Lamb Hair Mc Daniel 2011 2012 CHAPTER 11

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Lamb, Hair, Mc. Daniel 2011 -2012 CHAPTER 11 Chapter 11 Copyright © 2012 by

Lamb, Hair, Mc. Daniel 2011 -2012 CHAPTER 11 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 1 © imagesource/photolibrary Developing and Managing Products

Learning Outcomes LO 1 Explain the importance of developing new products and describe the

Learning Outcomes LO 1 Explain the importance of developing new products and describe the six categories of new products LO 2 Explain the steps in the new-product development process LO 3 Discuss global issues in new-product development LO 4 Explain the diffusion process through which new products are adopted LO 5 Explain the concept of product life cycles Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 2

The Importance of New Products Explain the importance of developing new products and describe

The Importance of New Products Explain the importance of developing new products and describe the six categories of new products LO 1 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 3

Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions

Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products LO 1 Chapter 11 Lower-Priced Products Copyright © 2012 by Cengage Learning Inc. All rights reserved 4

The New-Product Development Process Explain the steps in the new-product development process LO 2

The New-Product Development Process Explain the steps in the new-product development process LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 5

The New-Product Development Process New Product Success Factors Long-term commitment Company-specific approach Capitalize on

The New-Product Development Process New Product Success Factors Long-term commitment Company-specific approach Capitalize on experience LO 2 Chapter 11 Establish an environment Copyright © 2012 by Cengage Learning Inc. All rights reserved 6

Exhibit 11. 1 New-Product Development Process LO 2 Chapter 11 Copyright © 2012 by

Exhibit 11. 1 New-Product Development Process LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 7

New-Product Strategy is… a plan that links the new-product development process with the objectives

New-Product Strategy is… a plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation. LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 8

Idea Generation Customers Employees Distributors Vendors Sources of New-Product Ideas Competitors R&D Consultants LO

Idea Generation Customers Employees Distributors Vendors Sources of New-Product Ideas Competitors R&D Consultants LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 9

Approaches for New Product Development Brainstorming The process of getting a group to think

Approaches for New Product Development Brainstorming The process of getting a group to think of umlimited ways to vary a product or solve a problem. Focus Group The objective of focus group interviews is to stimulate insightful comments through group interaction. LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 10

Idea Screening is… the first filter in the product development process, which eliminates ideas

Idea Screening is… the first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s newproduct strategy or are inappropriate for some other reason. A Concept Test is… LO 2 Chapter 11 a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions. Copyright © 2012 by Cengage Learning Inc. All rights reserved 11

Business Analysis Demand Considerations in Business Analysis Stage Cost Sales Profitability LO 2 Chapter

Business Analysis Demand Considerations in Business Analysis Stage Cost Sales Profitability LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 12

Development u Creation of prototype u Sketch marketing strategy u Packaging, branding, labeling u

Development u Creation of prototype u Sketch marketing strategy u Packaging, branding, labeling u Promotion, price, and distribution strategy u Manufacturing feasibility LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 13

Simultaneous Product Development A new team-oriented approach to newproduct development where all relevant functional

Simultaneous Product Development A new team-oriented approach to newproduct development where all relevant functional areas and outside suppliers participate in the development process. LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 14

Test Marketing The limited introduction of a product and a marketing program to determine

Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 15

Costs of Test Marketing • Often take 1 year or more • Can cost

Costs of Test Marketing • Often take 1 year or more • Can cost over $1 million • Exposes new product to competitors • Competitors can “jam” testing programs with their own promotions LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 16

Alternatives to Test Marketing u Single-source research using supermarket scanner data u Simulated (laboratory)

Alternatives to Test Marketing u Single-source research using supermarket scanner data u Simulated (laboratory) market testing u Online test marketing LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 17

Commercialization Ordering Materials Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements LO

Commercialization Ordering Materials Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements LO 2 Chapter 11 Customer Advertising Copyright © 2012 by Cengage Learning Inc. All rights reserved 18

New-Product Success Factors Listening to customers Strong leadership Producing the best product Commitment to

New-Product Success Factors 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 LO 2 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 19

Beyond the Book Why New Products Fail • • No discernible benefits Poor match

Beyond the Book Why New Products Fail • • 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. Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 20

Global Issues in New-Product Development Discuss global issues in newproduct development LO 3 Chapter

Global Issues in New-Product Development Discuss global issues in newproduct development LO 3 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 21

Global Marketing Questions • Develop product for potential worldwide distribution • Modify for unique

Global Marketing Questions • Develop product for potential worldwide distribution • Modify for unique market requirements • Design products to meet regulations and key market requirements LO 3 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 22

The Spread of New Products Explain the diffusion process through which new products are

The Spread of New Products Explain the diffusion process through which new products are adopted LO 4 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 23

Diffusion The process by which the adoption of an innovation spreads. LO 4 Chapter

Diffusion The process by which the adoption of an innovation spreads. LO 4 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 24

Categories of Adopters Innovators Early Adopters Early Majority Late Majority LO 4 Chapter 11

Categories of Adopters Innovators Early Adopters Early Majority Late Majority LO 4 Chapter 11 Laggards Copyright © 2012 by Cengage Learning Inc. All rights reserved 25

Product Characteristics and the Rate of Adoption Complexity Compatibility Relative Advantage Observability Trialability LO

Product Characteristics and the Rate of Adoption Complexity Compatibility Relative Advantage Observability Trialability LO 4 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 26

Marketing Implications of the Adoption Process Word of Mouth Communication Aids the Diffusion Process

Marketing Implications of the Adoption Process Word of Mouth Communication Aids the Diffusion Process Direct from Marketer LO 4 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 27

Product Life Cycles Explain the concept of product life cycles LO 5 Chapter 11

Product Life Cycles Explain the concept of product life cycles LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 28

Product Life Cycle (PLC) A concept that provides a way to trace the stages

Product Life Cycle (PLC) A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 29

Exhibit 11. 2 Four Stages of the Product Life Cycle LO 5 Chapter 11

Exhibit 11. 2 Four Stages of the Product Life Cycle LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 30

Exhibit 11. 3 Product Life Cycles for Styles, Fashion, and Fads LO 5 Chapter

Exhibit 11. 3 Product Life Cycles for Styles, Fashion, and Fads LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 31

Introductory Stage u u u u High failure rates Little competition Frequent product modification

Introductory Stage u u u u 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 u Communication challenge is to stimulate primary demand LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 32

Growth Stage u Increasing rate of sales u Entrance of competitors u Market consolidation

Growth Stage u Increasing rate of sales u Entrance of competitors u Market consolidation u Initial healthy profits u Aggressive advertising of the differences between brands u Wider distribution LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 33

Maturity Stage u u u u Sales increase at a decreasing rate Saturated markets

Maturity Stage u u u u 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 LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 34

Decline Stage u Long-run drop in sales u Large inventories of unsold items u

Decline Stage u Long-run drop in sales u Large inventories of unsold items u Elimination of all nonessential marketing expenses u “Organized abandonment” LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 35

Exhibit 11. 4 Relationships between the Diffusion Process and the Product Life Cycle Product

Exhibit 11. 4 Relationships between the Diffusion Process and the Product Life Cycle Product life cycle curve Diffusion curve LO 5 Chapter 11 Copyright © 2012 by Cengage Learning Inc. All rights reserved 36

Beyond the Book Chapter 11 Videos Chapter 11 Kodak – Developing and Managing Products

Beyond the Book Chapter 11 Videos Chapter 11 Kodak – Developing and Managing Products Place Kodak’s digital cameras in the product life cycle. http: //www. cengage. com/marketing/boo k_content/1439039429_lamb/company_c lips/ch 11. html Copyright © 2012 by Cengage Learning Inc. All rights reserved 37