9-1
PRINCIPLES OF MARKETING
Chapter 9
New Product Development
and
Product Life-Cycle Strategies
© Copyright 1999 Prentice Hall
New-Product Development 9-2
Strategies
Strategies for Obtaining New Product Ideas
Acquired Original
Companies Products
Acquired Product
Patents Improvements
Acquired Product
Licenses Modifications
New
Brands
© Copyright 1999 Prentice Hall
Causes of New Product Failures 9-3
• Overestimation of Market Size
• Product Design Problems
• Product Incorrectly Positioned, Priced or
Advertised
• Costs of Product Development
• Competitive Actions
• To create successful new products, the
company must:
– understand it’s customers, markets and
competitors
– develop products that deliver superior value to
customers.
© Copyright 1999 Prentice Hall
New Product Development 9-4
Process
Marketing Business
Strategy Analysis
Concept Product
Development Development
and Testing
Idea Test
Screening Marketing
Idea Commercialization
Generation
© Copyright 1999 Prentice Hall
9-5
New Product Development Process
Step 1. Idea Generation
Idea Generation is the Systematic
Search for New Product Ideas
Obtained Internally and From:
D
C
I
C O S
S
U M U
T
S P P
R
T E P
I
O T L
B
M I I
U
E T E
T
R O R
O
S R S
R
S
S
© Copyright 1999 Prentice Hall
9-6
New Product Development Process
Step 2. Idea Screening
• Process to spot good ideas and drop
poor ones as soon as possible.
• Many companies have systems for rating
and screening ideas which estimate:
– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
• Then, the idea is evaluated against a set
of general company criteria.
© Copyright 1999 Prentice Hall
9-7
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One
© Copyright 1999 Prentice Hall
9-8
New Product Development Process
Step 4. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
© Copyright 1999 Prentice Hall
9-9
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If No, Eliminate
Product Concept
If Yes, Move to
Product Development
© Copyright 1999 Prentice Hall
9-10
New Product Development Process
Step 7. Test Marketing
Standard Controlled
Test Market Test Market
Full marketing campaign A few stores that have
in a small number of agreed to carry new
representative cities. products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
© Copyright 1999 Prentice Hall
9-11
New Product Development Process
Step 8. Commercialization
Commercialization is the
Introduction of the New Product
into the Marketplace.
To
When? Where? Whom? How?
© Copyright 1999 Prentice Hall
9-12
Product Life Cycle
Sales and Profits Over the Product’s Life From
Introduction to Decline
Sales and
Profits ($)
Sales
Profits
Time
Product Introduction Growth Maturity Decline
Develop-
ment
Losses/
Investments ($)
© Copyright 1999 Prentice Hall
Introduction Stage of the PLC 9-13
Summary of Characteristics, Objectives, & Strategies
Sales Low sales
Costs High cost per customer
Profits Negative
Create product awareness
Marketing Objectives
and trial
Product Offer a basic product
Price Use cost-plus
Distribution Build selective distribution
Advertising Build product awareness among
early adopters and dealers
© Copyright 1999 Prentice Hall
Growth Stage of the PLC 9-14
Summary of Characteristics, Objectives, &
Strategies
Sales Rapidly rising sales
Costs Average cost per customer
Profits Rising profits
Marketing Objectives Maximize market share
Offer product extensions,
Product service, warranty
Price Price to penetrate market
Distribution Build intensive distribution
Advertising Build awareness and interest in
the mass market
© Copyright 1999 Prentice Hall
Maturity Stage of the PLC 9-15
Summary of Characteristics, Objectives, &
Strategies
Sales Peak sales
Costs Low cost per customer
Profits High profits
Marketing Objectives Maximize profit while defending
market share
Product Diversify brand and models
Price to match or best
Price competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and
benefits
© Copyright 1999 Prentice Hall
Decline Stage of the PLC 9-16
Summary of Characteristics, Objectives, &
Strategies
Sales Declining sales
Costs Low cost per customer
Profits Declining profits
Marketing Objectives Reduce expenditure and milk the
brand
Product Phase out weak items
Price Cut price
Go selective: phase out
Distribution unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyal customers
© Copyright 1999 Prentice Hall
