Lamb, Hair, McDaniel
MKTG2007-2008
10
CHAPTER
Designed by
Amy McGuire, B-books, Ltd.
Chapter 10
Developing and
Managing Products
Prepared by
Deborah Baker, Texas Christian University
Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved
1
Learning Outcomes
LO1
Explain the importance of developing
new products and describe the six
categories of new products
LO2
Explain the steps in the new-product
development process
LO3
Discuss global issues in new-product
development
Chapter 10
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2
Learning Outcomes
LO4
Explain the diffusion process through
which new products are adopted
LO5
Explain the concept of product life
cycles
Chapter 10
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3
LO1 The Importance of New Products
Explain the importance
of developing new
products and describe
the six categories of
new products
Chapter 10
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4
New Product
New Product
A product new to the
world, the market, the
producer, the seller, or
some combination of
these.
LO1
Chapter 10
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5
Categories of New Products
New-to-the-World
New Product Lines
Product Line Additions
Improvements or Revisions
Repositioned Products
LO1
Chapter 10
Lower-Priced Products
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6
Beyond the Book
LO1 New Product for Starbucks
Chapter 10
 Starbucks recently marketed
the film Akeelah and the Bee.
 It says the film is a natural
extension of the Starbucks
experience.
 Critics say the pervasive chain
is overextending its welcome.
SOURCE: Janet Adamy, “Lights, Camera, Action at Starbucks,” Wall Street Journal, April 22-23/2006, A2.
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7
LO1 REVIEW LEARNING OUTCOME
Developing New Products
Chapter 10
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8
LO2
The New Product
Development Process
Explain the steps in
the new-product
development process
Chapter 10
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9
The New-Product
Development Process
New Product Success Factors
Long-term commitment
Company-specific approach
Capitalize on experience
LO2
Chapter 10
Establish an environment
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10
New-Product
Development Process
New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
LO2
Chapter 10
New Product
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11
Idea Generation
Customers
Employees
Distributors
Competitors
Sources of
New-Product
Ideas
Vendors
R&D
Consultants
LO2
http://www.ideo.com
Online
Chapter 10
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12
Tips for New Product
Development
 Disperse R & D around the globe
 Keep teams small and empower employees
 Flatten hierarchy
 Encourage generation of crazy new ideas
 Welcome mistakes
LO2
Chapter 10
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13
Brainstorming
Brainstorming
The process of getting a
group to think of unlimited
ways to vary a product or
solve a problem.
LO2
Chapter 10
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14
Idea Screening
Idea Screening
The first filter in the product
development process, which
eliminates ideas that are
inconsistent with the
organization’s new-product
strategy or are inappropriate
for some other reason.
LO2
Chapter 10
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15
Concept Testing
Concept Testing
A test to evaluate a
new-product idea, usually
before any prototype has
been created.
LO2
Chapter 10
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16
Business Analysis
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
LO2
Chapter 10
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17
Development
 Creation of prototype
 Marketing strategy
 Packaging, branding,
labeling
 Promotion, price, and
distribution strategy
 Manufacturing feasibility
 Final government approvals if needed
LO2
Chapter 10
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18
Simultaneous Product
Development
Simultaneous
Product
Development
A new team-oriented
approach to new-product
development where all
relevant functional areas
and outside suppliers
participate in the
development process.
LO2
Chapter 10
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19
Test Marketing
Test
Marketing
http://www.merwyn.com
The limited introduction of
a product and a marketing
program to determine the
reactions of potential
customers in a market
situation.
Online
LO2
Chapter 10
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20
Alternatives to Test
Marketing
 Single-source research using
supermarket scanner data
 Simulated (laboratory) market
testing
 Online test marketing
http://www.newproductworks.com
LO2
Chapter 10
Online
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21
Commercialization
Production
Inventory Buildup
Distribution Shipments
Sales Training
Trade Announcements
LO2
Chapter 10
Customer Advertising
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22
LO2 REVIEW LEARNING OUTCOME
New-Product Development Process
Chapter 10
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23
Beyond the Book
Why Some Products Succeed and Others Fail
Chapter 10
Explain why some
products succeed
and others fail
NOTE: Supplemental content – not in book.
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24
Beyond the Book
Why New Products Fail
Chapter 10
 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.
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25
Beyond the Book
Success Factors
Chapter 10
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.
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26
Beyond the Book
Success Factors
Chapter 10
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
NOTE: Supplemental content – not in book.
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27
Beyond the Book
Why Products Succeed and Others Fail
Chapter 10
NOTE: Supplemental content – not in book.
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28
LO3
Global Issues in
New-Product Development
Discuss global issues
in new-product
development
Chapter 10
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29
Global Marketing Questions
 Develop product for
potential worldwide
distribution
 Build in unique
market requirements
 Design products to meet
regulations and key market
requirements
LO3
Chapter 10
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30
LO3 REVIEW LEARNING OUTCOME
Global Issues in New-Product
Development
Single product worldwide
Modification of products
Multiple products in
multiple countries
Chapter 10
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31
LO4 The Spread of New Products
Explain the diffusion
process through
which new products
are adopted
Chapter 10
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32
Diffusion
Diffusion
The process by which the
adoption of an innovation
spreads.
LO4
Chapter 10
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33
Categories of Adopters
Innovators
Early Adopters
Early Majority
Late Majority
LO4
Chapter 10
Laggards
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34
Product Characteristics and
the Rate of Adoption
Complexity
Compatibility
Relative Advantage
Observability
Trialability
LO4
http://www.electronicgadgetdepot.com
Online
Chapter 10
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35
Sales of New Audio Products
LO4
Chapter 10
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36
Marketing Implications
of the Adoption Process
Word of Mouth
Communication
Aids the
Diffusion Process
LO4
Chapter 10
Direct from
Marketer
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37
LO4 REVIEW LEARNING OUTCOME
Diffusion Process for New Products
Chapter 10
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38
LO5
Product Life Cycles
Explain the concept
of product life cycles
Chapter 10
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39
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
Chapter 10
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40
Product Life Cycle
Growth
Stage
Maturity
Stage
Decline
Stage
Dollars
Introductory
Stage
Sales
Profits
0
LO5
Chapter 10
Time
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41
Product Life Cycles for
Styles, Fashions, and Fads
LO5
Chapter 10
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42
U.S. Sales of Televisions
LO5
Chapter 10
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43
Introductory Stage






LO5
Chapter 10
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
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44
Introductory Stage in Europe
LO5
Chapter 10
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45
Growth Stage





Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the
differences between brands
 Wider distribution
LO5
Chapter 10
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46
Maturity Stage








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
LO5
Chapter 10
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47
Decline Stage
 Long-run drop in sales
 Large inventories of
unsold items
 Elimination of all nonessential
marketing expenses
 “Organized abandonment”
LO5
Chapter 10
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48
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
Chapter 10
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49
LO5 REVIEW LEARNING OUTCOME
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
Chapter 10
High to recoup
development
costs
Fall as result of
competition &
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.
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50