Chapter 8: Developing New Products and Managing the
Product Life Cycle
Every product has a life cycle– it’s born, goes through different phases and eventually dies as
newer products come along that bring greater value. A product life cycle presents two major
challenges…
1.​ Product Development: Firm must be good at developing new products to replace
aging ones
2.​ Adaptation of Marketing Strategies: In face of changing tastes, technologies, and
competition, firm must adapt
New Product Development Strategy:
●​ Acquisition: Buying a whole company, patent, or license to produce someone else’s
product
●​ New Product Development: Original products, product improvements, product
modifications and new brands that the firm develops
○​ New products are important to customers and marketers -> bring new
solutions and variety to customers’ lives
○​ Key source of growth!
The New Product Development Process:
Idea Generation
●​ Idea generation: Systematic search for new product ideas
●​ Internal Idea Sources: Using internal sources, company can find new ideas
○​ Idea generation -> Idea Screening -> Concept development and testing ->
Marketing Strategy Development -> Business Analysis -> Product
Development -> Test marketing -> Commercialization
External Idea Sources
●​ Distributors and supplies can also contribute ideas
○​ Distributors are close to the market & can pass along information about new
consumer problems & new product possibilities
○​ Suppliers can tell company about new concepts, techniques, & materials that
can be used to develop new products
○​ Competitors ads are watched to get new clues about their products
○​ Customers: Most important sources of new product ideas
Crowdsourcing
●​ Crowdsourcing: Company invites broad communities of people (customers,
employees, independent scientists and researchers) into innovation process, tapping
into breadth of sources- both inside and outside the company can produce
unexpected and powerful new ideas
Idea Screening
●​ Idea generation is to create large number of ideas (quantity over qualilty) -> idea
screening: helps spot good ideas and droop poor ideas as soon as possible
●​ R-W-W: REAL, WIN, WORTH-DOING; Asks those three questions: Is it real? Can we
win? and Is it worth doing?
Concept Development and Testing:
●​ Product Concept: Detailed version of the new product idea stated in meaningful
customer terms
●​ Product Idea: An idea for a possible product that the company can see itself
doing/offering to the market
●​ Product Image: Way consumers perceive an actual/potential product
●​ Concept Development:
○​ Developing new product into alternative concepts and find out how attractive
it is to each customer
○​ Concept Testing: Testing new product concepts with groups of target
consumers (may be presented symbolically or physically)
●​ Marketing Strategy Development:
○​ Marketing Strategy Development: Designing an initial marketing strategy for
introducing new product based on the product concept
○​ Marketing Strategy Statement:
■​ 1. Describes target market
■​ 2. Outlines product's planned price, distribution and marketing budget
for first year
■​ 3. Describes planned long run sales, profit goals, and marketing mix
strategy
●​ Business Analysis:
○​ Involves a review of the sales, cost and profit projections for a new product ->
to find out whether or not they satisfy company objectives
●​ Product Development:
○​ Product Development: Developing the product concept into a physical
product to ensure the product idea can be turned into a workable market
offering
■​ Undergo lots of prototypes and testing
●​ Test Marketing:
○​ Test marketing: Product & its proposed marketing program are tested in
realistic market settings
■​ Gives marketer experience with marketing a product before going to
the expense of its full introduction
■​ Lets company test its product and the entire marketing program
(amount of testing varies with each new product)
■​ Test costs can be high and takes time that may allow market
opportunities to slip by or competitors to gain advantage
Commercialization:
●​ Commercialization: Introducing the new product into the market
○​ If company goes ahead, it will face high costs (e.g. company may need to build
a manufacturing facility, and spend money on advertising)
○​ Must decide on introduction timing -> if new product will eat into other sales
of company products, introduction should be delayed
○​ Where to launch: In single location, region, national market/international
market
■​ Some companies should quickly introduce new models into the full
national market
■​ May introduce new products through swift global rollouts
Managing New Product Development:
Customer Centered New P.D:
●​ Successful new product development begins with through understanding of what
customer actually wants and values
●​ C.C.P.D: focuses on finding new ways to solve customer problems and create more
satisfying customer experiences
○​ Most successful new products are ones that are differentiated, solve major
customer problems, and offering a compelling customer value proposition
○​ Team-based New Product development: Companies use this approach to
market more quickly
■​ Requires total company, cross functional effort to save time and
increase marketing effectiveness
■​ Assembles team of people from various departments that stays with
new product from start to finish
Systematic New Product Development:
●​ The new product development should be holistic and systematic rather than
compartmentalized and haphazard
●​ Innovation Management System: collects, reviews, evaluates, and manages new
product ideas
○​ Favourable outcomes: 1) creates an innovation oriented company culture
*shows that top management supports & rewards innovation, 2) yield larger
number of new product ideas
■​ New product success requires more than just thinking up a few good
ideas -> requires holistic approach for finding new ways to created
valued customer experiences
Product Life Cycle Strategies:
●​ Product Life Cycle (PLC): Course thatg a product’s sales and profits take over its
lifetime
○​ 1. Product development (Company finds and develops new product idea; sales
are 0 and company’s investment costs mount)
○​ 2. Introduction: Period of slow sales growth as product is introduced into
market (Profits are nonexistent in stage)
○​ 3. Growth: Rapid period of market acceptance and increasing profits
○​ 4. Maturity: Slowdown in sales growth because it has achieved acceptance by
most potential buyers (Profits level decline because of of increased marketing
outlays to defend product against competition)
○​ 5. Decline: Period when sales fall off and profits drop
●​ Not all products follow all five stages, some introduced products die quickly, others
may stage in the mature stage for a while, etc….
●​ PLC concept can describe a product class, product form, or brand
○​ Product Classes: Longest life cycles -> sales stay in mature stage for a very
long time
○​ Product forms: Have more standard PLC shape (Dial telephones, VHS tapes,
films cameras…)
○​ Brand Life Cycle: Can change quickly because of competitors
○​ Style: Basic and distinctive mode of expression
○​ Fashion: Currently accepted/trendy style in a given field (business attire,
business casual)
○​ Fads: Temporary periods of usually high sales driven by consumer enthusiasms
Introduction Stage
●​ Introduction Stage: Starts when product is first launched
●​ Introduction takes time and sales growth is slow
○​ Profits are low.negative because of low sales and high distribution and
promotion expenses
○​ Market Pioneer: must choose a launch strategy that is consistent with
intended product positioning
■​ Realize that initial strategy is just first stpe in grander marketing
scheme
Growth Stage:
●​ Sales start climbing quickly
●​ Early adopters will continue to buy, later buyers will start following
○​ New competitors will enter market and introduce product features & will
expand
■​ Profits increase during growth stage as promotion costs spread over a
large volume
○​ Firm faces trade off between high market share and high current profit
○​ Improves product quality & adds new products and features -> enters new
product segments and new distribution channels
Maturity Stage
●​ Product’s growth slows down -> normally lasts longer than the previous stages and it
poses strong challenges to marketing management
○​ Most products are in the maturity stage of life cycle
○​ Slowdown in sales results in many producers with products to sell -> leads to
greater competition (marking down prices, increasing advertising and sales
promotions, and upping their product development budgets
■​ All of these steps lead to a decrease in profit
○​ Should consider modifying the market, where company tries to increase
consumption by finding new users and new market segments for its brands
○​ Modifying the product: Changing characteristics such as quality, features,
style, packaging, or technology platforms to retain current users or attract new
ones
○​ Modifying the Marketing Mix: Improving sales by changing one or more
marketing mix elements -> can offer new services to buyers, cut prices, launch
better advertising campaign, etc.
Decline Stage
●​ Stage in which a product’s sales fade away
○​ Reasons for decline: Technological advances, shifts in consumer tastes,
increase in competition
○​ As sales decline, firms may withdraw from the market
○​ Must identify products in the decline stage and decide whether to maintain,
harvest, or drop them
■​ Harvest: Management may reduce various costs (PPE, maintenance,
etc), hoping that sales hold up
●​ If successful, harvesting will increase company profits in short
run
■​ Drop: By dropping a product from their line, a company gets rid of it by
selling the product or simply liquidating it at salvage value
Additional Product and Service Considerations:
Product Decisions and Social Responsibility:
●​ Should consider public policy issues & regulations regarding acquiring or dropping
products, patents, product quality, etc.
●​ Manufacturer must comply with specific laws regarding product quality and safety
●​ Act of 1972 -> Consumer Product Safety Commission: Has the authority to ban or
seize potentially harmful products and set severe penalties for violation of the law
○​ Product Stewards: people who must protect consumers from harm and the
company from liability by proactively ferreting out potential product problems
International Product and Services Marketing
●​ Must figure out what products to introduce & in which countries
●​ Must decide how much to standardise / adapt their products for world markets
●​ Standardization: Helps a company develop a consistent worldwide image (also lowers
the product design, manufacturing and marketing costs)
○​ However, markets and consumers differ wildly and may respond with mixed
reactions