Marketing Management New Product Development and the Product Life Cycle Paul Dishman, Ph.D. Department of Business Management Marriott School of Management Brigham Young University Lecture 14
Marketing Management
New Product Development and theProduct Life Cycle
Paul Dishman, Ph.D.Department of Business Management
Marriott School of Management
Brigham Young University
Lecture 14
Paul Dishman, Ph.D.
Marketing Management
Causes of New Product Failures
• One study estimated that as many as 80% of new consumer packaged products failed.
• Only about 40% of new consumer products are around 5 years after introduction.
• Why?– Overestimation of market size,– Product design problems,– Product incorrectly positioned, priced or advertised,– Product may have been pushed despite poor marketing research
findings,– Costs of product development, or– Competitive actions
Paul Dishman, Ph.D.
Marketing Management
Improving New-Product Success
• New product success depends on having a:– Unique superior product (one with higher quality, features, and
value in use), &– Well-defined product concept (a defined target market, product
requirements, and benefits).
• To create successful new products, the company must:– understand its customers, markets and competitors, &– develop products that deliver superior value to customers.
Paul Dishman, Ph.D.
Marketing Management
IdeaGeneration
Commercialization
IdeaScreening
ConceptDevelopmentand Testing
MarketingStrategy
BusinessAnalysis
ProductDevelopment
TestMarketing
Major Stages in New-Product Development (Fig. 9.1)
Paul Dishman, Ph.D.
Marketing Management
NPD: Idea Screening
• Process to spot good ideas and drop poor ones as soon as possible.
• Many companies have systems for rating and screening ideas which estimate:– Market Size– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return
• Then, the idea is evaluated against a set of general company criteria.
Paul Dishman, Ph.D.
Marketing Management
1. Develop New Product Ideas into Alternative Detailed
Product Concepts
NPD: Concept Development
Product Image is the Way Consumers Perceive an Actual or Potential Product2. Concept Testing - Test the
New Product Concepts with Groups of Target Customers
3. Choose the One That Has theStrongest Appeal to Target
Customers
Paul Dishman, Ph.D.
Marketing Management
Part Three Describes Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Two Describes First-Year:Product’s Planned Price
DistributionMarketing Budget
Part One Describes Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
New Product Development Process Step 4. Marketing Strategy
Paul Dishman, Ph.D.
Marketing Management
Business AnalysisReview of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business AnalysisReview of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Step 5. Business AnalysisStep 6. Product Development
If No, Eliminate Product Concept
If Yes, Move to Product Development
Paul Dishman, Ph.D.
Marketing Management
AdvertisingAdvertising
PackagingPackaging
ProductProductBudget LevelsBudget Levels
Positioning Positioning
DistributionDistributionPricingPricing
BrandingBranding
Elements that May be Test
Marketed by a Company
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic
Market Settings.
NPD: Test Marketing
Paul Dishman, Ph.D.
Marketing Management
StandardStandardTest MarketTest Market
Full marketing campaignin a small number of representative cities.
Controlled Controlled Test MarketTest Market
A few stores that have agreed to carry newproducts for a fee.
SimulatedSimulatedTest MarketTest Market
Test in a simulated shopping environment
to a sample of consumers.
NPD: Test Marketing
Paul Dishman, Ph.D.
Marketing Management
When is the Right Time to
IntroduceProduct?
When is the Right Time to
IntroduceProduct?
Where to Launch a
New Product?
Where to Launch a
New Product?
Commercialization is the Introduction of the New Product into the Marketplace.
NPD: Commercialization
Paul Dishman, Ph.D.
Marketing Management
Sales
Losses/Investments ($)
Sales andProfits ($)
Profits
Time
Sales and Profits Over the Product’s Life From Inception to Demise
Product Life Cycle (Fig. 9.2)
ProductDevelop-
ment
Introduction Growth Maturity Decline
Paul Dishman, Ph.D.
Marketing Management
Applications of theProduct Life Cycle• The PLC concept can describe a:
– Product class which has the longest life cycles (i.e. gas-powered cars),
– Product form which tend to have the standard PLC shape (i.e. minivans),
– Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus),
– Style which is a basic and distinctive mode of expression,– Fashion which is a popular style in a given field,– Fad which is a fashion that enters quickly, is adopted
quickly and declines fast.
Paul Dishman, Ph.D.
Marketing Management
Problems Using the PLC
Trouble identifying Which Stage of the PLC the Product Is In
Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLCStrategy is Both a
Cause and a Result of the Product’s Life
Cycle
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise:
Paul Dishman, Ph.D.
Marketing Management
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Low sales Low sales
High cost per customerHigh cost per customer
Negative or lowNegative or low
Create product awareness and trialCreate product awareness and trial
Offer a basic productOffer a basic product
Usually is high; use cost-plus formulaUsually is high; use cost-plus formula
DistributionDistribution High distribution expensesHigh distribution expenses
AdvertisingAdvertising Build product awareness among early adopters and dealers
Build product awareness among early adopters and dealers
Introduction Stage of the PLC
Egg Beaters had to first convince people that they needed an egg substitute (overcoming a strong negative response to “fake eggs”)then demonstrate that their product was a perfect solution.
Paul Dishman, Ph.D.
Marketing Management
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Rapidly rising sales Rapidly rising sales
Average cost per customerAverage cost per customer
Rising profitsRising profits
Maximize market shareMaximize market share
Offer new product features, extensions, service, and warranty
Offer new product features, extensions, service, and warranty
Price to penetrate marketPrice to penetrate market
DistributionDistribution Increase number of distribution outletsIncrease number of distribution outlets
AdvertisingAdvertising Build awareness and interest in the mass market
Build awareness and interest in the mass market
Growth Stage of the PLC
Paul Dishman, Ph.D.
Marketing Management
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Peak salesPeak sales
Low cost per customerLow cost per customer
High profits, then lower profitsHigh profits, then lower profits
Maximize profits while defending market share
Maximize profits while defending market share
Diversify brand and modelsDiversify brand and models
Price to match or best competitorsPrice to match or best competitors
DistributionDistribution Build more intensive distributionBuild more intensive distribution
AdvertisingAdvertising Stress brand differences and benefits
Stress brand differences and benefits
Maturity Stage of the PLC
Paul Dishman, Ph.D.
Marketing Management
Maturity Stage of the PLC
Company tries to increase
consumption of the current product.
Changing characteristics such as quality, features, or styles to attract
new users.
Company tries to improve sales by
changing one or more marketing mix elements.
Paul Dishman, Ph.D.
Marketing Management
SalesSales
CostsCosts
ProfitsProfits
Marketing ObjectivesMarketing Objectives
ProductProduct
PricePrice
Declining salesDeclining sales
Low cost per customerLow cost per customer
Declining profitsDeclining profitsReduce expenditure and maintain,
reposition, harvest or drop the product
Reduce expenditure and maintain, reposition, harvest or drop the
productPhase out weak itemsPhase out weak items
Cut priceCut price
DistributionDistribution Go selective: phase out unprofitable outlets
Go selective: phase out unprofitable outlets
AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers
Reduce to level needed to retain hard-core loyal customers
Decline Stage of the PLC
Volkswagon made a comeback when one of its hal lmark products was well past the decl ine stage.
Never too Late.
What other companies have broughtback products from the past?
Cl ick or press spacebar to return.
Paul Dishman, Ph.D.
Marketing Management
Exercise
• Close your books and forget the examples
• Get in groups• Based on the characteristics of each
stage in the PLC, think of four examples of products in each stage and defend your answer
• Judge
Paul Dishman, Ph.D.
Marketing Management
Product Examples
• Product Development
• Introduction
• Growth
• Maturity
• Decline