Lamb Hair Mc Daniel 2012 2013 CHAPTER 11

Learning Outcomes 1 Explain the importance of developing new products and describe the six categories of new products 2 Explain the steps in the new-product development process 3 Discuss global issues in new-product development 4 Explain the diffusion process through which new products are adopted 5 Explain the concept of product life cycles

The Importance of New Products Explain the importance of developing new products and describe the six categories of new products 1 3

Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products 4 1

The New-Product Development Process Explain the steps in the new-product development process 2 5

New Product Success Factors Long-term commitment Company-specific approach Capitalize on experience Establish an environment 6 2

Exhibit 11. 1 New-Product Development Process 7 © 2013 by Cengage Learning Inc. All

New-Product Strategy A plan that links the new-product development process with the objectives of the marketing department, the business unit, and the corporation 8 2

Idea Generation Customers Employees Distributors Vendors Sources of New-Product Ideas Competitors R&D Consultants 9 2

Approaches for New Product Development Brainstorming Focus Group 10 The process of getting a group to think of unlimited ways to vary a product or solve a problem. The objective of focus group interviews is to stimulate insightful comments through group interaction. 2

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. A Concept Test 11 a test to evaluate a new-product idea, usually before any prototype has been created. Often successful for line extensions. 2

Business Analysis Demand Considerations in Business Analysis Stage Cost Sales Profitability 12 2

Development 13 § Creation of prototype § Sketch marketing strategy § Packaging, branding, labeling § Promotion, price, and distribution strategy § Manufacturing feasibility 2

Simultaneous Product Development A new team-oriented approach to newproduct development where all relevant functional areas and outside suppliers participate in the development process. 14 2

Test Marketing 15 The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. 2

Costs of Test Marketing • • 16 Often takes 1 year or more Can cost over $1 million Exposes new product to competitors Competitors can “jam” testing programs with their own promotions 2

Alternatives to Test Marketing u Single-source research using supermarket scanner data u Simulated (laboratory) market testing u Online test marketing 17 2

Commercialization Ordering Materials Production Inventory Buildup Distribution Shipments Sales Force Training Trade Announcements Customer Advertising 18 2

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 19 2

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. © 2013 by Cengage Learning Inc. All Rights Reserved. 20

Global Issues in New-Product Development Discuss global issues in newproduct development 3 21

Global Marketing Questions • Develop product for potential worldwide distribution • Modify for unique market requirements • Design products to meet regulations and key market requirements 22 3

The Spread of New Products Explain the diffusion process through which new products are adopted 4 23

Diffusion The process by which the adoption of an innovation spreads. 24 4

Categories of of Adopters Categories Adopters Innovators Early Adopters Early Majority Late Majority Laggards 25 4

Product Characteristics and the Rate of Adoption Complexity Compatibility Relative Advantage Observability Trialability 26 4

Marketing Implications of the Adoption Process Word of Mouth Communication Aids the Diffusion Process Direct from Marketer 27 4

Product Life Cycles Explain the concept of product life cycles 5 28

The 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). 29 5

Exhibit 11. 2 Four Stages of the Product Life Cycle 30 © 2013 by

Exhibit 11. 3 Product Life Cycles for Styles, Fashion, and Fads 31 © 2013

Introductory Stage § § § § 32 High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promo focus on awareness & information Communication challenge is to stimulate primary demand 5

Growth Stage § § § Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands § Wider distribution 33 5

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 34 5

Decline Stage § Long-run drop in sales § Large inventories of unsold items § Elimination of all nonessential marketing expenses § “Organized abandonment” 35 5