Chapter 9: Developing New Products and Managing the Product Life Cycle
From “Principles of Marketing” — Kotler & Armstrong (17th Global Edition)
Exam-Ready Master Note
CHAPTER OVERVIEW
Products don’t last forever. Markets evolve. Technology changes. Customer needs shift.
This chapter covers two critical areas of marketing:
1. How companies develop new products (from idea to launch)
2. How they manage existing products throughout their life cycle
SECTION 1: The Importance of New Product Development
Why New Products Matter
• Drives growth, innovation, and competitiveness
• Enables differentiation in a saturated market
• Responds to changing consumer preferences
• Replaces outdated products in the decline stage
What is a New Product?
• New-to-the-world innovations (e.g. the first iPhone)
• Product improvements/modifications (e.g. iPhone 15)
• New lines or brand extensions (e.g. Coke Energy)
Many new products fail—up to 80% flop due to poor planning, market misjudgment, or bad execution.
SECTION 2: The New Product Development (NPD) Process
This is an 8-stage framework every company should follow. You must know these steps in order and in
depth.
Stage 1: Idea Generation
• Internal Sources: Employees, R&D, sales teams, executives
• External Sources: Customers, competitors, distributors, suppliers
• Crowdsourcing: Gathering ideas from large communities (e.g. LEGO Ideas)
Example: Lay’s “Do Us a Flavor” campaign crowdsourced chip flavors from fans.
Stage 2: Idea Screening
• Eliminate bad ideas early to save costs.
• Use R-W-W Framework:
o Real: Is there a real need and desire?
o Win: Can we win in the market?
o Worth doing: Is it worth the cost and effort?
This is where most ideas die.
Stage 3: Concept Development and Testing
• Develop product ideas into product concepts.
• A product concept is a detailed version in consumer terms.
• Conduct concept testing:
o Use focus groups, surveys, A/B testing
o See if customers understand the value, and would buy
Example: A car company tests 3 variations of an electric SUV concept with different positioning.
Stage 4: Marketing Strategy Development
• Develop an initial strategy covering:
1. Target market and value proposition
2. Sales, market share, profit goals
3. Marketing mix (4Ps) draft: pricing, distribution, promotion, product
Stage 5: Business Analysis
• Evaluate financial viability:
o Sales estimates
o Cost projections
o Break-even analysis
o Risk and sensitivity analysis
If it can’t be profitable, it’s out.
Stage 6: Product Development
• Turn concept into an actual working product.
• Create prototypes, test for functionality, safety, design.
• R&D heavy; high investment
• Includes lab tests, beta trials, and user feedback
E.g., Tesla testing early Cybertruck models before market launch.
Stage 7: Test Marketing
• Launch in limited markets to test:
o Product acceptance
o Pricing
o Advertising
o Distribution
• Types:
o Standard (full mix tested in a few cities)
o Controlled (in-store panels)
o Simulated (virtual environment or surveys)
Skipped if time is short, or product is low-risk.
Stage 8: Commercialization
• Full market launch:
o When to launch: Seasonality, competition, readiness
o Where to launch: Regional/national/global
o How: Roll-out speed, marketing budget
Example: Apple’s global iPhone launches are fully integrated campaigns.
SECTION 3: Managing the Product Life Cycle (PLC)
All products go through life stages—your job is to maximize success at each stage.
The 5 Stages of the PLC:
Stage Sales Profits Strategy
1. Development 0 Negative Build & test concept, high investment
2. Introduction Slow rise Negative Promote awareness, high spend
3. Growth Rapid rise Increasing Maximize share, improve product
4. Maturity Peak Plateau Defend share, find new uses/segments
5. Decline Falling Dropping Harvest or divest
Introduction Stage
• High costs, low profits
• Objective: Create awareness and trial
• Strategy:
o Skim pricing: High price, recover R&D (tech gadgets)
o Penetration pricing: Low price, quick adoption (streaming apps)
Growth Stage
• Rapid sales growth, new adopters
• Competitors enter
• Objective: Maximize market share
• Strategy:
o Improve quality/features
o Expand distribution
o Lower price slightly
o Heavy advertising
Maturity Stage
• Sales peak, saturation
• Most competitive stage
• Objective: Defend market share
• Strategy:
o Diversify brand and models
o Find new uses (Arm & Hammer baking soda = fridge deodorizer)
o Enter new segments or markets
Decline Stage
• Sales & profits drop
• Reasons: Tech shift, changing tastes, competition
• Objective: Minimize losses or exit
• Strategy:
o Harvesting: Reduce investment, maximize cash (e.g. old-gen iPods)
o Dropping: Discontinue the product
SECTION 4: Additional Considerations in Product Strategy
Social Responsibility
• Avoid harmful or deceptive products (unsafe, addictive, misleading)
• Meet ethical standards
• Design with sustainability in mind (eco-friendly packaging)
International Product Decisions
• Standardization: One global product (e.g. iPhone)
• Adaptation: Customize for local needs (e.g. McDonald’s India menu)
Global marketers must balance cost efficiency with cultural fit.
Quick Recap of Key Concepts
• New Product Development is essential for long-term success
• The 8-step NPD process helps reduce risk
• The PLC model helps guide marketing strategy through a product’s life
• Smart marketers plan ahead for product launches, growth, maturity, and decline
Bonus Tips for Scoring High in Exams:
• Draw and label the PLC curve with strategies at each stage
• Memorize the 8 steps of NPD in sequence
• Be able to apply each strategy to a real-world brand or case
• Think critically: “Why do good products fail?” → Bad fit, bad timing, poor execution
