New Product Development and Product Life-Cycle Strategies PDF

# New Product Development and Product Life-Cycle Strategies ## By Md Tamhid Ul Islam ### MKT 202 ### (Chapter 9 from the book) ## New Product Development - Development of original products, product improvements, product modifications, or development of new brands through the firm's own R&D effort...

# New Product Development and Product Life-Cycle Strategies ## By Md Tamhid Ul Islam ### MKT 202 ### (Chapter 9 from the book) ## New Product Development - Development of original products, product improvements, product modifications, or development of new brands through the firm's own R&D efforts. ## Why should companies develop new products? 1. Current products of each company will eventually become obsolete as their sales volume and market share are reduced by changing consumer needs or superior competing products. 2. As a product ages, it may become less desirable, and therefore, its profits may decline. Offering a new product can be lifesaving. 3. Despite being the market leader, Grameen Phone is offering new packages to the people to attract and retain more customers than their competitors do. ## Product Development Stages - **Idea generation:** This process is focused on finding new product ideas. The goal is to gather as many good ideas as possible. - **Idea Screening:** This process helps identify good ideas and drop out the bad ones. - **Concept Development and Testing:** Testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal - **Marketing Strategy Development:** Designing an initial marketing strategy for a new product based on the product concept. There are three vital parts in marketing strategy: - **The first part** describes the target market, the planned value proposition, and the sales, market-share, and profit goals for the first couple of years. - **The second part** outlines the product's planned price, distribution, and marketing budget for the first year. - **The third part** describes the planned long-run sales, profit goals, and marketing mix strategy. - **Business Analysis** - Business analysis involves estimating the sales, costs, and profit for a new product to find out whether they satisfy the company's objectives. - If they do, the product can move to the product development stage. - **Product Development** - Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering. - R&D or engineering department develops the product concept into a physical product. - Often, products undergo rigorous tests to make sure that they perform safely and effectively or that consumers will find value in them. - **Test Marketing:** The stage of new product development in which the product and its proposed marketing program are tested in realistic market settings. - **Commercialization** - Introducing the new product into the market. - A company launching a new product must first decide on introduction timing. If the new product will eat into the sales of other company products, the introduction may be delayed. - Next, the company must decide where to launch the new product--in a single location, a region, the national market, or the international market. ## Product Life Cycle - **Introduction:** The PLC stage in which a new product is first distributed and made available for purchase. - *Low sales* - *High cost per customer acquired* - *Negative or very low profits* - Product: One or few products, basic product and relatively less variant - Price: Use cost-plus basis to set - Distribution: Selective distribution is suggested to see the market response as well as to keep the cost of operation low. - Promotion: Promotional activities are usually focused on building brand awareness among innovators, early adopter, and dealers/resellers. High promotional expenses. Sales promotion in the form of free samples. - **Growth:** The PLC stage in which a product's sales start climbing quickly. - *Rapidly rising sales* - *Average cost per customer* - *Rising profits* - *Early adapters continue to buy, and later buyers follow their lead* - *Growing competition* - Product: Offer product extensions, service, warranty - Price: Price remain same or decrease at the right time to attract more buyers (as unit manufacturing cost decrease) - Distribution: Build intensive distribution, enter new market - Promotion: Build awareness and interest in the mass market; also advertise to differentiate; less use of sales promotion is advised; personal selling to intermediaries. - **Maturity:** The PLC stage in which a product's sales growth slows or levels off. - *Sales peak* - *Low cost per customer* - *High profits* - *Competition begins to decline* - Product: Although many products in the mature stage appear to remain unchanged for long periods, most successful ones are actually evolving (changing quality, features, style, packaging etc.) to meet changing consumer needs. - Price: Set to match or beat competition - Distribution: Build more intensive distribution; find new market. - Promotion: Advertisements should focus on brand differences. Advertise to remind and differentiate. Uniqueness of the product is shown. Sales promotion such as discount/coupons can be effective. Direct marketing to loyal customers. - **Decline:** The PLC stage in which a product's sales fade away. - *Declining sales* - *Low cost per customer* - *Declining profits* - *Declining competition* - Product: Reduce the number of products in the line and try to innovate new ones. - Price: Lower the price to sell the remaining output - Distribution: Use selective distribution; phase out unprofitable outlets - Promotion: Reduce to the level needed to retain hard-core loyalists. Also, laggards are targeted. ## Examples Products That Are in Different Stages of Product Life Cycle | Stage | Examples | |----------------------|-------------------------------------------------------------------------| | **Introduction** | Online/mobile banking, Smart Android 4K TV, VR | | **Growth** | Online Food delivery services, E-mail system, Credit and debit cards, Super shop concept like Agora, PQS | | **Maturity** | Coca Cola/ Pepsi, Personal Computer, Public University | | **Decline** | Jute carpets Post office, Shishu park Black & white TV |