Chapter 8: New Product Development and Product Life-Cycle Strategies

 A company has to be good at developing and managing new products.

 Every product seems to go through a life cycle – it is born, goes through several phases,
and eventually dies as newer products come along that better serve consumer needs.
 The product life-cycle presents two major challenges:

1. Because all products eventually decline, the firm must find new products to replace
aging ones. This is the problem of new product development.

2. The frim must be good at adapting its marketing strategies in the face of changing
tastes, technologies, and competition as products pass through life-cycle stages. This
becomes the problem of product-life cycle strategies.

A firm can obtain new products in two ways:

1. One way is by acquisition where the firm buys a whole company, a patent, or license to
produce someone else’s product.

2. The other way is through new product development.

Causes of new product failures:

 Overestimation of market size

 Product designer problems
 Product incorrectly positioned, priced, or advertised
 Product may have been pushed despite poor marketing research findings
 Costs of product development
 Competitive actions

Success factors are thought to be:

 Unique superior product – one with higher quality, features and value in use
 A well-defined product concept – a defined target market, product requirements, and
benefits

Major Stages in New Product Development

1. Idea Generation - systematic search for new product ideas.

Sources for New Product Ideas:

 Internal Sources, where formal research and development, company,
scientists, engineers, manufacturing, executives, and salespeople can
contribute to new product ideas.
 Competitors. It is a good idea to watch competitor’s ads and other
communications to get clues about new products.
 Distributors, Suppliers, and others in the distribution chain as sources of
information.
2. Idea Screening - It involves screening new product ideas in order to spot good ideas and drop
poor ones as soon as possible.

3. Concept Development and Testing- It involves testing the concepts with a group of target
consumers to find out if the concepts have strong consumer appeal.

4. Marketing Strategy Development - It involves designing an initial marketing strategy for a

new product based on the product concept.

5. Business Analysis - It involves a review of the sales, costs, and profit projections for a new
product to find out whether these factors satisfy the company’s objectives.

6. Product Development - It involves developing the product concept into a physical product in
order to ensure that the product idea can be turned into a workable product.

7. Test Marketing - The product and marketing program are introduced into more realistic
marketing settings.

8. Commercialization - This is Introducing a new product into the market.

PRODUCT LIFE CYCLE (PLC)

Product development stage begins when the company finds and develops a new product idea.
During product development, sales are zero and the company’s investment costs mount. This is
a pre-stage
Introduction stage – period of slow sales growth as the product is being introduced in the
market. Profits are nonexistent in this stage because of heavy expenses of product
introduction.

Growth Stage – period of rapid market acceptance and increasing profits.

Maturity Stage – period of slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits level off or decline because of increased marketing
outlays to defend the product against competition.

The decline stage – the period when sales fall off and profits drop.

PLC can be applied to styles, fashions, and fads

 A style is a basic and distinctive mode of expressions. For example, clothing could be
formal, business, or casual. Once a style is invented, it may last for generation, coming in
and out of vogue.
 Fashion is a currently accepted or popular style in a given field, for example, the
“preppie look” in clothing. Fashions tend to grow slowly, remain popular for a while and
then decline slowly.
 10. A fad is a fashion that enters quickly, is adopted with fast zeal, peaks early, and
declines away fast. Fads last only for a short time and attack a limited following.