New-Product Development Strategy

Strategies for obtaining a new product: Acquisition: - buy the whole company - buy patent/licenses New-product development efforts: - product improvements and modifications - development of new brands

Examples of product failures

Colgate Kitchen Entrees Crystal Clear Pepsi The McDonald Hula Burger

Possible reasons of products failure

~ Overestimation of market size ~ Design problems ~ Incorrect pricing or positioning ~ High Development costs ~ Competitors reaction

8 Steps of New Product Development Process

Step 1 : Step 2 : Step 3 : Step 4 : Step 5 : Step 6 : Step 7 : Step 8 :

Idea Generation Idea Screening Concept Development & Testing Marketing Strategy Development Business Analysis Product Development Test Marketing Commercialization

Step 1 : Idea Generation

Systematic search for new-product ideas. Two sources : Internal Sources External Sources

Internal Sources Formal Research Development Process External Sources Customers Competitors Distributors / Reseller Suppliers Outsourcing Crowdsourcing

Step 2 : Idea Screening

Spot Good Ideas Drop Poor Ideas

Estimate market size, product price, development time and costs, manufacturing costs, and rate of return.

Step 3 : Concept Development & Testing

Product Idea Product Concept
Product Image

Product Idea An idea that the company can see itself offering.
Product Concept Detailed version of the idea. Product Image Consumers perceive an actual or potential product.

Step 4 : Marketing Strategy Development

Designing an initial marketing strategy for a new-product.
Three Parts

Part One Part Two -

Describes the target market Planned product positions

Planned price, distribution, and marketing budget.

Part Three Describes the long-run sales, profit goals and marketing mix strategy.

Step 5 : Business Analysis

Review of the sales, costs, and profit. Estimate Cost Marketing Operation Finance Cost Estimate Sales Sales History

Step 6 : Product Development

Develop concept into physical product. Prototypes are made. Develop & test one / more physical versions of the product concept.

Step 7 : Test Marketing

Product / marketing program introduced in more realistic market settings.
Give experience with marketing.

Step 8 : Commercialization
Timing
Where to introduce the product Market rollout Minimize the risk of a new-product failure.

Organizing New-Product Development

# Sequential Approach - complete each stage before moving to next phase
# Simultaneous Approach - overlapping steps to save time and increase effectiveness

Product Life Cycle (PLC) Strategies

- Shows the course that a products sales and profits take over a lifetime - Discribe how products and markets work & develop a good marketing strategies

(a) Introduction Stage

Low sales Negative or zero profits

Marketing strategies Create product awareness and trial

(b) Growth Stage

Rapidly rising sales Rising profits

Marketing Strategies Maximize the product market share

(c) Maturity Stage

Sales at peak High profits Marketing Strategies Maximize profits and defend market share

Ways to maintain high profit

Modifying the market - increase the consumption of product Modifying the product
- changing characteristics to attract new users

Modifying the marketing mix - increase sales by changing marketing mix elements

(d) Decline Stage

Declining sales Declining profits

Marketing Strategies Reduce expenditures and milk the brand

Tutorial Answer

1.

List TWO (2) ways a firm can obtain new products.

- Acquisition

- New product development efforts

2. List TWO(2) approaches in new product development.

- Sequential Approach ( step by step )

- Simultaneous Approach ( overlapping steps )

3. A typical product life cycle (PLC) undergoes FOUR distinct stages. List the stages and identify a companys, marketing objectives involved in each of these stages.
1.Introduction Stage -Create product awareness and trial
2.Growth Stage -Maximize market share 3.Maturity Stage -Maximize profits while defending market share 4.Decline Stage -Reduce expenditures and milk the brand

4. Within the malaysian context, identify stage of the product life cycle that hybrid automobiles are in?
1.
2.

Characteristic Growth stage of PLC Sales are growing Rising of profits Number of competitors is growing Product has been accepted by buyers
Strategies Offer variety of product Penetration strategy Promotion advertise and promote

5.

The maturity stage is characterized by slowing product growth. It is also a stage where the company enjoys profit maximization. In short, it is a stage where most marketers hope their product will remain for as long as possible. Explain briefly how product managers can achieve this aim.

Modifying market, consumption of product Modifying the product, mutable characteristics Modifying marketing mix, sales, elements

Section C 1. Listed here are three different products in various stages of the product life cycle. What marketing strategies would you suggest to these companies? Answers: (a) Canon digital cameras - growth stage (b) Panasonic high-definition television-introductory stage (c) Handheld manual can openers - decline stage.

a. Maximize profit-warranty, features, accessories b. Create product awareness, sales promotion c. Reduce expenditure, cut price, close product line