Lamb, Hair, McDaniel
2010-2011
CHAPTER 11
Developing and Managing
Products
1
Learning Outcomes
LO 1 Explain the importance of developing new products and
describe the six categories of new products
LO 2 Explain the steps in the new-product development process
LO 3 Discuss global issues in new-product development
LO 4 Explain the diffusion process through which new products
are adopted
LO 5 Explain the concept of product life cycles
2
The Importance of New
Products
Explain the importance
of developing new
products and describe
the six categories of
new products
LO1
3
Categories of
New Products
New-to-the-World
New Product Lines
Product Line Additions
Improvements or Revisions
Repositioned Products
Lower-Priced Products
LO1
4
The New Product
Development Process
Explain the steps in
the new-product
development
process
LO2
5
The New-Product
Development Process
New Product Success Factors
Long-term commitment
Company-specific approach
Capitalize on experience
Establish an environment
LO2
6
New-Product
Development Process
New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
LO2
Development
Test Marketing
Commercialization
New Product
7
Idea Generation
Customers
Employees
Distributors
Competitors
Sources of
New-Product
Ideas
Vendors
R&D
Consultants
http://www.ideo.com
LO2
Online
8
Tips for New Product
Development
 Disperse R & D around the globe
 Keep teams small and empower employees
 Flatten hierarchy
 Encourage extensive brainstorming and
generation of crazy new ideas
 Welcome mistakes
LO2
9
Idea Screening
The first filter in the product development
process, which eliminates ideas that are
inconsistent with the organization’s newproduct strategy or are inappropriate for
some other reason.
Concept test: A test to evaluate a
new-product idea, usually before any
prototype has been created. Often
successful for line extensions.
LO2
10
Business Analysis
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
LO2
11
Development
 Creation of prototype
 Marketing strategy
 Packaging, branding, labeling
 Promotion, price, and distribution
strategy
 Manufacturing feasibility
 Final government approvals if needed
LO2
12
Simultaneous Product
Development
A new team-oriented approach to newproduct development where all relevant
functional areas and outside suppliers
participate in the development process.
LO2
13
Test Marketing
Test
Marketing
foodcom.com/signup
The limited introduction
of a product and a
marketing program to
determine the reactions
of potential customers
in a market situation.
Online
LO2
14
Alternatives to
Test Marketing
 Single-source research
using supermarket
scanner data
 Simulated (laboratory)
market
testing
 Online test marketing
LO2
http://www.newproductworks.com
Online
15
Commercialization
Production
Inventory Buildup
Distribution Shipments
Sales Training
Trade Announcements
Customer Advertising
LO2
16
New-Product
Success Factors
Listening to customers
Strong leadership
Producing the best
product
Commitment to newproduct development
Vision of future market
Project-based team
approach
Getting every aspect right
LO2
17
New-Product
Development Process
Number of new product ideas
Idea
generation
LO2
Idea
screening
Business
analysis
Development
Test marketing
Commercialization
0
Time
18
Beyond the Book
Why New Products Fail
•
•
•
•
•
•
•
•
No discernible benefits
Poor match between features and
customer desires
Overestimation of market size
Incorrect positioning
Price too high or too low
Inadequate distribution
Poor promotion
Inferior product
NOTE: Supplemental content – not in book.
LO2
19
Beyond the Book
Success Factors
Factors in Successful
New Products
Match between product and market needs
Different from substitute products
Benefit to large number of people
NOTE: Supplemental content – not in book.
LO2
20
Global Issues in
New-Product Development
Discuss global
issues in newproduct
development
LO3
21
Global Marketing Questions
•
Develop product for potential
worldwide distribution
•
•
Modify for unique
market requirements
•
Design products to meet
regulations and key market
requirements
LO3
22
The Spread of New Products
Explain the diffusion
process through
which new products
are adopted
LO4
23
Diffusion
Diffusion
The process by which the
adoption of an innovation
spreads.
LO4
24
Categories of Adopters
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
LO4
25
Product Characteristics and
the Rate of Adoption
Complexity
Compatibility
Relative Advantage
Observability
Trialability
http://www.electronicgadgetdepot.com
LO4
Online
26
Marketing Implications
of the Adoption Process
Word of Mouth
Communication
Aids the
Diffusion Process
Direct from
Marketer
LO4
27
Product Life Cycles
Explain the concept
of product life
cycles
LO5
28
Product Life Cycle
Product
Life Cycle
A concept that provides a way
to trace the stages of a
product’s acceptance, from its
introduction (birth) to its
decline (death).
LO5
29
Product Life Cycle
Maturity
Stage
Dollars
Introductory Growth
Stage
Stage
Decline
Stage
Sales
Profits
0
Time
LO5
30
Product Life Cycles for
Styles, Fashions, and Fads
LO5
31
Introductory Stage







High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits with slow sales increases
Promotion focuses on awareness and
information
 Communication challenge is to stimulate
primary demand
LO5
32
Growth Stage





Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the
differences between brands
 Wider distribution
LO5
33
Maturity Stage








LO5
Sales increase at a decreasing rate
Saturated markets
Annual models appear
Lengthened product lines
Service and repair assume important roles
Heavy promotions to consumers and dealers
Marginal competitors drop out
Niche marketers emerge
34
Decline Stage
 Long-run drop in sales
 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
 “Organized abandonment”
LO5
35
Diffusion Process and PLC Curve
Sales
Introduction
Growth
Decline
Maturity
Product
life cycle
curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
LO5
36
LO5
Product Life Cycles
INTRODUCTION
Sales
Product
Strategy
Limited models.
Frequent
changes.
GROWTH
More models.
Frequent
changes.
Distribution
Strategy
Limited
Expanded
wholesale/
dealers. Longretail distributors. term relations.
Promotion
Strategy
Awareness.
Aggressive ads.
Stimulate
Stimulate
demand. Sampling.
demand.
Pricing
Strategy
High to recoup
development
costs.
Fall as result of
competition
and efficient
production.
Time
MATURITY
DECLINE
Eliminate
Large number
unprofitable
of models.
models.
Extensive.
Margins drop.
Shelf space.
Phase out
unprofitable
outlets.
Advertise.
Promote
heavily.
Phase out
promotion.
Prices fall
(usually).
Prices
stabilize at
low level.
37
E-readers
E-readers such as Amazon’s Kindle, Barnes & Noble’s
Nook, and Sony’s e-reader are increasingly available
products that have sparked serious debate among book
lovers, publishers, and techies about the future of printed
text.
– In what stage of the product life-cycle are these
different readers?
• Sony e-Readers
• Barnes & Noble's Nook
• Amazon's Kindle
– Who is adopting these products now?
– Discuss the different company’s attempts at
competitive advantage.
LO5
38