Product Life Cycle & New Product Development

8/9/2019 Product Life Cycle & New Product Development

1/38

PRODUCT

PRODUCT VARIETY

QUALITY

DESIGN

FEATURES WARRANTIES

SERVICES

BRAND NAME

SIZE & FORM

PACKAGING

RETURNS


2/38

TimeIntroduction

Profits

Sales

Growth Maturity Decline

Sales and Profits Over the Products Life From

Development to Decline

Product Life Cycle

Development


3/38

Product Life Cycle

Demand / Technology life Cycle

Product Form Life Cycle

Brand Life Cycle


4/38

Time

Productcategory

profits

Productcategory

sales

IntroductoryIntroductorystagestage

GrowthGrowthstagestage

MaturityMaturitystagestage

Declinestage

Product Life Cycle


5/38

The Shape of the Sales

Curve May Vary...

Time

Time Time

Time

Sa

les

Sa

les

Sa

les

S

al

es

TRADITIONAL FAD

SEASONAL (CYCLICAL) REVIVAL or NOSTALGIA


6/38

Marketing Strategies for PLC

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

DistributionStrategy

Promotion

Strategy

PricingStrategy

Limited models

Frequent

changes

More models

Frequent

changes.

Large number

of models.

Eliminate

unprofitable

models

Limited

Wholesale/

retail distributors

Expanded

dealers. Long-

term relations

Extensive.

Margins drop.

Shelf space

Phase out

unprofitable

outlets

Awareness.

Stimulatedemand.Sampling

Aggressive ads.

Stimulatedemand

Advertise.

Promote heavily

Phase out

promotion

Higher/recoup

development

costs

Fall as result of

competition &

efficient produc-

tion.

Prices fall

(usually).

Prices

stabilize at

low level.


7/38

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low salesLow 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 earlyadopters and dealers

Build product awareness among earlyadopters and dealers

Introduction stage


8/38

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Rapidly rising salesRapidly 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 massmarket

Build awareness and interest in the massmarket

Growth Stage


9/38

SalesSales

CostsCosts

ProfitsProfits


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 marketshare

Maximize profits while defending marketshare

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 benefitsStress brand differences and benefits

Maturity stage


10/38

MarketMarket

ModificationModification

MarketMarketModificationModification

ProductProductModificationModification

ProductProductModificationModification

MarketingMarketingMixMix


MarketingMarketingMixMix


Maturity Stage Product DefenseStrategies

Maturity stage


11/38

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profits

Reduce expenditure and maintain, reposition,harvest or drop the product

Reduce expenditure and maintain, reposition,harvest or drop the product

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outletsGo selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retainhard-core loyal customers

Reduce to level needed to retainhard-core loyal customers

Decline stage


12/38

NEW PRODUCT DEVELOPMENT


13/38

Objectives

Challenges in New Product Development

(NPD)

Organizational Structure & NPD

Stages & Management of NPD

Diffusion & Adoption of New Products

Look at the Product lifecycle

Fads, style, etc


14/38

Original products, product improvements,

product modifications and new brands that the

company develops through its own research anddevelopment.

What is new product


15/38

Categories of New

Products

New-To-The-WorldNew-To-The-World

New Product LinesNew Product Lines

Product Line AdditionsProduct Line Additions

Improvements/RevisionsImprovements/Revisions

Repositioned ProductsRepositioned Products

Lower-Priced ProductsLower-Priced Products

SixCategories

ofNew

Products

SixCategories

ofNew

Products


16/38

Not introducing a superior product

Overestimation of Market Size

Product Incorrectly Positioned, Priced orAdvertised

Blow out in costs of Product Development

Competitive Actions - price wars etc

Disharmony between marketing and R&D

Causes of new product

Failure


17/38

To create successful new products, thecompany must:

understand its customers,markets and competitors,

develop products that deliversuperior value to customers.

Causes of new product

Failure


18/38

New Product Development

Process

IdeaIdea

GenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization


19/38

OriginalProductsOriginalProducts

Product

Improvements

Product

Improvements

Product

Modifications

Product

Modifications

NewBrands

New

Brands

AcquiredCompaniesAcquired

Companies

Acquired

Patents

Acquired

Patents

Acquired

Licenses

Acquired

Licenses

Strategies for Obtaining New Product Ideas

New product

development strategies


20/38

Step 1: Idea Generation

CustomersCustomers

EmployeesEmployees

DistributorsDistributors

CompetitorsCompetitors

R & DR & D

ConsultantsConsultants

Creative ThinkingCreative Thinking

Sources ofSources of

New-ProductNew-ProductIdeasIdeas

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas


21/38

Attribute Listing

The process of listing down

major attributes of existing

products & modifying each

attribute for an improved

product


22/38

Forced Relationships

In this process several

objects are considered in

relationships with each

other to create a new

product.


23/38

Morphological Analysis

This method calls for

identifying structural

dimensions of a problem and

exmining the relationship

amongst them.


24/38

Need /problem

identification

This method calls for

identifying needs, problems

& even asking for ideas.


25/38

Brainstorming

The process of getting a

group to think of unlimited

ways to vary a product or

solve a problem.


26/38

Process to spot good ideas and drop poorones as soon as possible.

Many companies have systems for ratingand screening ideas which estimate:

Market Size

Product Price

Development Time & Costs

Manufacturing Costs

Rate of Return

Then, the idea is evaluated against a set ofgeneral company criteria.

Step 2: Idea Screening


27/38

1. Develop New Product Ideasinto Alternative Detailed

Product Concepts

1. Develop New Product Ideasinto Alternative Detailed

Product Concepts

2. Concept Testing - Test theNew Product Concepts withGroups of Target Customers

2. Concept Testing - Test theNew Product Concepts withGroups of Target Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers

Step 3: Concept

Development & Testing


28/38

Part Two Describes Short-Term:Products Planned Price

DistributionMarketing Budget

Part Two Describes Short-Term:Products Planned Price

DistributionMarketing Budget

Part Three Describes Long-Term:Sales & Profit GoalsPart Three Describes Long-Term:Sales & Profit Goals

Marketing Strategy Statement Formulation

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Step 4: Market Strategy

Development


29/38

Business Analysis

Review of Product Sales, Costs,

and Profits Projections to See if

They Meet Company Objectives

Business Analysis

Review of Product Sales, Costs,

and Profits Projections to See ifThey Meet Company Objectives

If Yes, Move to

Product Development

If Yes, Move to

Product Development

If No, EliminateProduct Concept

If No, Eliminate

Product Concept

Step 5: Business Analysis

Step 6: Product development


30/38

AdvertisingAdvertising

PackagingPackaging

ProductProductBudget LevelsBudget Levels

Positioning

Strategy

Positioning

Strategy

DistributionDistributionPricingPricing

BrandingBranding

Elements thatMay be Test

Marketed by a

Company

Test Marketing is the Stage Where the Product and

Marketing Program are Introduced into More RealisticMarket Settings.

Step 7: Test Marketing


31/38

When?When?

Where?Where?

Commercialization is the Introduction of theNew Product into the Marketplace.

Step 8: Commercialization


32/38

Step 8: Commercialization

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

Steps inSteps inMarketing aMarketing aNew ProductNew Product

Steps inSteps in

Marketing aMarketing aNew ProductNew Product


33/38

Diffusion

The process by which the adoption

of an innovation spreads.


34/38

Categories of adopters

in Diffusion process

Innovators Early adopters

Early majority

Late majority Laggards


35/38

P

ercentageo f

Ado

pters

Time

Innovators2.5%

EarlyAdopters

13.5%

LateMajority

34%

EarlyMajority

34%

Laggards16%

Categories of Adopters


36/38

Diffusion process and

product life cycle curve

InnovatorsEarly adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

DiffusionDiffusioncurvecurve

Introduction Growth Maturity Decline

Sa

les


37/38

Product characteristics

and the rate of adoption

Complexity

Compatibility

Relative advantage

Observability Triability


38/38

Marketing implications of

the adoption process

Communication aids the diffusion process

Word-of-mouth

Direct from marketer

Product Life Cycle & New Product Development

Documents