑ Competition Group Discussion ◼ Think of products you have seen in stores. Can you think of any that seems doomed to fail (or have already failed)? ◼ Why? Major Stages in New-Product Development ◼ Idea generation ◼ Idea screening ◼ Concept development and testing ◼ Marketing strategy development ◼ Business analysis ◼ Product development ◼ Test marketing ◼ Commercialization Idea Generation ◼ Internal sources: ❑ Company employees at all levels ◼ External sources: ❑ Customers ❑ Competitors ❑ Distributors ❑ Suppliers ❑ Outsourcing Idea Screening ◼ Process used to spot good ideas and drop poor ones. ❑ Executives provide a description of the product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return. ❑ Evaluated against a set of company criteria for new products. Concept Development and Testing ◼ Product Idea: ❑ idea for a possible product that the company can see itself offering. ◼ Product Concept: ❑ detailed version of the idea stated in meaningful consumer terms. ◼ Product Image: ❑ the way consumers perceive an actual or potential product.  Let’s Talk! Pair up with another student and assume that you are in charge of the concept testing for the product shown at right. What questions would you ask the consumers who are evaluating this product concept? ◼ Possible Questions: 1. How often would you use our products? 2. Which features are most valuable to you? 3. How would you compare our products to our competitors’? 4. What important features are we missing? 5. What are you trying to solve by using our product? 6. What other types of people could find our product useful? 7. How easy is it to use our product? 8. How would you rate the product value for money? 9. How likely are you to recommend this product to others? 10. How could we improve our product to better meet your needs?  Marketing Strategy Development ◼ Part One: ❑ Describes the target market, planned product positions, sales, market share, and profit goals. ◼ Part Two: ❑ Outlines the product’s planned price, distribution, and marketing budget. ◼ Part Three: ❑ Describes the long-run sales and profit goals, and marketing mix strategy. Four primary elements of a marketing mix strategy: product, price, placement, and promotion. Business Analysis ◼ Involves a review of the expected sales, costs, and profit projections to assess fit with company objectives. ◼ If results are positive, project moves to the product development phase. Product Development ◼ Develop concept into physical product. ◼ Calls for large jump in investment. ◼ Prototypes are made. ◼ Prototype must have correct physical features and convey psychological characteristics. Test Marketing ◼ Product and program introduced in more realistic market setting. ◼ Not needed for all products. ◼ Can be expensive and time consuming, but better than making major marketing mistake.  Commercialization ◼ Must decide on timing (i.e., when to introduce the product). ◼ Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally). ◼ Must develop a market rollout plan. Market rollout: introduction and integration of a new product or service to the market.