Chapter 9: Product Management and New-Product Development For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 9 Objectives When you finish this chapter, you should 1. Understand how product life cycles affect strategy planning. 2. Understand what is involved in designing new products and what “new products” really are. 3. Understand the new-product development process. 9-2 4. See why product liability must be considered in screening new products. 5. Understand the need for product or brand managers. 6. Understand how total quality management can improve goods and services. 7. Understand the important new terms. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Product Life Cycle Market Introduction Market Growth Market Maturity Sales Decline Total Industry Sales + Total Industry Profit $0 Time – Exhibit 9-1 9-3 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Planning for Life Cycle Stages Introducing New Products Focus: Managing Mature Products Focus: Budget / Rate of Growth Persuasion / Less Profit Focus: Future Adaptation New Markets Dying Products 9-4 New or Improve? Focus: New Strategies Focus: Phase Out For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill New-Product Development Process Idea Generation Ideas from: Customers and users Marketing research Competitors Other markets Company people Middlemen Screening Idea Evaluation Strengths and Weaknesses Fit with objectives Market trends Rough ROI estimate Concept testing Customer reactions Rough estimates of cost, sales, profits Development R&D Develop model or service prototype Test marketing mix Revise plans as needed ROI estimate Commercial -ization Finalize product and marketing plan Start production and marketing “Roll out” in select markets Final ROI estimate Exhibit 9-4 9-5 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Types of New Product Opportunities Immediate Satisfaction High High Long-Run Consumer Welfare Low Low Desirable Products Salutary Products Pleasing Products Deficient Products Exhibit 9-5 9-6 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill New-Product Development Management Top Level Support Key Issues Authority Market-Guided R&D 9-7 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Total Quality Management Cost of Defects Management Leadership and return on quality Continuous Improvement TQM Customer Focus Empowerment Quality tools, benchmarking, and the like 9-8 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Key Terms Product Life Cycle Market Introduction Market Growth Market Maturity Sales Decline Fashion New Product FTC Consumer Product Safety Act Product Liability 9-8 Concept Testing Product Managers Brand Managers Total Quality Management (TQM) Continuous Improvement Pareto Chart Fishbone diagram Empowerment Benchmarking For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill