Product Life Cycle
“…in addition to nonstop advertising, food companies must
bring out a constant stream of new products to keep sales up
and revenue high.” (The End of Food)
Why new product development?
•
•
•
•
Impacts the future
Role of the sales professional
New products more broadly defined
In developing a product, a firm is
determining a lot about its future
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Question #5
5 New Product Classes?
• New-to-the-World
• New Product Lines
• Additions to Existing Product Lines
Extensions
• Product Improvements
• Repositioning
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New to the World
• Innovative products→ create a new market
• “the thoroughbreds of product innovation”
• Examples:
– Kellogg’s Pop Tarts (1963)
– Oscar Mayer’s Lunchables (1988)
– Dreyer’s Slow-Churned Light Ice Cream (2003)
Creating “new to the world” products is expensive but potentially quite lucrative.
New Product Line
• Allows a company to enter an existing market for
the first time - often copies a rival’s product
Line Extension
• Company makes additions to existing product
lines
• Wendy’s Homestyle Chicken Strips
• Heinz green and purple ketchup (2000)
Product Improvements
• Quality, feature, service enhancements toward
greater value -Different flavor, change in
packaging (i.e. tamper proof)
Repositioning
• Existing products targeted to a new market
• Cereal becomes a portable snack (Kellogg’s)
• 7-Up – the “un-cola”
List & Classifying New Products
(Added)
•
New-to-the-World: Innovative products.
Create a new market. Monsanto’s blue
cotton
•
New Product Lines: Allows the company to
enter an established market for the first time.
Gerber life insurance, private label
•
Additions to Existing Product Lines:
Extensions. Vanilla Pepsi, Vanilla Diet
Pepsi, Ocean Spray’s grapefruit juice
products
•
Product Improvements: Quality, feature,
service enhancements toward greater value.
Soft drink refrigerator packs
•
Repositionings: Existing products targeted to
a new market. Gerber graduates, Hilton and
professional businesswomen
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Be able to list example
new products by
class or label one
given you with the
correct category
1. ______________
2. _______________
3. ______________
4. _______________
5. ______________
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New Product Type and Development
Time
Based on the previous classifications of new
products, which would you expect to take the
longest to get to the market?
Repositioning
Improvements
Extension
New lines
New-to-the-world
Q#5 (b):
Development Time by New
Product Type
Which would you expect to take the longest to get to
market? The shortest time to market?
• New-to-the-World: Innovative products.
• New Product Lines, new to the Co.
• Additions to Existing Product Lines: Extensions.
• Product Improvements: modifications
• Repositionings: new market existing item
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Product Life Cycle
Life Cycle Stage
Competition
Advertising
None
Input on demand
for various features
Raising client
awareness
Focus on awareness
Increasing
Gather
maximum
profits
Trial/loyalty
Intense
Differentiation
Loyalty
Less
Tie in to other
products
Less return to adv.
Difficult to differentiate
Less
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Role of Sales
Professional
Look for niche
clients
AEC 320-Fall 2008- Robbins
ditto
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Q#4: Activities in New Product Development
Process
1st step of product
life cycle
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Where do new product ideas come from?
• Opportunity Identification
– Market Intelligence: Understand changes in the market
and the best segments (profitable, growing) to enter
– Internal Intelligence or idea Generation: Generate new
product ideas to enter these markets.
• Product or Service Design
– Consumer Value Measurement
– Other tools: Product Positioning3,
Forecasting4, Perceptual Mapping5,
Conjoint Analysis6,Test Marketing7
Product Positioning:
Forecasting:
Helps set goals.
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Perceptual Mapping
•
•
•
•
Objective: getting feedback from customers.
Identify holes
Helps see opportunities
Axes derived from surveys to see how primary
attributes valued.
(conjoint analysis)
• How is our product is perceived and the
competitive density of the space
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Organic Food Stores (like Wild Oats)
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•
•
•
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Whole Foods Market, a fast growing US
food retailer
How is their Price and Quality
Supermarkets are suffering
US Household with incomes are changing
Organic Food Stores are not high volume
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Organic Food Stores
Whole Foods Market has elite fare
Compare to the ‘30’s King Kullen’s store
Who, “Piled it high and sold it low”
Supermarkets are suffering because of Wal-Mart &
similar stores
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Conjoint Analysis
• Define demand at the at the attribute level
• People drink wine not just because it’s wine
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The (Modified and Simplified)
McFadden Case - Dr. Hu
List attributes
– In-vehicle time
– Outside-vehicle time
– Cost
• List “levels” within each attribute
Attributes and Levels - Dr. Hu
• How to determine attributes and levels?
• Then what?
– Design and implement a survey
– Analyze data
– Draw conclusion
Data Collected - Dr. Hu
• Attributes associated with each
transportation mode; i.e., product (X
variables)
• Choices people made (Y variables)
• Individuals’ characteristics (age, income,…)
(another set of X variables)
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- Dr. Hu -
Luckily…
• Attributes associated with each
product (alternative)
• Choices people made
• Individuals’ characteristics
(age, income,…)
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Results - - Dr. Hu
• Individuals’ preferences for each level within
each attribute
• Individuals’ willingness to pay for each level
within each attribute
• Individuals’ overall WTP for a product
(package)
• What and why different people like (dislike)
different levels and attributes
• Particularly Useful for…
Conjoint Analysis
– Statistical tool that helps us to understand
consumer preferences of product
– Typical approach
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Conjoint Analysis
Allows developers to estimate the marginal value
of each attribute—
Pros & cons?
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Q#1: What is Supply Chain Management and the
advantages of using it?
• A strategy that integrates the various organizations’
objectives in order to increase the efficiency of the entire
supply chain
• The channel members must behave as if they are part of
the same company
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Q#2: WHAT ARE THE BENEFITS OF BUYERSUPPLIER INVOLVEMENT?
BUYER INVOLVEMENT
SUPPLIER INVOLVEMENT
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Q#3: What is OUTSOURCING and what
are some of the advantages and drawbacks
of using it?
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Best Management Practices in NPD
1
• 1) Systematic Process
• 2) Early involvement
• 3) Parallel Processing
Advantages and disadvantages
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PARALLEL PROCESSING
ADVANTAGES & Disadvantages
• Shortens the product development cycle time;
• Reduces delays caused by failure to include necessary
information
• Encourages frequent interaction
• Maintains continuity across phases
• There is a need for significant changes in the corporate culture
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AEC 320-Fall 2008- Robbins
31
Cross-Functional Teams in NPD
ADVANTAGES & DISADVATAGES
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AEC 320-Fall 2008- Robbins
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Development Time Matters
Strategy making has changed...The premium now is on
moving fast and keeping pace...The best strategies are
irrelevant if they take too long to formulate.
----Kathleen M.
Eisenhardt
Speed kills competition.
----Richard D. Stewart
As a strategic weapon, time is the equivalent of
money, productivity, quality even innovation.
----George Stalk, Jr.
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ADVANTAGES & DISADVANTAGES of
First to Market
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The challenge is:
“To achieve speed without cutting corners, sacrificing
quality or eliminating steps”
“Today’s climate is characterized by increased competition,
changing customer requirements, rising product
development costs and an increasing dependence on
external organizations.”
(Gupta and Souder, 1998)
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Misconceptions of NPD
• Two misconceptions of NPD
– It worked over there, it will work over here
– It worked once, it will work again
• Each organization will need to develop a flexible
& unique NPD strategy that works for them
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