Chapter 10 Developing, Positioning, and Differentiating Products through the Life Cycle PowerPoint by Karen E. James Louisiana State University - Shreveport ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 0 in Chapter 10 Objectives Understand the challenges a company faces in developing and introducing new products. Learn the main stages in developing new products and how they can be better managed. Know the factors that affect the rate at which consumers adopt new products. ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 10 Objectives Learn what marketing strategies are appropriate at each stage of the product life cycle. Understand how a company can choose and communicate an effective market position. ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 10 New Product Development What is a “New” Product? – New-to-the-world products – New product lines – Additions to existing product lines – Improvements and revisions of existing products – Repositioned products – Cost reduction products ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 10 New Product Development New Product Failure is Rampant: – 95% of new U.S. consumer products – 90% of new European consumer products Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 10 New Product Development Successful new products: – Offer a strong relative advantage – Reflect better understanding of customer needs, and beat the competition to market – Exhibit higher performance-to-cost ratios and higher contribution margins – Are launched with larger budgets – Have stronger top management support ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 10 Managing New Products New Product Development Process: Ideas to Strategy Idea generation Concept testing Idea screening Marketing strategy development Concept development Business analysis ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 10 Managing New Products New Product Development Process: Development to Commercialization Product development Market testing Commercialization ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 10 Consumer Adoption Process Adopters of new products move through five stages: – Awareness – Interest – Evaluation – Trial – Adoption ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 10 Consumer Adoption Process People adopt new products at different rates – Innovators – Early adopters – Early majority – Late majority – Laggards ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 10 Consumer Adoption Process Five product characteristics influence the rate of adoption: – Degree of relative advantage – Degree of compatibility – Degree of complexity – Degree of divisibility (trialability) – Degree of communicability ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 10 Marketing Through the Product Life Cycle Five product characteristics influence the rate of adoption: – Degree of relative advantage – Degree of compatibility – Degree of complexity – Degree of divisibility (trialability) – Degree of communicability ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 10 Stages of the Product Life Cycle PLC Stages Introduction Growth Low sales High costs per customer Negative profits Maturity Innovator customers Decline Few competitors ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 10 Stages of the Product Life Cycle PLC Stages Rising sales Average costs Introduction Rising profits Growth Early adopters customers Maturity Decline ©2003 Prentice Hall, Inc. Growing competition To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 10 Stages of the Product Life Cycle PLC Stages Peak sales Low costs Introduction High profits Growth Middle majority customers Maturity Decline ©2003 Prentice Hall, Inc. Stable/declining competition To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 10 Stages of the Product Life Cycle PLC Stages Declining sales Low costs Introduction Declining profits Growth Laggard customers Maturity Decline ©2003 Prentice Hall, Inc. Declining competition To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Objective: to create awareness and trial Offer a basic product Price at cost-plus Growth Selective distribution Maturity Awareness – dealers and early adopters Decline Induce trial via heavy sales promotion ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Growth Objective: maximize market share Offer service, product extensions, warranty Price to penetrate Intensive distribution Maturity Awareness and interest – mass market Decline Reduce promotions due to heavy demand ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages Introduction Growth Maturity Decline ©2003 Prentice Hall, Inc. Objective: maximize profit while defending market share Diversify brands/items Price to match or beat competition Intensive distribution Stress brand differences and benefits Increase promotions to encourage switching To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 10 Objectives and Strategies for the Product Life Cycle PLC Stages Objective: reduce costs and milk the brand Phase out weak models Introduction Cut price Growth Selective distribution Maturity Decline ©2003 Prentice Hall, Inc. Reduce advertising to levels needed to retain hard-core loyalists Reduce promotions to minimal levels To accompany A Framework for Marketing Management, 2nd Edition Slide 19 in Chapter 10 Positioning and Differentiation Two views of positioning: – Ries and Trout: products are positioned in the mind of prospect – Treacy and Wiersema: positioning via value disciplines Product leader firm Operationally excellent firm Customer intimate firm ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 20 in Chapter 10 Positioning and Differentiation Positioning statements: – To (target group and need) our (brand) is (concept) that (point-of-difference) Example: To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine. ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 21 in Chapter 10 Positioning and Differentiation Differentiated products feature meaningful and valuable differences that distinguish the company’s offering from the competition. Differences are stronger when they are important, distinctive, superior, preemptive, affordable, and profitable. ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 22 in Chapter 10 Positioning and Differentiation Product Differentiation Tools Form Reliability Features Repairability Performance Style Conformance Design Durability ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 23 in Chapter 10 Positioning and Differentiation Services Differentiation Tools Ordering ease Customer consulting Delivery Maintenance and repair Installation Customer training ©2003 Prentice Hall, Inc. Miscellaneous To accompany A Framework for Marketing Management, 2nd Edition Slide 24 in Chapter 10 Positioning and Differentiation Personnel Differentiation Tools Competence Reliability Courtesy Responsiveness Credibility Communication ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 25 in Chapter 10 Positioning and Differentiation Channel Differentiation Tools Coverage Performance Expertise Image Differentiation Tools Symbols Atmosphere Media Events ©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 26 in Chapter 10