9-2
Review:Products
Individual Products
Branding
Consumer Products
Attributes
Total
Product
Concept
Packaging
Industrial Products
Labelling
Product Mixes
Product Lines
9-3
This Week - Objectives
• Describe:
– Finding and
developing new ideas.
– New product
development process
– Stages in PLC
– Marketing strategies &
PLC
New Products
• New Product: “original products, brand improvements,
product modifications and new brands that a company
develops through R&D efforts”.
• New to the world (ground shaking innovation that
creates other support innovations and new behaviours VCR, computers)
• New category for the firm (Arnotts Biscuits and Streets
Ice Cream)
• New addition of product line (Arnotts Tim Tams
biscuits with Baileys)
• Product improvement (‘lower in salt’)
• Repositioning (redesign the packaging or casing and
may involve re-branding – Sony Playstation names Ps1
in lead up to Playstation 2.
9-5
Why do New Products Fail?
• Market segment too small
– Insufficient demand
• Poor match with company capabilities
– Does not build on distinctive competency
• Not unique
– Perceived as similar to existing products
• Little benefit compared to competition
– Significant performance advantage?
• Poor positioning
• Inadequate channel support
– Lack of motivation to provide distribution intensity or
support
Why do New Products Fail?
• Forecasting error
– Sales potential overestimated
• Competitive response
– Competition copies/improves product
• Changes in tastes or environment
– Shift in consumer preferences, social attitudes, changes
in raw material prices
• Ineffective launch
– Selling, distribution, advertising plans etc. poorly
implemented
• Insufficient profitability
– poor profit margins
• Organisational Problems
– Conflict, poor management practices
9-7
Why do New Products Succeed?
• Product matches customer needs
• Use existing company know-how
– Product developed within company’s core markets
• Product has competitive advantage
• Entrepreneurial organisational environment
• New product development process
Questions????
• Ethical considerations of NPD
– Does the product create harm
– Is the new market ready for this type of
product
– Does the introduction of the new product
create new social problems or predictable
negative outcomes
– Does research always provide the right
answers?
New Product Development
Process
Marketing
Strategy
Concept
Development
and Testing
Idea
Screening
Idea
Generation
9-9
Business
Analysis
Product
Development
Test
Marketing
Commercialisation
9-10
1. Idea Generation
• Where organisations engage in a continuing
search for product ideas consistent with target
market needs and objectives. Ideas generated
from:
– Internal sources (eg. R&D departments)
– Customers (eg. How can our product be
improved? What features would you like?)
– Competitors (eg. What is the competition doing
and can we do it better?)
– Distributors, suppliers, other sources
9-11
2. Idea Screening
• Screening new product ideas to spot the
good ones and drop the poor ones. Can
use:
– Managerial Judgement: management rates
new products on key criteria
– Customer Evaluations: consumers rate product
ideas and intentions to buy.
9-12
3. Concept Development & Testing
Concept Development:
• Involves expressing a product idea in terms of its
positioning, benefits, unique features, attributes,
etc.
– Product concept for a new can opener:
• Battery or electrically operated; portable and lightweight; no
larger than a small food processor; handles cans up to 8cm
in diameter; 5 year warranty; priced at less than $50
– Product concept for a TV program:
• A reality TV program; showing couples competing to
renovate a unit, screened weekly, with 4 couples and one
presenter targeting young singles and young ‘DINKS’ who
are regular TV viewers
9-13
3. Concept Development & Testing
Concept Testing: Measure consumers’ reactions
to new product concept?
– Is the concept easy to understand?
– Do you see distinct benefits of this product over
competing offers?
– Do you find concept & claims believable?
– Would you buy this product? How often?
– What improvements would you suggest?
– (ie. Purchase intent, frequency, believability,
communication, uniqueness of idea, etc.)
9-14
4. Market Strategy Development
• Describe: target market; planned position;
sales, market share, profit goals; price,
distribution & marketing budgets for yr. 1; longrun sales, profit goals and marketing mix
strategy
– The target market for the new TV concept: “will be
adults who are single, or DINKS and middle to upper
socio economic groups, that are achievers, strivers,
and lead an active lifestyle where their home is the
focus of entertaining. Positioned as a renovation,
lifestyle and relationship program that is about personal
growth, competition and reality. In the 14 weeks of
competition it will be the number 1 rating in a Sunday
6.30pm timeslot.
9-15
5. Business Analysis
• Involves reviewing the new product from all
organisational perspectives to determine
performance criteria and likely profitability.
• Outcome will be a “go/no-go” decision.
– Start casting for couples and presenters?
9-16
6. Product Development
• Need to give consideration to both:
– Product’s physical attributes: translate consumer
preferences into physical product attributes (eg.
handheld electric can opener that displays the
nutritional contents of the product).
– Product design: exterior design of product sometimes
important in purchase decisions.
• “What would be shown? Couples arguing, couples renovating,
couples in their current employment roles, families, morning,
noon and night shots?” How long will each clip be? Who will
narrate?
9-17
7. Test Marketing
• Products/marketing programs tested in
more realistic settings. Allows us to:
– Examine consumers “real” reactions to new
products prior to full launch.
– Evaluate marketing strategies and determine
likely success of the product.
• Test markets should be representative of
product’s target segment, reflect
competitive conditions and allow us to
determine repurchase rate.
9-18
8. Commercialisation
Commercialisation is the introduction of
the new product into the marketplace.
When?
Where?
Whom?
Is it the
right
time?
Single or
multiple
locations
Who are
the best
prospects
How?
Action
plans
9-19
The Product Life Cycle
Sales and profits over the product’s life from
introduction to decline
Sales and
Profits ($)
Sales
Profits
Time
Product Introduction
Developme
nt
Losses/
Investments ($)
Growth
Maturity
Decline
PLC Concepts
• PLC can refer to:
– Product class (lipstick, drinks)
– Product form (stay-on lipstick, energy drinks)
– Product brand (Maybelline stay-on lipstick, Red Bull)
• PLC shape is variable for:
– Style (Mediterranean home design in Perth)
– Fashion (Coloured cement render, feature walls)
– Fad (two kitchens, cinema rooms)
Introduction Stage
Fedex1 video
Product mode
Price policy
Place
Promotion
Profits
Introduction
new
use skimming or
penetration strategies
rapidly building
distribution network
build general demand
expected losses
Growth
Maturity
Decline
Growth Stage
Fedex2 video
Product mode differentiated products
Price policy maintain stable pricing policy
Place solidify distribution channels
and network
Promotion generate secondary demand
Profits start of profits
Introduction
Growth
Maturity
Decline
Maturity Stage
Acer video
Product mode modify product or product usage
Price policy price reduction
Place increase distribution efforts
Promotion concentrate on product
positioning
Profits highest profits (peak)
Introduction
Growth
Maturity
Decline
Maturity Stage (cont.)
• Product revitalisation achieved by:
– Market Modification: finding new users
(eg. Playstation for teenage girls), uses
(eg. Cornflakes & Anzac cookies) or
increase usage
– Product Modification: change features,
quality, design, to attract new users &
increase usage (eg. Gillette razors)
– Marketing Mix Modification: sales
promotion, price cuts, new ads etc.
9-24
Decline Stage
Product mode
Price policy
Place
Promotion
Profits
Introduction
maintain a basic product
maintain pricing or rise prices
limit distribution efforts
cut-back on advertising and
sales promotions
reduced profits
Growth
Maturity
Decline
9-26
Decline Stage (cont.)
• Product strategies include:
– Product Deletion: eliminate unprofitable products
ie Kit Kat Chunky, Kit Kat Chunky Caramel, Kit Kat
Mint
– Product Harvesting: slowly phasing product out
by reducing expenditure: Kodak 35mm films
– Product
Revitalisation: bringing products back to life
through new ads, brands – Levis, Bailey’s,
Smirnoff Vodka (Vanilla, Mandarin, Blackcurrant)
Limitations of the PLC
• Product sales do not always follow
symmetrical S-curve.
• Difficult to determine product’s position in
lifecycle.
• Length of cycle may vary.
9-28
Summary
• We have looked at:
– How companies find and develop new product
ideas
– The steps in the new product development process
– The stages in the PLC and how marketing
strategies change during the product’s life